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The Risks and Rewards of Renting your Condo on Airbnb

Until about three years ago, if you were a condo investor, you really only had two choices of what to do with your unit:

1) Rent it out on a standard 12-month unfurnished lease. Under this option you might get somewhere around $1600/month for a typical junior 1 bedroom downtown.  With this strategy your vacancy rate would be close to zero over the last five years in Toronto.

2) Furnish it, and rent it out short term for three-six months at a time. Under this option you might get around $2000/month for that same 1 bedroom, although your vacancy rate is typically higher.

Today you have a third option: furnish the unit and rent it out by the night on Under this option your little 1-bedroom unit in a central downtown location could fetch as much as $3000-4000/month if fully occupied. The potential rewards for using Airbnb are obvious – you can make a huge return on your investment.

If you own a centrally located downtown condo, your monthly positive cash flow could be as much as $1000-$1500/month which would give you an off-the-charts ROI. You might have heard or know someone who is making insane cash flow on their condos using Airbnb. At first glance, this seems like a very attractive option for condo investors, but is it worth the potential risks?

You face risk primarily from three sources: the condo board, the CRA, and from your insurance company.

  1. Risks from the condo board / property management.

This is the biggest source of risk to consider.

In 98% of all condo buildings in Toronto (and in Ottawa:RH) you will find a clause in the declaration that states that short-term leases are not permitted. Short-term leases are usually defined as anything less than six months, but sometimes it can be as little as three months, even one month. Airbnb rentals are by the night, and most travellers usually average three nights or less, so by definition it is not allowed.

So what could happen to you if you decide, like many have, to rent out your condo on Airbnb even though your condo’s bylaws forbid it?

1) The condo board can decide to take legal action against you. Not only that, they can also charge you for any expenses related to pursuing legal action against you. So if you lose, you will also have to pay the condo corporation for their troubles.

2) They can deactivate your key-fobs, thereby making it impossible for your Airbnb tenants to get into the building.

3) They can deny access to the building and/or your unit to anyone attempting to occupy the unit in violation of the short-term lease rule.

  1. Risk from a taxation/CRA perspective

Using Airbnb is a bit of a grey area from a taxation perspective. Since you are essentially operating a hotel, then you could be expected to charge and remit taxes just like any other commercial hotel.

This means charging HST to all your tenants and remitting that HST to the CRA. It means your yearly tax accounting could get real complicated.

Depending on your municipality and local rules, there might be local hotel taxes that go to the city that you would technically be responsible for collecting.

Or you could just not do any of this and risk fines and/or penalties if you get caught.

  1. Risk from an Insurance perspective

Do you think your insurance policy on your condo allows for you to rent out your condo by the night? Yeah, probably not.

If something ever happened in the unit and you need to make a claim, or worse, if something ever happened to someone in the unit and you were being sued, your insurance company would not cover you if they found out that the occupant was from Airbnb.

Conclusion: Using Airbnb is not worth the risks for condo investors

Perusing you will quickly see there are dozens of landlords using the website to rent out their condos downtown. However, in my opinion, the potential risks far outweigh the potential rewards to make this a viable long term strategy for investors.

There may come a day when someone figures out an Airbnb model that works for condo investors and addresses the risks outlined above, but for now, my advice to my clients is stick with standard 12-month leases on your properties.

Stories of tenants (people who do not own the property) who are subletting their unit out on Airbnb are getting more and more common.

Some people will fraudulently rent out multiple condos in their own name and sublet them all on Airbnb. They rent out a unit for say $1600/month and then furnish it with cheap furniture and put it up on Airbnb for $100-$150/night. They do this with three or four properties and suddenly they are rolling in cash every month like some sort of Airbnb feudal lord!

This is particularly a concern in any building that does not have front desk security/concierge as it’s easier to do this and not be caught.

TIP: If you own a condo that you are renting out on a standard 12-month lease, check to make sure your property is NOT on Airbnb.


This article was written by Andrew La Fleur, Toronto’s leading expert on condo investing. Since 2007 Andrew has been sharing his expertise and insider connections to help hundreds of clients every year make money by investing in the Toronto condo market. He is the founder of, contributor to New Condo Guide magazine, and has been featured in the The Toronto Star, The Globe and Mail and The Wall Street Journal.

Contact Andrew: or at 416-371-2333 or visit his web page at

 Note from Robert: The dollar amounts quoted in this article are Toronto values. Ottawa values will differ.


Check the Status Certificate Before Buying or Selling a Condominium

By Robert Hof

Very, very important advice from Mark Weisleder. Robert.

When buying or selling a re-sale condominium, the most important document in the deal is the status certificate. It answers important questions that matter to most buyers, such as:

  • Do I own the parking or locker unit?
  • Are pets permitted in the building?
  • When is the pool open for swimming?
  • How much money is in the reserve fund to look after future repairs?
  • Are there any special assessments being charged because there is not enough money to pay for needed repairs right now?
  • Is anyone suing the condominium and is there enough insurance to pay for it? For example, someone slipped on the ice that was not properly cleared
  • Who is the property manager, providing guidance to the board of directors?

Most condominium deals are conditional upon the buyer’s lawyer being satisfied after reviewing all of the condominium documents, including the status certificate, the declaration, by laws, rules, most recent budget and reserve fund study completed by the condominium corporation. Even though lawyers are not accountants or engineers, they are asked to provide an opinion to the buyers as to the financial well being of the building.

In my experience, there are no easy rules to provide guidance. A reserve fund may have over a million dollars in it, but the building may need over 2 million in repairs. Another building may only have $200,000 in the reserve fund, but they may have completed all necessary repairs that may be needed for years to come. You get the picture.

There have been stories recently about how CMHC had labelled some condominium buildings as having questionable financial statements, and would not provide mortgage insurance to anyone buying in those buildings. Buyers who are applying for an insured mortgage must make sure that they do not waive any financial condition regarding a condominium re-sale purchase until they know for sure that the insurance company is satisfied with the building.

In other cases, there may be no option for a board of directors but to go out and borrow money to complete necessary repairs when there is not enough money in the reserve fund. The owners can then pay it back over time through increases in the maintenance fees. This does not necessarily mean that the building is being badly managed. As long as there is a plan to get it to financial stability.

If you are selling a unit and there is a low reserve fund, or a potential for a special assessment to pay for needed repairs, either adjust the sale price to reflect for this, or negotiate a holdback on closing for 1-3 years, so that if a special assessment is levied later, it would come out of the holdback amount. If it is not levied, then the holdback would go to the seller at the end of the holdback period.

Although it is not mandatory for a board of directors to use a management company to assist them, I am suspicious if there is no management company. Board members are generally unqualified to make these types of decisions or handle large budgets. But be careful who you hire. The story of Channel Property Management and Manzoor Khan, the property manager who allegedly defrauded several condominium corporations out of millions of dollars in 2011 continues to haunt the owners in the affected buildings, who are still having difficulty selling their units today.

In general, townhouse condominiums do not require as large a reserve fund as a highrise condominium, because they will not have as many future repair requirements, other than the repair or replacement of the roof. The unit owners are responsible for everything inside their units. It is thus important for everyone buying a townhouse to also include a condition for a home inspection, to check everything inside the home before you commit to buy. I know many buyers who also conduct a home inspection in a highrise condominium, not only to look for problems with the HVAC or other system inside the unit that the buyer will be responsible for, but in some cases to also inspect the building as a whole to determine if it is also being carefully maintained.

Sellers, find out what your status certificate will say before you put your unit up for sale. Buyers, ask what is in the status certificate because this will form the basis of your continued enjoyment of your home after closing.

 Click here to read the article:


The Perils of Buying or Selling a pre-construction condominium

By Robert Hof


Mark Weisleder

Mark Weisleder

By real estate lawyer, Mark Weisleder.

For the last number of years, it was almost a given that if you bought a pre-construction condo, you would be able to sell it at a profit when the building was finished several years later. I am now seeing examples in my own law practice where there is no such guarantee.

In one example, the condo was purchased by Syrian immigrants 5 years ago, prior to the outset of hostilities in that country. When the building was finished in 2013, the buyers could not get access to their money in Syria. As such, they could not close their purchase and could not find anyone to purchase their contract. They forfeited all deposits paid, which were more than $30,000.

In another situation, the buyer was approved for financing 4 years ago when the condominium agreement was signed with the developer. However, when the building was finished, the same lender refused to give the financing, stating that the buyer’s financial status had changed and that they no longer qualified for the mortgage. In this case, the buyer was able to sell their contract before closing, but they had to take a loss of $20,000, and had to pay real estate commission on the sale as well, increasing their losses.

In another situation, the buyers were able to sell their contract before closing at a profit of $30,000. They later received a re-assessment notice from the Canada Revenue Agency on the basis that since this buyer never actually received title to their unit, they had to pay tax on the full $30,000 gain as though it were income, and not as a capital gain, where they would have been taxed on one half the gain, or $15,000.

Is there any way buyers can be protected from any of the above situations occurring?

In all cases, buyers should make sure when they sign a pre-construction contract, that they have the right to sell or assign it before closing without requiring the permission of the seller.

The situation with the Syrian buyers was very unfortunate, but it does not give them a legal right to cancel a contract. The same is true of the buyer whose financing gets pulled at the last minute. In order to have this right, it has to be negotiated at the time the contract is signed. Buyers should consider negotiating a clause with the builder that states that if there is a change of life circumstance before closing, such as death, serious injury or loss of employment, that they can cancel the contract upon the payment of a set amount or penalty.

For buyers who have no choice but to sell before closing, there may be a way to fight a re-assessment by the Canada Revenue Agency if you can demonstrate that at the time you bought, you clearly intended to close the sale, but that circumstances changed at closing, requiring you to sell. Since every individual situation will be different, it is best to always seek tax advice from a lawyer or accountant before making any decision to challenge a re-assessment. In addition, if you are ever called by someone from the Canada Revenue Agency inquiring about any prior transaction you may have made, my advice is to tell them you will call them back, and then get legal or accounting advice first. In my experience, it is very unsettling to get a call out of the blue from the Canada Revenue Agency and it is easy to say something wrong or get confused.

Click here to read the article:


 – Mark Weisleder

How to prevent a condo board breakdown

By Robert Hof

When owners lose trust in a condominium Board of Directors, necessary repairs do not get done, lawyers get called and the value of all of the units in the building start to decrease. Here are some tips both before and after you buy to make sure this does not happen to you.

  • Read all the condo documents before you buy, including the rules, restrictions and financial statements of the corporation. Make sure they are not operating a deficit and there is enough money in the reserve fund to pay for needed repairs;
  • Volunteer to join committees to assist in making the building more of a community; to learn about problems and pass them on to the property manager for resolution;
  • Attend all meetings to make sure that you understand and agree with all decisions being made.
  • Remember that most directors do this work for no compensation, and are required to make sure that there is enough money being collected to pay all current and future repairs that are necessary.

Click here to read the article:


Many condo buyers are happily going carless

By Robert Hof
Very interesting material here about the role of the car in our urban lives.
Urban life can be hectic, and often doesn’t leave us the time or the inclination to get to know our neighbourhoods. In the face of that, many people are starting to live a more conscientious, purposeful lifestyle, considering how the way they live impacts their surroundings. In the fourth part of this series, we look at how car usage is changing. Two years ago, Ted and Cathy Blackbourn were so sick of commuting to Toronto from Kitchener that they sold their house and moved into a condo in the St. Lawrence market area.
Full article –

Why condo owners need insurance coverage

By Robert Hof

A recent study commissioned by Allstate Insurance demonstrated that many new condominium buyers are confused about the need to obtain a separate insurance policy to cover their unit and belongings after closing. These buyers believe that the condominium insurance policy will protect them. This is not true. While the condominium insurance will cover the building and the common elements, it does not generally cover any improvements you make to your unit, your contents, any liability if someone gets injured in your unit or if a damage such as a leak starts in your unit and damages another unit. In addition, you may still be responsible for any deductible amount in your condominium building coverage as well.

The good news is that there are policies of insurance that can be obtained to protect against all of the above noted occurrences, including coverage against certain special assessments that may be imposed as a result of damages to the common elements.

Please read the attached article to learn more about this:

Avoid condo buyers’ remorse: Read the fine print

By Robert Hof

Mark Weisleder has some serious words of warning. Robert

When you buy a condominium from plans and it won’t be built for a few years, the developer has to give you a list of important documents when you sign the sale agreement. These include the rules that will govern the condominium and a budget for the first year, so you can figure out in advance what you will pay for common expenses.

You have 10 days from the date the developer gives you that information to change your mind. If you do not cancel, then it is a firm deal.

The lawsuits surrounding the new Trump Tower in Toronto illustrate what can happen. Some buyers of the luxury hotel-condo units are trying to get out of deals in some cases signed seven years ago.

They are claiming that maintenance fees, property taxes and other incidentals on the project’s 276 hotel-condo units have skyrocketed from earlier projections. The developer is countersuing, claiming it is a case of buyers’ remorse.

The situation demonstrates the need to scrutinize condominium agreements before signing, because trying to get out of deals later can prove extremely expensive. Although the Trump hotel/complex is different than most residential condominiums, there are still many buildings that have business units on the main floor, so proper inquiries need to be made in advance.

Here are the questions you need answered during that ten day period.

What additional charges will I pay on closing?

Tarion Warranty Corp. which offers consumers warranties on new homes, requires developers to indicate in the purchase agreement, all additional charges you may have to pay on closing. These are either dollar amounts, such as the Tarion enrolment fee, or things like development charges, which may not be known before the condo is built.

In my experience, these charges can add between 1 and 2 per cent over and above your purchase price. The best way for buyers to protect themselves is to negotiate a cap on these expenses right away, so that there is a maximum that can be charged on closing.

What are the rules regarding pets and visitor parking?

Some buildings may provide parking for visitors or charge them for it, others may not. Some allow pets up to a certain weight; others forbid all pets. There will probably be restrictions on attaching anything to or trying to enclose your balcony or patio. You probably will not be able to change the flooring, remove a wall, change the plumbing fixtures or install appliances without the permission of the Board.

Can the developer decide not to build?

Most agreements contain something called an economic viability date. This means that if the developer does not pre-sell enough units, they can just decide to cancel the project and refund your deposit. Buyers are not entitled to any damages. Check this date immediately, and ask whether the developer has the right to extend it.

What is included in common expenses?

Many buyers believe all expenses will be covered by a common payment each month. This is not true. Some buildings may require buyers to pay for and maintain their own HVAC or hydro. Cable will also be extra. Other condos may even require you to maintain your exterior garden or patio as well. This is typically found in “freehold” townhouse projects.

What if there are business units on the main floor?

Make sure that any commercial unit pays utilities separately, since businesses typically use more water and hydro than a regular unit. Imagine if you have a Tim Hortons on your ground level. Very convenient, but it could mean you are subsidizing their utility costs.

Is the common expense payment guaranteed?

The developer’s budget should indicate what you should expect to pay in the first year. However, if construction is delayed, there is usually a clause that the budget will increase by, on average, an additional 4 per cent per year. This means your expenses also will rise. In addition, the developer only guarantees your common expenses in your first year of ownership. If there is any increase after the first year, you are on your own.

Based on what I have heard from condominium specialists, it is not uncommon for the common expenses to rise almost 30 per cent in the first three years of ownership in a new condo building. This could include leasing contracts for building equipment or systems that do not take effect until the second year, for example when the furnace is not owned. This also includes the fact that, while the law requires a 10 per cent reserve fund from day one, this is usually not enough.

If you can just barely afford this condo based on payments that you are being promised today, you may have serious affordability problems later.

Ask the right questions before you buy a new condominium, so that you do not have issues later.

Mark Weisleder is a Toronto real estate lawyer. Contact him at

 Reproduced from

First-time homeowners expected to drive demand for lower-priced condos

By Robert Hof

Good article from The Citizen – Robert

By NECO COCKBURN, Ottawa Citizen

November 9, 2012

First-time homebuyers will be fuelling the market for condos and possibly townhouses, rather than more expensive detached homes, for the next couple of years, according to a senior market analyst with Canada Housing and Mortgage Corporation.

OTTAWA — First-time homebuyers are expected to stabilize the housing market and drive demand for lower-priced condominiums downtown and in urban parts of the city’s west and southeast areas over the next couple of years, says a senior market analyst with the Canada Mortgage and Housing Corp.

“Rather than first-time homebuyers going for singles, they’ll be going for condos and possibly townhouses,” which are typically cheaper, said Abdul Kargbo at a CMHC housing outlook conference on Thursday.

“We’ll definitely see an increase in demand in downtown, but what we are equally going to see is the shift,” Kargbo said.

Because of tighter mortgage rules introduced by the federal government and a relatively flat economic environment, he said, “we are not going to see a continuation of higher-priced condos in the downtown being purchased. We’ll see a shift from higher-priced condos into less-expensive condos, and this will be driven by the first-time homebuyers.”

Demand for townhouses will similarly be strong in urban parts of the city’s east side, where they’re affordable, said Kargbo.

He added he doesn’t think there are too many condo projects on the go in the city. The number of completions is trending downward to a sustainable level, he said, while the inventory of unsold condos remains flat.

The downtown along with urban areas in the east, west and southeast are among those that have the greatest proportions of 25- to 34-year-olds, an age group that has moved to the city more than others, and with an average household income of $79,900 will push the home-buying trend, Kargbo said.

Overall, Ottawa’s housing market should continue to be “relatively stable” over the next two years, he said.

“We’re still seeing positive growth, except that the growth rate is not going to be as brisk as we’ve seen in the previous years.”

The city’s economy is expected to remain even despite public-sector cuts, according to the CMHC. It’s generally expected that the resale market will slow “just gradually”, but prices are expected to remain “positive”, senior market analyst Sandra Pérez-Torres told the conference.

A report issued by CMHC this week said new home construction and resale activity in Ottawa is expected to slow into the first half of next year before improving during the second half.

“In the immediate term, modest job growth and tighter mortgage market conditions will exert downward pressure on housing demand. While new mortgage rules introduced in July will have a stabilizing effect on the housing market longer term, the new rules will moderate sales slightly in the short run,” it states.

“Tighter mortgage rules combined with high home prices will continue to limit first time buyer demand. While some buyers will be able to substitute into a lower priced home, others will likely postpone their home purchase decision. However, a gradual improvement in job and income growth during the latter part of next year, combined with modest price increases should support Ottawa resale activity by the second half of 2013.”

The CMHC also released statistics Thursday indicating that housing starts in the city fell in October. The seasonally adjusted annualized rate of starts was 3,519 units last month, down from 6,220 units in September.

“Housing starts moderated largely due to the expected slowdown in apartment construction,” Pérez Torres stated in a press release. Cumberland had almost half of all housing construction in the city in October, according to the report.

In Gatineau, housing starts increased to 3,691 units in October from 1,847 in September, mainly because of multi-unit starts, particularly rental apartments.

Building a better Condominium Act: Current issues and suggested amendments

By Robert Hof

Interesting video presentation on the crafting on the new Condominium Act that is currently in the works.

Thanks to Condo Business magazine.

No breaks for offshore condo investors from the taxman

By Robert Hof

This is something that buyers, sellers and their agents should be aware of – Robert.

There have been a lot of stories of foreign citizens buying Canadian condominium units from floor plans and then reselling them, for a profit, as soon as the building is registered. These sellers must be aware that the Canadian taxman must be paid before they get their money. In some cases, the entire deal could be delayed until this gets done.


In general, you are a resident of Canada for tax purposes if you have lived here for at least 183 days in the past year. If you are a resident, and you sell any Canadian real estate, you do not have to pay any tax owing until you file your tax return at the end of the year.

For instance, if you are a resident and sold a property in July 2012, you would owe income tax, if any, by April 30, 2013 — the deadline for filing your 2012 income tax return.

However, if you are a non-resident, you must clear up your taxes before a real estate sale closes. This means applying to the Canada Revenue Agency (CRA) for something called a Certificate of Compliance. In general, you need to pay 25 per cent of the capital gain on your sale in order to get the certificate.

If the certificate is not received prior to closing, the buyer will insist on a holdback, typically 25 per cent of the entire purchase price, until the certificate is in fact produced. (In some cases the holdback amounts to 50 per cent of the purchase price.)

In more and more cases that I see in my practice, these certificates are not available for closing, owing to a backlog in processing the requests by the CRA. The reason the buyer insists on the certificate, or the holdback, is that if the seller sells without paying the required taxes, the tax burden then becomes the buyer’s responsibility.

Let’s look at an example: the non-resident buys a condominium for $300,000 in 2010 and wants to sell it now for $400,000. The gain is $100,000. The tax on the $100,000 must be paid before closing in order for the seller to receive the certificate. However, if the certificate is delayed, then the sum of $100,000, being 25 per cent of the total purchase price, will be held back on closing until the certificate is delivered.

If there is a mortgage on the property, this might require the seller to come up with his own money to pay off the balance of the mortgage before closing, since there may not be sufficient funds left after the holdback to do this.

Even if the property is sold at a loss, the seller must still obtain the certificate or else the same 25 per cent of the purchase price will be held back on closing.

The CRA may also delay the delivery of the certificate if the seller owes outstanding income tax for prior years, or if the seller has not, for example, paid the proper withholding taxes on any rental income he received from the property during his years of ownership.

How is all this tracked? In every real estate deal in Canada, the seller is required to provide a sworn declaration that, on closing, he will not be a non-resident of Canada. When such a declaration is made, the seller may receive the full purchase price from the buyer and he has until April 30 of the following year to pay the taxes. However, if the seller is not a resident, then the taxes must be paid early, as described above.

Real estate agents should explain this process immediately to clients selling a property in order to ensure that lawyers and accountants are aware in advance that tax filings must be made before any deal closes.

If you are buying from a non-resident, you should also ask questions to make sure that there is nothing that might delay your anticipated closing.

Foreign citizens might make a profit buying and selling Canadian real estate, but they will not escape Canadian taxes. In all cases, seek professional advice before signing any agreement to sell a property.

– Mark Weisleder is a Toronto real estate lawyer. Contact him at

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