short term rental toronto

Toronto is letting ghost hotel owners off the hook

Laws should not be interpreted to reach absurd results. This legal principle is referred to as the “absurdity doctrine.” But if its Kafkaesque short-term rental bylaw enforcement policy is anything to go by, Toronto’s municipal government missed the memo.

Municipal Licensing and Standards, an agency of Mayor Tory’s administration, claims that under Toronto’s short-term rental bylaws, so long as a non-occupant property owner contracts out short-term rental management, and does not personally offer illegal rentals on platforms like Airbnb, it is impossible to charge the property owner.

The agency says that applies even where a manager is hired specifically to manage illegal short-term rentals. This interpretation is ridiculous. It’s also wrong. And it’s exacerbating the city’s housing crisis to benefit those breaking the law at the expense of those struggling to afford a roof over their head.

In 2017, Toronto passed a bylaw requiring all persons operating online short-term rentals to register with the city and pay a small Municipal Accommodation Tax.

Under the law, short-term rentals may only be offered in one’s principal residence. The law intended to put a stop to “ghost hotels:” residential properties operating as de-facto hotels for online short-term rentals, rather than much-needed housing for city residents.

Not only do ghost hotels take stock off the market for renters, thereby decreasing supply and raising demand along with rental rates, but by turning residential units into effectively unregulated commercial operations, they increase demand for property and further drive already-insane housing costs.

Due to dragged-out legal challenges, which the city ultimately won, the bylaw only took effect in September 2020. Even then, short-term rental operators were given until January 1st, 2021 to comply. Few bothered to.

In late 2020, I moved into a house on a residential street in downtown Toronto. My non-attached next-door neighbours are a family with young children. We became friendly. From time to time, they would tell me about the property on the other side of their semi-detached home.

That house was a ghost hotel run by Instagram-friendly millennials inclined to park their Porsche in the bike lane. They managed the property on behalf of an owner who displayed little interest in dealing with guests’ after-hours parties keeping my neighbours’ kids awake at night, despite my neighbours’ ongoing pleas.

I was not initially looking to embroil myself in the conflict between my neighbours and the ghost hotel, but in April 2021, loud and blatantly illegal lockdown parties being thrown in the ghost hotel pushed me over the edge.

That’s when I joined my neighbours in fighting back.

Being a lawyer, I wrote a demand letter to the owner telling her to put a stop to the shenanigans. I also helped push the city to at long last step in and deal with the problem.

Soon after, the city brought charges against the managers for illegal short-term rental operation without a license, but the property owner who hired them would face no charges. She has since sold the property.

The property owner openly admitted, in writing, to hiring short-term rental operators to manage her property. Those millennials weren’t even the first short-term rental managers she’d hired.

But when I asked the city why the owner was let off the hook, the investigation supervisor said that it was impossible to charge owners under the bylaw. Municipal Licensing and Standards’ director of investigation services said the same thing. The agency’s executive director repeated the party line.

There are two big problems with the agency's interpretation of the bylaws. The first problem is that it’s absurd and ridiculous.

If one party hires another specifically to act as their agent in performing illegal activity, be it theft, sale of contrabands, or otherwise, they have not outsourced their criminality.

And yet Municipal Licensing and Standards would have us believe that it is utterly powerless to bring charges against a property owner that’s hired someone to break the law on their behalf.

The second problem is that the bylaw does, in fact, support charges against owners who contract out management.

It defines a “Short-Term Rental Company” as “any person who facilitates or brokers short-term rental reservations via the internet and who…receives payment, compensation, or any financial benefit.”

“Person” is defined as including “multiple persons who, acting together, carry on the business of a short-term rental company, despite the fact that no single one of those persons carries on the activity in its entirety.”

When a property owner hires a property manager to operate short-term rentals on their behalf, all persons involved are acting together to carry on “the business of a short-term rental company”, with the owner serving as a person who facilitates short-term rentals, along with management, for financial benefit.

The bylaw states that “no person shall carry on the business of a short-term rental company unless they have obtained a licence to do so from Municipal Licensing and Standards.” And further, “no person shall…facilitate the advertising or rental of…a short-term rental if its operator is not registered as such under this Chapter.”

Note that this provision even distinguishes between persons facilitating the rental and the rental operator.

A person who hires someone specifically to operate short-term rentals for them has taken part in facilitating short-term rentals. Those parties are working together, making them a “short-term rental company” under the law. And they can be charged for operating without a license.

If Municipal Licensing and Standards cannot understand that, then it is not equipped to do its job of enforcing the law City Council passed for the benefit of Toronto’s citizenry.

Mayor Tory must either tell his agency to get its act together and enforce the law, or he can replace the agency’s personnel with those competent to perform. Failure to do either is a dereliction of the mayor’s duty.

In which case, he should be replaced in Toronto’s upcoming mayoral election with a politician willing to actually do something about Toronto’s ever-worsening housing crisis, rather than kowtowing to property owners breaking the law with impunity.

Marc Z. Goldgrub is a lawyer at the boutique Toronto-based law firm Green Economy Law Professional Corporation. The firm specializes in providing legal services for green businesses and nonprofits, parties operating in the health and psychedelic sectors, as well as parties dealing with housing-related matters. 

Lead photo by

A Great Capture

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