Recent Decisions Support Increased Powers for Condo Boards in Restricting Commercial Activity within Individual Units

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 their units.
• Section 32 (5) of the Condominium Property Act does not create an unrestricted right for a unit owner to alienate the unit and must be interpreted to permit by-laws which restrict alienation of units other than by transfer, lease, mortgage or other dealings which refer to these enumerated legal concepts. Given that a license (unlike a lease) does not create an interest in a real property, capable of being enforceable against a third party, section 32 (5) of the Condominium Property Act does not operate to invalidate by-laws prohibiting short-term rentals such as those offered through Airbnb and HomeAway.

This decision follows the Court’s earlier decision in Condominium Corporation No. 042 5177 v. Kuzio, 2019 ABQB 814, which granted the condominium corporation an interim injunction restraining unit owners from offering short-term accommodation in their units. While the application of an interim injunction may now be a moot point, it is worth noting that in considering the “tripartite” factors, Justice W.N. Renke determined that the short-term rentals were in fact causing irreparable harm to the Condo Corp. and the greater condominium community notwithstanding the Condo Corp. failed to establish significant improper conduct by the short-term occupants that exceeded any improper conduct of unit owners or long-term tenants.

Rather, the Court found irreparable harm had been established on the basis of the existence of a real risk that short-term occupants would pay less regard to noise, garbage dumping and security provisions whereas the pecuniary loss suffered by the unit owners remained quantifiable.

These decisions support increased powers for condominium boards looking to restrict commercial activity within individual units, which could have implications beyond short term rentals. If you have questions about whether your condominium’s existing by-laws support a permanent ban on short term rentals, or how to deal with commercial use of units more generally, please contact Erina Sato  or Jennifer Biernaskie.

[1] Condominium Corporation No. 042 5177 v. Kuzio, 2019 ABQB 814, para 61