As the media blitz for the Pan Am Games builds to a frenzy for the opening of the games this Friday, I thought I would mention a word of caution about renting out condos to visiting tourists.
The caution has less to do with making sure you qualify the person renting out the unit and more to do with the process as a whole.
That said, here are my top 5 questions from prospective tenants that should raise red flags.
- Are there any restrictions on the number of cats I can bring with me?
- So are the smoke detectors hard wired or could I disconnect them?
- Do you accept BitCoin for payment?
- Can I fit a horse on the balcony? No, what about a pony?
- Is there a liquor store in the building or right close by?
Now that we’ve got you sorted on the tenant side, let’s talk about the legality of renting out the unit at all.
The majority of condo corporations have restrictions on rentals, including short-term rentals. In my experience, most buildings do not permit short-term rentals at all. When an owner of a unit chooses to violate these rules, they then put themselves in a position where any damage or problems resulting from their so-called guests can come directly back on the unit owner. This includes legal fees charged by the condo corporation for any problems that occur.
In addition, many issues that are covered if they happen to a homeowner while they are residing at the unit can no longer be covered by their insurance company if the property has been rented out and no notice given to the insurance company.
If it is the tenant of a condo who decides to make some money by renting out their rental to visiting tourists, then the situation is even more complicated. The majority of leases state that tenants are not permitted to sub-lease without the approval of the landlord. A number of leases also include restrictions on how long visitors can stay before they need to notify the landlord that there is effectively someone else living at the unit.
In my experience, tenants who chose to rent out their unit on a short-term basis rarely let their landlord know about what they are doing. Landlords are understandably not interested in taking on the risk of having short-term sub-tenants who have little vested interest in maintaining the unit or following the building rules. Recognizing this fact, tenants who are renting out their rental unit short-term often do so without letting the landlord know. This means that in addition to the likely violation of the condo corporation rules and regulations, the tenant is also violating the terms of their lease.
While the appeal of renting out a condo you own (or even a condo you are just renting) for some easy money is understandable, the risks associated with doing so are considerable.
I’ve advised my clients with rental condos in the downtown area to send their tenants a quick note about how it is not permitted to rent out their unit short term. If you would like the wording I suggested for the email, feel free to get in touch.
Enjoy the Pan Am Games!
PS – As always, if you or someone you know need help with buying, selling or investing in real estate, please get in touch. I’d love to be responsible for what comes next.