The Airbnb Tenant from Hell

Imagine your peaceful cottage weekend being hijacked by Airbnb party animals.

In this episode of Beneath the Law, Gavin Tighe and Stephen Thiele dive into the legal and ethical quagmire of short-term rentals in Ontario and beyond. 

They unpack a shocking case from Milton where a tenant secretly turned a landlord’s home into an illegal Airbnb operation—complete with unauthorized renovations and fire code violations—then had the audacity to sue the town for millions. 

Listen For

2:20 The Airbnb Lawsuit from Milton
4:45 Licensing, Liability & a $4 Million Claim
6:05 Justice, Balance & Vacation Property Economics
20:07 Charter Rights vs. Economic Interests
22:26 Who Really Pays the Fines?
24:40 Asset Devaluation & Changing Laws
 
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Contact Us

Gardiner Roberts website | Gavin email | Stephen email  

Transcript

Gavin Tighe (00:01)

Well, this is great because every weekend I got a new group of yahoo's in here who are, you know, ripping it up and it's like their big party weekend of the summer every single weekend. So people who want a cottage for peace and quiet, all of a sudden, you know, they're living beside animal house next door and every weekend it's a new set of animals.

and welcome to the next episode of Beneath the Law I'm Gavin Tighe, Stephen Thiele, my buddy and good friend. How are you this morning?

Stephen Thiele (00:36)

I'm great, I didn't have to fight a lot of traffic congestion, we'll talk about that later. And, ⁓ what can I tell you, it's beautiful day here in the Six.

Gavin Tighe (00:47)

It is a lovely day in Southern Ontario. Very few of those in the last six months, and we finally are into spring. And I think that's uplifting everyone's spirits. And I was joking that it's been a long time since there were leaves on the trees in spring and leafs in the playoffs at the same time. here we

Stephen Thiele (01:09)

we

are a hundred percent but not a great goal last night and ⁓ yes morgan riley got a hat trick but not in the best way

Gavin Tighe (01:18)

No, although I, someone was telling me that the, just also witnessed the appointment, I guess, of the new Pope. He is the 267th Pope. And I take great comfort in that because that 1967, of course, is the last time the Leafs won the Stanley Cup. And I think that's, you know, divine providence is in motion here.

Stephen Thiele (01:43)

Yeah, well, I'm not a Roman Catholic, but I'll leave that to ⁓ those who are Roman Catholic to draw that link.

Gavin Tighe (01:50)

Why not? You'll take as a lead. Anyways, speaking of, speaking of hope, ⁓ an interesting dilemma. There's this, ⁓ constant seems to be a constant battle, as we live in the age of Airbnb and other short-term rentals with people who, ⁓ we won't say own because I think the case is interesting in that way too, but a recent case.

Stephen Thiele (01:52)

We'll take it we'll take anything in Toronto

Gavin Tighe (02:20)

out of Milton, ⁓ and the imposition of short term rental bylaws by any number of municipalities banning or restricting the ability of people to rent out their property, ⁓ to short term rentals through apps like Airbnb, and, or verbal or what have you, ⁓ and a lawsuit that came out of that. So Stephen, why are you?

set the table, if you will, for this interesting little foray into the justice system.

Stephen Thiele (02:57)

Yeah, and I find this to be a remarkable case because of the factual background and I will not ⁓ I will try to be short or brief with respect to it. So we have in the town of Milton, they introduced a bylaw to basically regulate the ⁓ rental of a property for short term purposes, ⁓ 28 days or less. ⁓ And a tenant. A tenant ⁓ rented out

his landlord's house ⁓ advertising it on Airbnb for short-term rental. The landlord had not authorized the use and there was no license. So in Milton, you need a license to operate short-term rental. And the tenant was advertising the property. The landlord found out about it and complained. Fire officials and town officials went out to the property and

the tenant was even boasting that he was using it as a short-term rental a number of fire code violations were found the tenant had renovated the property to add rooms and lo and behold ⁓ a order was made that basically the tenant comply with all the fire code ⁓ safety issues that were found that the tenant not

⁓ advertise the home for short-term rentals and then he turns around and says the town ⁓ he says the town and says that the bylaws illegal and and actually ⁓ also claimed that he was being financially ruined ⁓ by milton and wanted to something like four million dollars

Gavin Tighe (04:45)

Nice work if you can get it. mean, think, sure. So just going back to the few interplay of a few interesting legal concepts here. So first of all, bylaws are, you know, they're, they're very becoming very, very common. I know that you had an altercation with the municipal authority in the great state of Hawaii with a, and

Stephen Thiele (05:09)

We're still dealing with that altercation and I'm actually very well versed in terms of short-term rental ⁓ industry and bylaws or laws that are trying to impact that industry. There are a lot of jurisdictions, you say, Gavin, that are dealing with this issue. see it as ⁓ cities, see it as a way to create more affordable housing. I think studies have suggested that that's not

the case. In certain tourist areas, you know, where you have ships come in, let's say into port in Spain, Barcelona, you have, you know, the influx of 30 or 40,000 people at the same time. So, you know, the local inhabitants are complaining. ⁓ But it's, it's look, it's a kind of uneven problem.

Gavin Tighe (06:05)

So, you know, I do think though that let's just, law is always about balance of interest. So let's talk about the two sides of the coin. And there's always two sides of a coin. There's a reason why, you know, when you see those statues of Leedy Justice, she's got the scale with two sides of it. So both sides of the equation, you know, have some merit and certainly there's a political side to it. So your point is well taken because a lot of people buy

⁓ holiday properties or recreational properties or other types of properties thinking, look, you know, I can carry this property because it's going to earn income for X number of months a year that I'm not using it. And that will help me to carry the cost of it. And then I'll get my use of it as well. Or, and then there are other people, I suppose, who buy properties purely for investment purposes that they buy, you know, a property for X dollars and they figure I'll make X.

you know, X a week out of this thing. And over the course of the year, I'll make this much money and it'll be a profitable enterprise for me to carry that property. So there's, there's a legitimate commercial expectation and people go into these properties. that, frankly, that equation, I mean, they, they buy the property thinking it's going to earn X amount of dollars. Therefore it's worth whatever. mean, when you buy any asset, any income producing asset, you look at, you know, what

how much income can it produce and what something is worth as an income producing asset is generally a function of how much income it can produce. So people go into it with that math and that equation. And when you get municipalities, and on the other hand, you hear all sorts of horror stories, like in cottage country in Ontario, there are tons of municipalities that have put in bylaws that say no short-term rentals. And the reason for that is that other residents are saying, well, this is great.

Because every weekend I got a new group of Yahoo's in here who are, you know, ripping it up and it's like their big party weekend of the summer every single weekend. people who want a cottage for peace and quiet, all of a sudden, you know, they're living beside animal house next door and every weekend it's a new set of animals. So that's, that's a legitimate, think a legitimate reason why you would want to restrict that.

Stephen Thiele (08:26)

Sure, of course. look, there are certain areas in the world that are basically tourist destinations. a government at a certain point in time has made a decision that a certain area should be allowed to put in a short-term rental, or you should be able to use your units as short-term rentals. And you have 95 % of owners in, let's say, a condo

complex renting their properties out of short-term rentals and i think that's legitimate ⁓ in cottage country i think the ⁓ issue is that you have ⁓ groups of people who are local inhabitants and all of a sudden you have a neighbor you know a handful of neighbours are using their properties a short-term rentals and so you can see where a municipality wants to restrict that use ⁓ because it does impact the ⁓ actual local residents

but you know getting back to this case what i find remarkable is the tenant just basically using the landlord's property without authorization ⁓ for short term rental and then and then more fighting property well

Gavin Tighe (09:42)

It highlights a couple of big issues here in Ontario, which is the perennial complaint of landlords that it's virtually impossible to get rid of a bad residential tenant. Right. And so here, this guy, we say he's a residential tenant, he wasn't a residential tenant. He was renting a home to turn it into a hotel and leveraging his

Residential tenancy, which wasn't residential at all, was clearly for a commercial purpose.

Stephen Thiele (10:17)

yeah and then in fact fire officials said that that basically had converted a residential ⁓ use into a lodging ⁓

Gavin Tighe (10:28)

⁓ Right. And that raises a whole, I mean, you you step back and you think about it, that raises a whole series of other issues. mean, someone who, a hotel has way more, ⁓ safety requirements, et cetera, you know, all sorts of regulation on it as a commercially, ⁓ run lodging houses, put it, right. Then, then your house does, I mean, you know, there's, there's all sorts of regulations and for good reason that if you're in a hotel,

Stephen Thiele (10:29)

You're already

Gavin Tighe (10:57)

⁓ govern the operation of the hotel that don't govern you in your own home.

Stephen Thiele (11:02)

Yeah, you've got sprinkler systems that need to be put in. think that's probably one of the largest ⁓ regulations from a fire safety perspective. And you're right, there's other regulations. ⁓ Taxes are different if you're operating a commercial business versus ⁓ a residential business. ⁓ So there's lots of things. But you should.

Gavin Tighe (11:26)

And the,

⁓ and the other, this case is an object lesson in that because we had some, this is literally the tenant from hell. You get some guy rents your house and you're getting whatever a month, which is great. And then all of a sudden he gets in there and he converted the basement into like a whole series of like little compartments, turned the laundry room into a apartment. And he basically turned it into a rooming house and.

That sounds, you know, pretty scary when you think about it, because we talk about regulations. There's a reason why you've got to have sprinkler systems in a hotel. There's a reason why you got to have fire escapes in a hotel because you get, you know, that number of people in a building and, know, something happens that there's a fire and all of a sudden it could be a real tragedy. I if you had, you know, 15 people sleeping in the basement of your house,

And they're in their little compartments that you've created with plywood and two by fours. And all of a sudden there's a fire and there's one exit. I mean, there's no other way to get out of the place. I mean, you could think of, it could be pretty horrific in terms of the, the tragedy that could incur, it could be incurred in that type of situation. So those regulations exist for a reason and that pretty good reason.

Stephen Thiele (12:45)

100%. And, you know, look, there are examples of rooming house fires or people getting in situations where they're leasing ⁓ a bedroom or a basement and there's a fire and, you know, people do die in those fires because they have no escape route. you know, it's like you said, this is a remarkable case that the tenant turns around and brings an application.

⁓ a lawsuit of proceeding against the ⁓ and says that you can't put this regulation in place that it's illegal and the court ⁓ basically says you know well what are you talking about ⁓ the municipal act does allow ⁓ townships to impose these kinds of regulations to regulate ⁓ short-term rental property use ⁓ what i find remarkable too Gavin is that

Airbnb allowed the posting ⁓ of these ⁓ units without a license. And my understanding of some of these platforms is they're supposed to check that they are licensed. here we have the Wild Wild West, which is causing a problem.

Gavin Tighe (14:02)

They, they all do that. This is the same old thing. A lot of these online apps like Uber is another one that I've understand. They take the position that they're not there. All they are is a intermediary between you and. A independent contractor on the other end. And similarly with Airbnb, I don't know. They would, I don't know what, uh, obligation they would have, uh, in regards to looking at.

You know, the, the, the properties that are listed on their site, uh, and whether or not there would ever be a claim against them, suspect it'd be very difficult. The other thing too, is that the municipality you've got, you know, Airbnb, I don't know where their servers are. Uh, but wherever their servers are, knows? I mean, you know, Timbuktu and you know, the town of Milton would have no ability to regulate Airbnb. They could, you know, it's, it's online. I mean, it's an interesting issue that as we live in a, in a

virtual world these days, who governs the internet?

Stephen Thiele (15:04)

Yeah, well, Gavin, that would be an interesting point ⁓ for a conflict of laws analysis in terms of if Uber ⁓ or Airbnb is advertising a property in Milton, they're carrying on business ⁓ in Milton. So I think an Ontario court would have jurisdiction over that. It's like a ⁓ internet defamation.

right if i read the defamation in ontario the ontario court would have a jurisdiction to deal with that uh... de famatory statement even if it's on the server in do by your or you know so some other part of the world so you know that that's an interesting question and and i can tell you from experience uh... that uh... municipal governments are beginning to basically uh...

at airbnb you know and here's again another cost of the taxpayer ⁓ with respect to properties that are improperly being advertised as short-term rental when they don't have a license and it causes a problem you know airbnb icons ⁓ like i say speak from ⁓ the why perspective has actually been ⁓ liaising with maui county government to remove properties that are not in a short-term rental zone

Because it does cause a problem. causes a problem for legitimate short-term rental owners.

Gavin Tighe (16:32)

Yeah. I mean, think the whole, the whole issue is what we see at the moment is really how commerce has evolved so quickly. ⁓ and regulation really lags behind it. I mean, in this particular instance, that, know, this, this situation that's created for the owner of this property, I mean, curiously, the tenant flips the property into turns it into a rooming house.

gets a whole series of fines and orders that he can't do that. ⁓ take Sue's municipality at the, in the epilogue of the story, did the, the, the landlord ever managed to get rid of this guy or is he still in the house?

Stephen Thiele (17:14)

well and and it's not clear from from the decisions ⁓ the tenant has been removed it almost appears as though from the comments made by the interior court of appeal ⁓ that upheld the lower court decision saying that the town could enforce its bylaw ⁓ seems to suggest that ⁓ you know the landlord has other routes that that the law that they could take

Gavin Tighe (17:39)

have good

Stephen Thiele (17:41)

Yeah, exactly right. Cause they need to go through landlord tenant board to evict a tenant. See, because that's a residential tenancy and, ⁓ you know, what does the landlord go to court to recoup costs for the, ⁓ unauthorized renovations? Like who knows what this property looks like now.

Gavin Tighe (17:47)

P29

⁓ 100%. And I mean, does anybody think for one second that the tenant is just still not going ahead and doing it anyways? I mean, I would suspect that if I went on Airbnb today, I might find that house listed for a short-term rental at a very cheap price if I wanted to sleep in the laundry room down in the basement of this.

I mean, Milton's a lovely little town, but it's not exactly a vacation destination for a lot of people. mean, these are, these are clearly more than, ⁓ short-term rentals in the, in the usual sense of the word. This is basically a rooming house.

Stephen Thiele (18:39)

No, well, for sure. look, Milton's probably like halfway between Toronto and Niagara Falls, so who knows what's being offered there. you know, again, I find it remarkable. Here we have this tenant basically making money off of somebody else's property. Like, you know, we don't see in terms of the decision the financial analysis or how much the tenant was making, but...

I'm pretty sure the tenant was probably making more money than he was paying in rent. yeah.

Gavin Tighe (19:11)

Yeah, well that's a

hundred percent. It's a pretty bad business model if you're not making more than you're spending. And the leverage here would be I'm paying X dollars in rent and I'm getting Y net, net net afterwards. mean, the tenant was probably annoyed. He invested all that money and, know, plywood and two by fours and buildings, enclosures. And, now his investment, ⁓ was, was being,

stopped and he was he was gonna be out of pocket i think that any he had the fines to it i suppose he had a

Stephen Thiele (19:43)

big problem. again, if I'm a landlord, what kind of recourse do I have against the tenant? you know, in terms of drafting a residential lease, you know, do you now need to put in a clause that the tenant shall not ⁓ advertise the property for a short-term rental or otherwise? And then, you know, if you find out, sue for breach of contract?

Gavin Tighe (20:07)

Well, you know what's interesting here, I do think from a legal perspective and a larger issue is the creative argument of the tenant to say that his charter rights have been violated, but on a purely economic basis. And I think that fundamentally there is no charter protection for economic interests.

Stephen Thiele (20:24)

That's my understanding from law school, but I haven't taken constitutional law in over 35 years. But I think that's correct. mean, generally, the Charter does not protect an economic interest, just as the Charter in Canada does not protect a property right. you know, like he had no evidence ⁓ in any event, and the court just basically said, well, there's no evidence and.

know, Section 7, ⁓ your rights to life, liberty, and security of the person weren't breached. And what equality right was breached? You know, that was Section 15. So the tenant had no evidence. I mean, I think the tenant was basically ⁓ using the court proceeding ⁓ as a delay tactic to prevent the enforcement against him and continue to make money ⁓ while he could.

Gavin Tighe (21:15)

Sure. I mean, how long did it take for this proceeding to get through the courts? Six years? Five years?

Stephen Thiele (21:21)

Exactly.

A few years, two, three years at least.

Gavin Tighe (21:26)

Right. And he's a self-represented litigant, right?

Stephen Thiele (21:29)

I believe so. think that's

Gavin Tighe (21:31)

Never. So, and I'm, I'm taken, he's never paid any of the costs award. I doubt he's ever paid the fines. And then you re it raises another issue. I mean, what would be the enforcement procedure? I mean, the fines are, are, are they personal or are they against the property owner? I generally speaking, a municipality has the right to levy charges against a property owner. So this, this landlord, I don't know the answer to this in this particular case, but.

The recourse is generally speaking an order against the property, which would be against title to the property. Now as a residential tenant, ⁓ the operator of the rooming house here had no title to any property. So the town may have been in fact making orders that would ultimately be encumbrances on the title to the landlord who was the guy getting kind of shafted all the way through the process.

Stephen Thiele (22:26)

Yeah, and look, mean, maybe that's why the landlord was the one that brought it forward to kind of cut a deal behind closed doors to make sure that the town didn't enforce against the landlord. Who knows? look, I mean, maybe the landlord wants to get rid of the tenant and will convert the house into an Airbnb and make more money. I don't know.

Gavin Tighe (22:50)

Maybe the landlord was annoyed that the tenant was making all this money and he didn't want to leave the cheese on the table. Sure, I mean, it's a lucrative way to operate ⁓ residential property. If it's grossing more than you would with a single tenant, that makes commercial sense to me. But obviously there's a whole whack of other considerations to go into that.

Stephen Thiele (23:14)

⁓ for sure. Look, you know, my experience with short term rental Gavin is that most people don't make a heck of a lot of money out of it. Yeah, you're absolutely, absolutely right. That basically it covers the costs of your property. You know, may give you a few extra thousand bucks ⁓ in your jeans to spend. But a lot of these things don't make a lot of money. You have to be basically operating, you know, I would say half dozen

properties to really make it a ⁓ legitimate income. who knows what the... Of course, well, it subsidizes the cost for the tenant for sure.

Gavin Tighe (23:48)

Right.

Yeah. So, I think that, you know, it raises an interesting question from a valuation perspective. If someone did buy a property thinking that they could rent it out and doing that math in their head and paid X amount of dollars for it. And then all of a sudden the rules changed and their ability to earn income off that capital asset was gone. That would effectively devalue the asset. Generally speaking, you know, if I could, if I could use my truck,

for example, if you can use a truck for a business and I can earn money out of it, it's worth more than if I truck that I can't use for a business. you know, theoretically any capital asset is worth more if it can earn income. And if it no longer can earn that income, it's going to be worth less.

Stephen Thiele (24:40)

Well,

we're seeing that in Hawaii right now. And unfortunately, I just read a report from an economist that Maui is in a recession. ⁓ And part of it is the spill to ⁓ remove rights on short-term rental. And the property values have gone down quite significantly. And it's creating a problem. anyway, look, Gavin, these are interesting issues. And part of why we dig beneath the law ⁓

First of all, no one is above the law, so everyone is beneath it. But it's to talk about these issues that arise out of these cases because the courts make a decision, but they have ⁓ impacts beyond the law.

black and white letter of the law and I think it's important if you're a law student out there we thank all of our listeners and watchers out there this is the way you need to think about decision

Gavin Tighe (25:42)

Right. there's always two sides to every coin, as you know, as a metal detecting affectionado. And there's always two sides to every issue and always two sides to every policy. Anyways, great, great discussion, Stephen. Thanks very much. And thank you all again for listening.