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More crack downs on Vacation Rentals and Bed and Breakfast without operating without a license

Added: Sep 07, 2017
Category: News About NOTL

I just saw an article in the Niagara Advance about the challenges of a few vacation rentals that are making it a problem for those that operate responsibly!

This brings back the memories of about 5 years ago when Niagara-on-the-Lake Vacation Rentals were facing a ban.   In our town its commonly known as Cottage Rentals, but for the rest of the world, I think they are more familiar with the terms Vacation Rental or Holiday Housing.   However, no matter what you call them, they need to be run responsibly.

Ontario in particular has several challenges for running a vacation home.  I just wish the media would help out by publishing some key bits of information that would help home owners offering their homes as a vacation rentals.   In addition HomeAway, VRBO, AirBnB and TripAdvisor  should make it clear that when you advertise on their website that there are insurance, fire codes, municipal by-laws and tax implications.   It maybe a small business but its tricky to make sure you are set up properly so that you don't make fatal costly errors!

1. Fire Code in Ontario considers any rental less than 28 days a hotel type stay.  If you offer accommodation and you have more than 10 guests staying less than 28 days your home needs to have lighted exits and a sprinkler system.   If you do not have this then the home owner is subject to fines and most likely your insurance is void because the Fire Code was not adhered too.

2. Rentals for a duration of less than a month need special insurance and its also advised that you get liability insurance of at least $2 Million.   Finding vacation rental insurance is a challenge because not many companies offer it and its usually about 1/3 higher than normal house insurance.

3.  Increasingly more municipalities and even the province are introducing regulations.   In Niagara-on-the-Lake they have existed since the 1980's and are strictly enforced.   The town of Niagara-on-the-Lake is currently chasing down about 100 vacation homes and other forms of short term rentals that do not comply with the by-law.   And no AirBnB does not exempt you from complying with any of the regulations!   AirBnB is just another on line travel agent, there isn't anything special  that magically shields you from complying with regulations.

4. Anytime you offer accommodation from less than a month, Revenue Canada under the HST rules, considers this a commercial activity.  This is a mine field of complicated and not well understood laws.   Finding an expert in vacation rental accounting and tax is very difficult.   However, if you don't do your due diligence, you could end up with a huge tax liability.    Like 13% of the current market value of your home !  Say you bought a vacation rental in Niagara for about $500,000  and you did vacation rental for 100 nights at $400 per night.   That is an income of $40,000 which means you need to register for HST.   So you do this for 5 years and make $100,000 in gross rental.  Then you decide to move in, this triggers a liability on the deemed current market value.   Now your house is worth $700,000, the hst liability would then be $91,000.  Yep almost every single penny you earned goes to pay tax to Revenue Canada.   No kidding!!!  So there are ways to mitigate this, but you need an expert in vacation rental accounting, tax and law!

So be ware, all those that fall for the notion of making a few bucks doing vacation rental.  It doesn't matter of you are in Niagara-on-the-Lake or cottage country,  doing this business in Ontario is extremely complicated!!

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