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Municipal - Short-Term Rentals. Township of Oro-Medonte v. Oro-Medonte Association for Responsible STRS
In Township of Oro-Medonte v. Oro-Medonte Association for Responsible STRS (Div Court, 2024) the Divisional Court dismissed an appeal (filed with leave) of a ruling of the Ontario Land Tribunal (OLT), which itself repealed an amending bylaw to a municipality's zoning by-law. The issue of concern was "disruptive short-term rentals" (Airbnbs).
These quotes illustrate one municipality's efforts to regulate in the much-vexed area of 'short-term rentals' (eg. Airbnbs), and related legal reasoning applied in the OLT and Divisional Court appeals:[3] Following a six-day hearing, the Tribunal gave an oral decision on March 22, 2022 granting the appeal and repealing By-law 2020-073. The Tribunal released written reasons on August 24, 2022. The Tribunal found that By-law 2020-073 did not represent good planning and was not in the public interest.
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C. Legislative and Procedural History
[7] To understand the Tribunal’s decision about the nature and impact of By-law 2020-073 on short-term rentals in the Township of Oro-Medonte, it is important to set out how the zoning by-laws have defined and regulated residential dwellings over time.
[8] The Township of Oro-Medonte passed a comprehensive zoning by-law in 1997. By-law 97-95 created six residential zones, two commercial zones, five industrial zones and eight other zones for specified land uses in the Township. By-law 97-95 identifies what types of “dwellings” are permitted in which zones. For example, single detached dwellings, which are defined as buildings containing one dwelling unit, are permitted in five of the six residential zones. Semi-detached dwellings and apartment dwellings are only permitted in one of the residential zones and the “Village One” zone. Unless a land use is expressly permitted in a particular zone under By-law 97-95, it is prohibited.
[9] The term “dwelling unit” was originally defined in By-law 97-95 as follows:A suite which functions as a housekeeping unit used or intended to be used as a domicile by one or more persons, containing cooking, eating, living, sleeping and sanitary facilities, and having a private entrance from outside the building or from a common hallway or stairway inside or outside the building. [10] In 2015, the Township enacted By-law 2015-192 which, among other things, changed the definition of “dwelling unit” to the following:One or more rooms in a building, designed as, or intended as, or capable of being used or occupied as a single independent housekeeping unit and containing living, sleeping, sanitary and food preparation facilities or facilities for the installation of kitchen equipment and has an independent entrance. For the purposes of this By-law, a dwelling unit does not include any commercial accommodation or a recreational trailer. [11] The term “commercial accommodation” was not defined in either By-law 97-95 or By-law 2015-192.
[12] One of the main issues in this appeal is what the phrase “a dwelling unit does not include any commercial accommodation” means: Does it mean that any lease or rental of a dwelling unit for money is prohibited as a “commercial accommodation”? Or does it mean that providing accommodation as a commercial endeavour like a hotel, motel or bed and breakfast is prohibited?
[13] In 2017, the Township started to receive complaints about properties being rented out for a few days at a time (generally over weekends) and the problems those rentals were causing including noise, vandalism, parking, garbage and septic impacts. Township staff presented a report to the Oro-Medonte Township Council about the problem. The report identified three possible responses: (1) amend By-law 97-95 to define short-term rentals and identify where short-term rentals would be permitted, (2) create a registration and licensing scheme for short-term rentals, or (3) continue to monitor the situation.
[14] In July 2018, the Township enacted an interim control by-law (By-law 2018-071) prohibiting new short-term rentals pending the completion of its study of the issue. Article 1 of By-law 2018-071 stated that only those short-term rental accommodations in existence on the date the by-law was enacted could be maintained. By-law 2018-071 defined “short term rental accommodation” as follows:A dwelling or any part thereof that operates or offers three or more bedrooms as a place of temporary residence, lodging or occupancy by way of concession, permit, lease, license, rental agreement or similar commercial arrangement for any period of 30 consecutive calendar days or less throughout all or any part of the calendar year. Short term accommodation shall not mean or include a motel, hotel, bed and breakfast establishments, hospital or similar commercial or institutional use. [15] The 2018 interim control by-law was extended for a second year in June 2019.
[16] By-law 2020-073 – the focus of this appeal – was enacted in July 2020. It was intended to replace the interim control by-law as a permanent solution to the short-term rental problem in the Township. The preamble to By-law 2020-073 states the Township wished to “clarify” the existing prohibition of commercial accommodations in dwelling units in By-law 97-95. By-law 2020-073 simply added the following definition of “commercial accommodation” to By-law 97-95:Commercial Accommodation – means temporary accommodation, lodging, or board and lodging, or occupancy in a building, dwelling or dwelling unit, hotel, motel, inn, bed & breakfast, or boarding house by way of concession, permit, lease, license, rental agreement or similar commercial arrangement for any period of 28 consecutive days or less throughout any part of a calendar year. For the purposes of this By-law, Commercial Accommodation does not include Village Commercial Resort Units. The effect of By-law 2020-073 was to prohibit any rental for 28 days or less in a residential zone, including the rental of family cottages.
[17] The Oro-Medonte Association for Responsible STRS appealed By-law 2020-073 to the Tribunal, arguing that By-law 2020-073 prohibited a well-established and accepted land use in the Township – short-term rentals – in a manner that was disproportionate to the harm the Township was trying to address.
[18] On the appeal, the Township argued that By-law 2020-073 did not create a new land use prohibition. The Township argued that under the 2015 definition of dwelling unit, all rentals, including short-term rentals, were a commercial use of property and were prohibited in areas zoned as residential. The Township argued that By-law 2020-073 created a new permitted land use by clarifying that longer-term rentals (of more than 28 days) are expressly permitted in residential zones.
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E. Tribunal’s Decision
[21] The parties to the hearing at the Tribunal agreed there was a problem with some short-term rentals in the Township. The parties also agreed that the Township had the authority to amend the zoning by-law to deal with short-term rentals. The issue was whether the means chosen by the Township were consistent with the Planning Act, the Provincial Policy Statement, the provincial Growth Plan, the County’s Official Plan and the Township’s Official Plan, and whether the means chosen represented good planning.
[22] The Tribunal understood there was a disagreement between the parties over whether By-law 2020-073 created a new permitted land use or created a new prohibited land use. The answer to that question turned on the meaning of the phrase “a dwelling unit does not include any commercial accommodation” in the 2015 definition of “dwelling unit”.
[23] The Township argued that by changing the definition of “dwelling unit” to include the phrase “a dwelling unit does not include any commercial accommodation”, any rental of any dwelling unit for money was prohibited no matter the length of the rental. The Township argued that by adding a definition of “commercial accommodation”, By-law 2020-073 “clarified” that rentals of more than 28 days are permitted in the Township. In other words, the Township argued that By-law 2020-073 created a new permitted land use.
[24] On the other hand, the Association of Responsible STRS argued that the addition of the phrase “a dwelling unit does not include any commercial accommodation” to the definition of dwelling unit could not reasonably have meant that all rentals were prohibited, including long-term rentals. The Association of Responsible STRS argued there would have been no need for the Township to enact an Interim Control By-law in 2018 or By-law 2020-073 if the 2015 amendment prohibited the rentals of all residential dwellings, including the problematic short-term rentals, as the Township suggested. The Association of Responsible STRS argued the term “commercial accommodation” in the 2015 amendment must have meant something other than simply renting out a dwelling unit for money. If the Association of Responsible STRS was right, By-law 2020-073 created a new prohibition on short-term rentals.
[25] The Tribunal rejected the Township’s argument and found that By-law 2020-073 created a new land use prohibition under the guise of a clarification. The Tribunal found that By-law 2020-073 did not represent good planning and was not in the public interest because its negative impacts were disproportionate to its potential benefits. The Tribunal found that By-law 2020-073 was not an effective tool to address the problem of disruptive short-term rentals and would have an “unintended punitive” impact on “benign, non contentious” cottage rentals. In other words, the Tribunal found that By-law 2020-073 was overbroad in that it would prohibit short-term rentals that posed no problem within the Township.
[26] The Tribunal also considered whether the result of the appeal would have been different if it had accepted the Township’s argument that By-law 97-95 prohibited all rentals of residential units. The Tribunal found that if By-law 97-95 prohibited all residential rentals as the Township suggested, By-law 2020-073 was not necessary to address the problem of disruptive short-term rentals. If all residential rentals were prohibited under the 2015 definition of “dwelling unit”, the Township could use the existing by-law to shut down disruptive short-term rentals without any amendment. The Tribunal also found that if the existing by-law was sufficient to address the problem, limiting residential rentals to those longer than 28 days unnecessarily targeted historically acceptable rentals that were not disruptive, which was contrary to the public interest.
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a. Did the Tribunal err in finding that By-law 97-95 did not prohibit all rentals?
[33] The Township argued that adding the phrase “a dwelling unit does not include any commercial accommodation” to the definition of “dwelling unit” in 2015 had the effect of prohibiting any dwelling unit from being rented for money no matter the length of the rental. The Township argued that by adding a definition of “commercial accommodation”, By-law 2020-073 “clarified” that rentals of more than 28 days are permitted in the Township. In other words, the Township argued By-law 2020-073 created a new permitted land use.
[34] The Tribunal rejected the Township’s argument and found that “commercial accommodation” must have meant something other than simply renting a dwelling unit for money. I find the Tribunal was correct in its interpretation of the 2015 definition of dwelling unit.
[35] I find the phrase “commercial accommodation” in the definition of a dwelling unit is ambiguous. It could mean that any accommodation for which money is exchanged is a commercial accommodation or it could mean that temporary accommodation provided as part of an ongoing commercial enterprise akin to a hotel, motel, resort or bed and breakfast are prohibited as commercial accommodations. To resolve this ambiguity, the court must undertake a contextual and purposive approach to find a meaning that harmonizes the wording, object, spirit and purpose of the By-law.
[36] The starting point of a contextual analysis must be the Planning Act, which provides the overall framework for land use regulation in the Ontario. Section 2 of the Planning Act enumerates several matters of provincial interest that municipalities must consider when carrying out their responsibilities. The list includes “the adequate provision of a full range of housing, including affordable housing”: Planning Act, s. 2(j). Enacting a definition of “dwelling unit” that prohibited all rentals in areas zoned as residential would be inconsistent with the municipality’s obligation to provide a full range of housing options, including affordable housing.
[37] Municipal decisions must also be consistent with policy statements issued by the Province under the Planning Act: Planning Act, s. 3(5). The 2014 and 2020 Provincial Policy Statements directed municipalities to provide an “appropriate range and mix of housing” including housing that is affordable to low- and moderate-income households: 2020 Provincial Policy Statement, ss. 1.4.1 and 1.4.3, 2014 Provincial Policy Statement, ss. 1.4.1. and 1.4.3. Again, enacting a definition of “dwelling unit” that prohibited all rentals in areas zoned as residential the Township would be inconsistent with the Provincial Policy Statements.
[38] If the term “commercial accommodation” is to be interpreted in a manner that is consistent with the Planning Act and the Provincial Policy Statements, it must mean something other than simply renting a dwelling unit for money. The Tribunal was, therefore, correct to reject the Township’s argument that as of 2015 renting a dwelling unit was prohibited.
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[44] The Tribunal’s decision that “commercial accommodation” must mean something other than simply renting a dwelling unit for money is also consistent with the justification given by the Township for enacting the interim control by-law in 2018 pending a final decision on how to regulate short-term rentals. In the preamble to the 2018 interim control by-law, the Township wrote that the purpose of the interim measure was to “temporarily prohibit” short-term rental accommodations pending a review of the issue. There would have been no need to temporarily prohibit short-term rentals pending a final solution if all rentals, including short-term rentals, were already prohibited in areas zoned as residential under By-law 97-95.
[45] Finally, the Tribunal’s interpretation of “commercial accommodation” is consistent with the text of the interim control by-law itself. By-law 2018-071 specifically allowed “short term rental accommodations in existence as of the date of the passing of this by-law and used for such purposes” to continue. This language is inconsistent with the position taken by the Township on the appeal to the Tribunal that all residential rentals had been prohibited as commercial accommodations since 2015. If all residential rentals had been prohibited since 2015, there would be no reason to allow residents to continue an illegal, non-conforming land use.
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[48] I find the Tribunal was correct to find that the prohibition on “commercial accommodation” in the definition of “dwelling unit” could not have created a complete prohibition on all residential rentals in the Township. To accept the Township’s argument would have been inconsistent with the Planning Act, the Provincial Policy Statement and the position taken by the Township during the study and consultation period.
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