Airbnb: Opportunities and limitations for homeowners
by Multi-Prêts Mortgages
What you’ll learn
- What to know if you advertise your property on Airbnb.
- Problems when your tenant sublets the property.
- Knowing your regulations and recourse
Recent rulings and proposed legislation to regulate the sharing economy aside, there still remains a great deal of uncertainty and misunderstanding on the matter, both here and abroad. In the case of the Airbnb platform, this new way of doing business certainly has its share of opportunities, but also of risk and obligations.
Being a homeowner in a sharing economy
For those who own a house or rental property, the platform offers these three typical scenarios:
- You rent out your main residence while you’re away.
- You rent out a housing unit you own, which you do not live in.
- Your tenant sublets their housing unit.
Here are the important elements to consider, depending on the situation.
Guidelines to follow for short-term rentals
Holding a CITQ certification or not: According to new Quebec legislation in place since April 15, 2016, whomever offers short-term rentals on a regular basis must hold a CITQ (Corporation of the tourist industry of Quebec) classification certificate. A regular basis is defined as “habitual, recurring or consistent”.
In other words, if you’re basically using your property as a hotel, you will be considered a business. On top of the 3.5% accommodation tax, annual revenue over $30,000 requires you to collect the GST and QST as a self-employed worker would.
Those who put up strangers in their main residence a few times a year while they’re away temporarily are not concerned by this measure. They can take advantage of the sharing economy as it was originally intended. It is, however, highly recommended to seek out an accountant or financial expert’s advice, as each situation may be handled differently.
If the residence is held in co-ownership, there may be internal regulations that limit short-term rentals.
The absence of a precise number of days adds to the uncertainty surrounding short-term rentals. The authorities are giving themselves this leeway to evaluate each situation on a case-by-case basis. It’s therefore up to you to show good judgment and get informed ahead of time.
Fees and fines: On top of paying the $275 fee to be a member of the CITQ, you have to ensure that you obey your township’s zoning regulations. Before you start, contact the CITQ to find out all your obligations. Fines of up to $25,000 per day can be issued to offending homeowners and tenants. Your insurance should also increase.
Snowbirds and long-term rentals: As these types of rentals extend over several months, short-term rental regulations do not apply.
Your tenant sublets their housing unit
This is a situation most landlords would rather avoid. After all, a new group of young tourists coming in every week to party is less than ideal.
However, in the great majority of cases, tenants are only renting out their apartment once or twice a year, and keep a close eye on the situation. After all, it’s not in their best interest either to let just anyone live in their apartment.
Unfortunately, some landlords are subjected to the excesses of “ghost” tenants. If the person who signs the lease is using the property for commercial purposes, recent rulings have finally allowed landlords to reclaim control.
Recourse: In July 2016, the Régie du logement (housing authority) granted a landlord the permission to change the locks of an apartment whose tenant was living outside the country while generating a steady income from Airbnb. To find out your rights when faced with unfortunate circumstances, contact the Régie.
It is now imperative that the matter be discussed when signing the lease, in order to try to avoid these situations. A tenant who wishes to use the property in a commercial fashion must make it known to the landlord.
- If you are renting out a property for short-term stays, the ill-defined “regular basis” notion will establish whether you need a CITQ certification or not.
- If your tenant is regularly subletting the property, and is making an excessive use of platforms such as Airbnb, recent rulings grant you certain recourse. Contact the Régie to find out more.