Yesterday I talked about the insurance crisis in Canada, and how it’s tied to the bond market.  Today I’ll be answering a question from Dean.

Dean has a second home located at a ski hill that he also rents out on a short term basis as a vacation rental. Dean called me to ask about a request he had for a family to live in his vacation rental while they were building a house. This was looking like a good arrangement, because he could rent out his property during the summer when the would usually sit empty, and the family could live in their desired neighbourhood while waiting for their house to be built.

Dean was concerned that the family could see delays in completion because this often happens when building, and that the family would want to stay in his vacation rental and not move out in December as they are promising to do now.  Dean would miss out on the Christmas season rentals that represent a large percentage of the income for the property, and that he’d miss out on his family’s tradition of staying at the property during their vacation.

Dean is right to be concerned.  The BC landlord and tenant laws were changed in recent years to prohibit fixed term rental agreements, and eliminated must-vacate clauses. This effectively gives a tenant control of the property until they decide they want to move out, the only exception if is a landlord or a close family member wants to move in. A landlord must give two months notice to move in, and even this can get gummed and be delayed by many more months up if the tenant makes application with the residential tenancy board to stay.

If a landlord does move into their rental unit, they or their family must stay for 6 months or face stiff fines for an illegal eviction.

If a property owner decides they don’t like laws that dictate what they are allowed to do or not do with their own property, and try to be sneaky to get around it, this can be very expensive if   a tenant displaced tenant  finds proof that you or your family members are not intending to move in, for instance finding the property listed for rent on AirBnB .

In one decision from Sept 3, 2020 that I reviewed this was a $18,000 windfall for the tenant who was displaced when the landlord’s mother didn’t move into the unit as intended, as shown by her visiting visa that was only for 1 month.

However, as Dean correctly pointed out,  the Residential Tenancy Act in BC doesn’t apply to vacation or travel accommodation, that is a stay less than 30 days. I haven’t been able to find any BC court rulings, or RTB arbitration decision that discuss the issue of a vacation rental guest turning into a tenant.  I did find a six year old blog post from a local law firm that suggests the length of stay could be irrelevant, but that the predominant purpose to run a short term rental would be the factor that decided if a person occupying the property was a guest, or a tenant under the BC Residential Tenancy Act. Factors that decide this question could include what type of services are offered during the stay (like room service), if cleaning is included, if the innkeeper can enter the unit at will, if there is cooking permitted in the suite, and if the stay was intended to be somewhat permanent by the occupier moving in any furniture, or decorating by hanging painting or photos.

Some people view the lack of clarity between a person being a tenant under the Residential Tenancy Act or a guest under the innkeepers act as a loophole that bad actors are exploiting to flout the rules.  There are affordable housing activists who are pushing for vacation rentals to be shut down and added to long term housing supply. There is a hashtag trending on Twitter called Occupy Airbnb, and organizers are encouraging people to move in and assert squatters rights. I’ll read some of the comments so you can get a flavour of the attitude of these people, but I’ve changed the names for privacy:

 

One poster wrote: Hey Vancouver, please boycott (name deleted) a social parasite contributing to the housing crisis by running an illegal Airbnb hotel.

And another one

“Airbnb hosts are social parasites. Despite all efforts by @VISTRO11, @Miteymiss, @brettdr and many others, @CityofVancouver

 has done nothing against them. It's time to engage in civil obedience and flex our legal rights and #OccupyAirbnb.  I urge everyone to do the following: 

1. Book an airbnb unit for a single night.
2. Move in and asserts your rights as a residential tenants by demanding a residential tenancy agreement, and dictate the term of the agreement
3. If they refuse take them to the residential tenancy branch
4. If the hosts harass you or try to forcefully throw you out, call the police

Someone Commented on this: Wouldn’t this be dangerous? What if they call the gangsters to kick you out?

OP: Did Canadians run away from Vimy Ridge?”

 

I know people post a lot of silly things online. It’s one of the pitfalls of self publishing being available to the masses. But the anger by the people concerned about the high cost of housing is real, and it is misplaced.   I did a review of decisions on BC’s residential branch  website for “airbnb”, of the first 30 disputes I read, only 2 had owners kicking out long term tenants to rent to someone else or to use as an air bnb.  Most other decisions were actually landlords seeking to end the tenancy of someone who pretended to be a long term tenant, but instead starting running an airbnb business out of the property. 

People are correct to feel disenfranchised, but taking away the property rights of landlords will not work and will make the problem worse as owners will be unwilling to risk renting out their property at all, with the exception of landlords willing to engage with people who incite violence, like the #occupyairbnb twitter account I quoted above. This will further exasperate the problem of affordable housing. New supply of housing is the real solution, and that is frustrated by government regulation. The true common enemy of Canadians is policy makers and central who steal productivity from everyday people by printing money. 

 

 

 

I’ve had short terms rentals before, both in a separate house a short drive away, and in the basement suite of my former primary residence. For the most part, guests are great.   Most guests were respectful and clean, with the odd exception.  I stopped doing it because it is running a business, and requires a lot of work.  For the separate house, I found myself making a lot of trips to deal with Check-ins, check-outs, cleaning, laundry for bedding, all part of the regular duties. Like any business, doing these activities at scale can be profitable, but requires expertise, systems to run efficiently, and work can be hired out.  Hiring out the work without spreading the cost of the help out over a larger portfolio decreases net income to the point that this strategy doesn’t earn much more money than a long term tenancy.  Vacation rentals are not free money, and there are problems that need to be solved on a regular basis, like the one Dean shared today. 

If I was Dean, I would factor in the cost of having the family stay in the home permanently, and offer a tenancy agreement with a rent that reflects that. Let’s imagine Dean would earn, $30,000 for the December / January vacation rental season at a rate of $500 per night, and would earn $18,000 for the remaining 10 months of the year  at $60 per night.  This $48,000 annual income equals $4,000 per month. Dean could offer the family a one year lease with a rent of $4000 per month. If the family moves out in time for Dean to use the place for his family vacation, and to rent the place out for his vacation rental business, he could offer them a refund of some of the rent   paid, and release them form the contractual obligation for the rest of their tenancy agreement. 

This arrangement would align the family’s financial incentive with Dean’s circumstances. 

If the family decides not to take the deal that is up to them, but Dean is not taking a risk without appropriate compensation for that risk. 

Share | Download