By Patrick O'Neil
Over the past decade, short-term rentals have emerged as a non-traditional option available to property owners to generate income. There are numerous platforms – Airbnb, VRBO and HomeAway, to name a few - through which a property owner can be connected with individuals seeking accommodations. Short-term rentals have become so mainstream that it is not uncommon to hear the names of the platforms being used as a verb – “I’m going to Airbnb a place to stay.”
Short-term rentals can offer property owners benefits that are not found in a traditional tenancy arrangement, including increased flexibility and minimal commitment to guests, beyond the length of a predetermined stay. For properties used seasonally, short-term rentals can supplement or offset costs incurred in the portion of the year not occupied by the owner, making it attractive in certain circumstances. In contrast to the more traditional, long-term tenancy arrangements, short-term rentals enable property owners to increase or decrease rates depending on the demand, without any of the procedural timing requirements for increasing rent as found in the Residential Tenancy Acts.
That being said, given the nature of short-term rentals, tenants may not be as motivated as a long-term tenant to ensure that the property is not damaged or that rules are respected, potentially leaving a property owner with damaged property or unhappy neighbours.
As the popularity of short-term rentals increases, the desire to regulate this subset of the hospitality industry has also increased. In Nova Scotia, the former Tourist Accommodations Act has been repealed and replaced by the Tourist Accommodations Registration Act (“TARA”). TARA, which was passed in the spring of 2019, has not yet been proclaimed in force (and therefore, is not in presently in effect).
TARA addresses, among other things, the requirement for short-term rental hosts to register in accordance with the regulations. At present, the Province has not enacted any regulations, meaning it is unclear what information a short-term rental host will be required to provide in order to register. TARA does, however, outline information regarding records required to be maintained by a host, including nightly and total pricing charged for the short-term rental.
For property owners who rely on short-term rentals, it is essential to maintain proper records of booking rates and history of rentals, notwithstanding that it is not mandatory until TARA is proclaimed. From an income tax perspective, it is important to diligently track rental income, as well as any deductible expenses. Moreover, if a short-term rental income exceeds $30,000 annually, a property owner is no longer considered a “small supplier” as defined in section 148 of the Excise Tax Act and must register for, and collect, HST.
Additionally, the retention of accurate records is critical in the event that it becomes necessary, for example, in a civil dispute or insurance claim, to establish the amount of lost income if the property is damaged or otherwise uninhabitable for a period of time. Speaking of insurance, it is recommended to confirm with your insurance broker that use of the property as a short-term rental does not impact your property insurance.
Some condominium corporations have also attempted to regulate short-term rentals by enacting by-laws or otherwise amended their condominium declarations in an effort to curtail unit owners from becoming active in the short-term rental market. Mandatory minimum stays have been introduced in an effort to respect the unit owner’s property rights while at the same time mitigating against a rotating cast of travelers who may not be as understanding or considerate when it comes to the rules and regulations of the condominium. Accordingly, for condominium unit owners intending to look to short-term rentals, it is important to review the condominium’s declaration, by-laws and rules to ensure that the intended use is not prohibited by the condominium corporation. Similarly, it is also becoming more common for residential tenancy leases to expressly refer to short-term rentals and whether it is permitted in a particular residence.
This article is for information only and is not intended to be legal advice. If you have any questions or would like further information, you should consult a lawyer.
