In a recent case, (TSCC No. 1556 and No. 1600 v. Owners of TSCC No. 1556, et al), the Ontario Superior Court of Justice refused to grant a court order to amend the declarations of two corporations to eliminate provisions in their declarations which specifically permitted transient, short-term rentals in the condominiums.
The two corporations were developed by the same builder and contained identical provisions in their declarations dealing with short-term rentals. The declarations specifically stated that transient short-term rentals were permitted in accordance with the applicable zoning by-laws. In addition, there were also numerous provisions in the declarations that any restrictions in the declarations were not to be construed to prohibit or restrict short-term rentals.
The condominium corporations took the position that the short-term rental provisions:
- were inconsistent with the Condominium Act, 1998 (the “Act”) because they impermissibly granted rights relating to occupancy and use (when the Act only allows declarations to contain conditions or restrictions with respect to occupancy and use), and because they interfered with the ability of the board of directors to make rules;
- were inconsistent with the City zoning by-laws; and
- were inconsistent with a restrictive covenant registered against the condominium properties which prohibited the construction of commercial space.
All three of these arguments failed on the following basis:
- The declarations did not grant any rights as the right to lease property is a right of ownership. The declarations merely confirmed that any provisions in the declarations which restricted uses, did not restrict the right to lease, and thus there was no inconsistency with the Act.
- As section 58(2) of the Act specifically states that rules must be consistent with the declaration, the condominium boards clearly could not make any rules prohibiting or restricting short-term rentals, as this would be inconsistent with the declarations.
- The wording in the declarations specifically stated that short-term rentals must be in compliance with the applicable City zoning by-laws in effect from time to time.
- While short-term rentals of residential units may be a commercial use, this was not contrary to the restrictive covenant, as there was no construction of commercial space in the condominiums and the restrictive covenant did not prohibit leasing residential units for a commercial purpose.
- The disclosure documents delivered to purchasers when they entered into their agreements of purchase and sale specifically stated that short-term rentals were permitted and some purchasers relied on the ability to lease their unit on a short-term basis when making their purchase decision.
As the court application failed, the only avenue to amend the declarations would be to obtain the written consent of the owners of 80% of the units in accordance with section 107 of the Act. Eighty per cent consent is a high threshold and often difficult to obtain. In this case, as the disclosure documents and the declarations clearly stated that there were no restrictions on the leasing of units, many of the owners may have relied on this when making their purchase decision, and thus would not consent to amending the declarations to prohibit or restrict short-term rentals.