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The era of ‘Airbnb’: Legal Issues around ‘Airbnb’ vacation rentals

October 20, 2015

Airbnb’, perhaps one of the more recent manifestations of the new “sharing economy” in our increasingly mobile, interconnected world, has been extending its reach into Vancouver, and with it come a host of legal repercussions.

 

It’s easy to see the appeal for visitors, owners, and tenants alike, who are all looking for more affordability in an expensive city that many tourists are drawn to throughout the year. Yet while individuals and the economy are quick to jump on the bandwagon, law and policy are rarely associated with such innovation and speed. As a result, the service is still operating in a legal grey area, since there is no legislation or regulatory policy specifically addressing the matter and no legal precedent in B.C. courts. 

 

Several issues and interests come into play: issues regarding insurance coverage for a property run as an Airbnb, issues regarding licensing and City zoning bylaws and, where condos are concerned, issues relating to the strata corporation and its bylaws. The potential legal repercussions affect owners, developers, prospective buyers, landlords and tenants, the visitors themselves, building managers and the strata corporation itself.

 

One possible scenario, for example, is where a tenant signs a lease for a residential tenancy and proceeds to post the rental unit on a website such as Airbnb, hosting visitors for short-term stays. The issue would need to be addressed in the residential tenancy agreement to ensure both the landlord and tenant are in agreement as to whether and to what extent this is allowed, and informed about their rights and obligations.

 

The standard residential tenancy agreement provided by the Residential Tenancy Branch of B.C. and used by most landlords and tenants addresses only the issue of subletting (copy found here: file:///C:/Users/iteicher/Downloads/rtb1%20(1).pdf). The agreement follows the standard terms in the governing legislation, the Residential Tenancy Act of B.C., stating that a tenant must not assign or sublet a rental unit unless the landlord consents in writing. If the tenancy is for a fixed term of 6 months or more, the landlord must not unreasonably withhold their consent. 

 

However, Airbnb is not the same as subletting. When the original tenant sublets to someone else, that person becomes the “sub-tenant” and a new tenancy agreement (sublease) must be signed by the original tenant and sub-tenant. The original tenant then becomes the sub-tenant’s landlord, and the original residential tenancy agreement governs their relationship. That is, the subtenant has the same rights and obligations that the original tenant had with the original landlord, and the sublease cannot contradict the terms of the original lease. This is of course not possible or practicable when the subtenant is only staying in the rental unit for a few days.

 

In addition, the person staying in the unit is not a sub-tenant but a short-term visitor, issues beyond the terms of the residential tenancy agreement come into play. For instance, the City of Vancouver Zoning and Development Bylaw 10.21.6, which prohibits rentals for a period of less than one month unless the unit is part of a hotel or bed and breakfast. Thus, operating an Airbnb is seen by the City in the same manner as operating a bed and breakfast business, and requires a corresponding license. You can view the City’s Zoning and Development bylaws here: http://former.vancouver.ca/commsvcs/BYLAWS/zoning/sec10.pdf

 

Furthermore, the strata corporation bylaws will often provide a term for minimum duration of a rental of a residential suite. Each building has its own set of bylaws which are usually available by request or on the developer’s website. The “Form K”, which is attached to the standard residential tenancy agreement, provides that the tenant must comply with the bylaws and rules and that if a tenant or occupant of the strata lot, or a person visiting the tenant or admitted by the tenant for any reason, contravenes a bylaw or rule, the tenant is responsible and may be subject to penalties, including fines, denial of access to recreational facilities, and if the strata corporation incurs costs for remedying a contravention, payment of those costs. Despite this, it is the owner who gets fined usually when the bylaws are violated, and it is up to the owner to recover from the tenant.

 

There may also be security issues when short-term stay visitors are using the building fobs and the common property areas in the building (including amenities and parking). Neighbours may be disgruntled and have concerns that short-term stay visitors are creating a nuisance and interfering with their right to quiet enjoyment of their property. You simply don’t know what you’re going to get when you have an ‘Airbnb’ next door with a different group of people every few days. Thus, additional bylaw violations may ensue from the guests’ behaviour.

 

There could be public or private property damage as well. Owners/landlords and tenants normally protect themselves from such eventualities by purchasing insurance. But if the insurance policy covers a regular landlord-tenant scenario, and the rental unit is instead being operated as an Airbnb service, the insurance policy may well be invalidated since this is now potentially a commercial business scenario. Insurance companies will surely charge more for Airbnb situations, if they agree to insure the rental unit at all given the degree of risk involved.

 

Finally, there are legal issues surrounding enforcement. What is the City actually doing to ensure that the zoning bylaws are being respected? What does the strata corporation do to ensure compliance with its bylaws? What do neighbours do to protect their own rights to safe and peaceful enjoyment of their residences? What does a landlord do when confronted by a tenant who breaches a lease to run an Airbnb out of their unit without obtaining permission? What are the appropriate remedies?

 

Every case will be different depending on the legal context – the parties, and any contracts or legislation involved. Ideally, litigation is the last recourse. However, it is important to have legal advice in such a scenario so that you are able to properly assess your rights and the risks involved, and decide on a course of action. In the landlord-tenant scenario, a dispute arising out of an Airbnb situation could be dealt with through mediation and negotiation if the parties are so inclined. The matter can also be dealt with by way of dispute resolution through the Residential Tenancy Branch, with an arbitrator hearing the case and making a decision. Finally, the matter can be litigated in the courts.

 

There are limits, advantages and disadvantages to each possibility. For example, the Residential Tenancy Branch will resolve disputes more quickly and inexpensively than starting a BC Supreme Court action, but the RTB has jurisdiction only over certain issues (governed by the Residential Tenancy Act, the tenancy agreement and its terms) and only up to a certain monetary amount ($25,000). The BC Supreme Court will be a larger investment in terms of time and money but, where the risks so warrant, the return will also be greater because there are more remedies available such as potential disgorgement of profits obtained by a tenant in breach of a lease. This means that in the right circumstances, a court could order that any profits wrongfully and illegally obtained in breach of a lease be returned by the breaching party to the party not in breach.

 

Airbnb is unlikely to go away. Therefore it’s important to be informed about your legal rights and potential obligations, and for landlrods, tenants, buyers, and developers alike to be alive to the issue and take it into consideration when drafting or signing bylaws or contracts, in order to guard against unknown or unforeseen consequences. The legislation may take a while to “get with the times”, but you can control the contracts you sign and the actions that you take to protect and enforce your legal rights.  

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