A friend told me that she went to the Caribbean for a holiday on a deal and it cost her $1,000 for 10 days.

While she was away, she rented out her downtown Toronto condo on Airbnb for $1,500. Sounds good. But is what she did legal in Ontario?

Here’s what Airbnb is all about:

Airbnb is a website that connects travellers from all over the world to homeowners who are looking to make extra money by renting out their entire homes, or in some cases, an extra room, for short periods of time. In just 6 years, the company has grown to now have over 550,000 room listings available on their website.

You hook up with your homeowner through the website and Airbnb takes a cut of the money that you pay.

You can see the appeal: Travellers can find a place in some of the best parts of a city such as Paris, London or San Francisco and pay a fraction of what it would cost to stay in a hotel. Some travellers prefer to stay in a private home so that they can obtain an authentic local experience. Still others warn that you must do your due diligence in advance and check for references so you are not disappointed when you arrive.

The company offers insurance to a host to cover some damages that may be caused by a traveller, but there are many exclusions, so read the policy carefully.

The company, which doesn’t own any hotels, is now valued at over $10 billion, more than many of the large hotel chains.

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As you can imagine, the hotel industry is not happy about this and some cities are fighting back. In New York City, for example, it is now illegal to rent your home for less than 30 days. Quebec has also passed laws against renting homes for short periods of time.

Is this legal in Ontario? While Ontario doesn’t have laws expressly forbidding renting your home for short periods of time, there are other matters to consider.

For example, most condominiums have rules that do not permit short-term rentals. This is primarily due to security concerns, as the owners are wary of different people just showing up each night at a neighbouring unit. It is interesting that property addresses are not included on the airbnb website. But website visitors can still find out about the property through pictures, information about the hosts and reviews by other travellers. If you’re renting your condo out and anyone in the building complains, the board could bring an action against you and you will likely have to pay the board’s legal fees if you do not stop.

I am also hearing that many tenants are also doing this without their landlord’s permission. This is probably a violation of Ontario’s Residential Tenancies Act, since a tenant is not permitted to sublet their unit for an amount greater than what the landlord is charging. In most cases, the daily rent charged will be much higher than what the tenant is paying in rent.

If you do rent out your home for short periods of time, you’d better advise your insurance company. While this may cause your premiums to rise, failure to advise could result in your insurer denying coverage if something does happen during the stay, since the risk increases when strangers use your home.

As you can imagine, the hospitality industry is not pleased with Airbnb. Tony Elenis, President and CEO of the Ontario Restaurant Hotel and Motel Association, sent me a list of all the regulatory burdens that hotel and motel operators must follow, including items such as having proper business and liquor licenses, Health and Safety requirements, proper signage and customer identification. As Tony states:

“The hospitality industry is extremely regulated and topping the list is the rules on health and safety of our employees and guests. We take pride in compliance here. This takes much training and understanding of meeting these objectives that only comes within a business structure and people involved in this profession.”

Even bed and breakfast companies must obtain proper licenses to operate from their local city and are subject to health and safety inspections to ensure the safety of their guests.

If you want to make extra money on Airbnb, be aware that if one neighbour complains, you may be shut down. If you want to use the site for a cheaper travel experience, remember to do a lot of due diligence in advance, to make sure you are not disappointed later.

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Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com