To rent or not to rent

The short-term rental (STR) market in Ontario's cottage country is undergoing significant regulatory change. Municipalities are introducing by-laws aimed at regulating, licensing, and overseeing STRs. Property owners must stay informed about how such changes may affect them.

Many municipalities have already implemented regulations, with others currently developing them. Generally, renting a residential property for fewer than 28 consecutive days requires a municipal license. These regulations ensure that STRs align with local infrastructure, environmental considerations, and community character. However, they may pose challenges for property owners who depend on rental income to offset costs.

Municipalities vary widely in STR licensing requirements:

• Some impose caps on the total number of licenses issued.
• Others require the licensed property to be the owner's principal residence.
• A few municipalities have prohibited STRs altogether in residential zones.

These restrictions can limit potential rental opportunities and may impact local tourism and businesses dependent on STR-driven traffic.

Regulating STRs involves balancing competing interests. STRs bring economic benefits by attracting visitors and supporting local businesses, as well as being a source of supplementary income for property owners. On the other hand, frequent guest turnover can disrupt residential neighborhoods, while the traditional hospitality sector (hotels and motels) may experience reduced demand, leading to job losses and a drop in tax revenue. Crafting fair regulations requires careful consideration of the concerns of all stakeholders.

Several municipal by-laws include requirements for a Designated Responsible Person (DRP) who must address complaints or issues at the property within a specific timeframe. These obligations vary:

• In South Algonquin, the DRP must respond within 60 minutes.
• In Lake of Bays, the timeframe is extended to 24 hours.

This requirement can be challenging for absentee property owners, who may need to hire local representatives to meet compliance standards.

Failure to comply with STR by-laws is an offence under Ontario's Provincial Offences Act. Municipalities can impose fines, revoke licenses, or employ demerit point systems. Additionally, some municipalities reserve the right to recoup enforcement costs as part of property owners' tax rolls.

Professionals involved in real estate transactions, such as agents and lawyers, must account for by-law compliance when advising clients interested in purchasing STR properties. Buyers should review existing and proposed by-laws to ensure the property's intended use aligns with local regulations. Adding a due diligence clause to purchase agreements allows buyers to confirm regulatory compliance, ensuring their plans for STR use remain feasible and affordable.

As STR regulations evolve, staying informed is essential for property owners, prospective buyers, and real estate professionals. Understanding local by-laws ensures smoother navigation of this changing regulatory environment. By proactively addressing these challenges, stakeholders can better safeguard their investments and contributions to the STR market.