Recent Decisions Support Increased Powers For Condo Boards In Restricting Commercial Activity Within Individual Units

• Published date: 11 June 2020
• Author: Erina Sato and Jennifer J. Biernaskie
• Subject Matter: Real Estate and Construction, Real Estate, Landlord & Tenant - Leases
• Law Firm: McLennan Ross LLP

Many condominium boards have implemented a temporary ban on short-term rentals in an effort to maintain the safety of their residents during the current COVID-19 pandemic. While some may opt to reallow this somewhat controversial use of residential units, others are considering permanently prohibiting this practice in light of ongoing issues arising from short-term rental units like increased noise complaints and safety concerns.

A recent case out of Edmonton establishes a strong precedent that condominium corporations in Alberta whose existing by-laws prohibit commercial use or limit occupancy to the owner, their tenants, family or friends will not require a majority vote of unit owners to implement a such ban.

In Condominium Corporation No. 042 5177 v. Kuzio, 2020 ABQB 152, Justice R. Paul Belzil determined that changes to the condominium by-laws prohibiting short-term rentals were intra vires the Board and granted a permanent injunction. The Court held that short-term rental of units, in the absence of a lease, not only contravened the by-laws of the Condo Corp., but would result in a fundamental change to the structure and character of the condominium.

The Court's decision turned on the following key findings:

• Short term occupancy through platforms like Airbnb results in the functional equivalent of a hotel stay and as such, an individual who temporarily occupies a condominium unit pursuant to a contractual arrangement facilitated by a web-based platform like Airbnb is a licensee (not a lessee). The Court cited its earlier (and related decision) of Condominium Corporation No 042 5177 v. Kuzio, 2019 ABQB 814 wherein Justice W.N Renke stated:

The nature of the occupancy of units by Customers, in my view, strongly supports the characterization of the arrangement with the Respondents as being a licence only. Customers occupy the premises only briefly. They do not take on the trappings of tenants under the Act or Bylaws. Their occupation is like that of a person who stays in a hotel room. Rather than understanding the relationship as being a very short lease, the relationship is better understood as being a very short stay in the functional equivalent of a very small hotel.¹

• In the absence of a lease, occupancy by someone who pays to occupy the premises results in the unit being used for commercial purposes. Accordingly, owners who rent out their units to short-term occupiers through platforms such as Airbnb or HomeAway are making commercial use of...