Landlord Protection Against Frequent, Short-Term Sublets

As platforms such as Airbnb become ever more popular, tenants will increasingly seek to sublet their units on a frequent, short-term basis – potentially to even turn a profit. Although in principle sublets benefit both landlords and tenants, the unfortunate reality is that if used improperly they can create a major problem for landlords. For example, if tenants seek to repeatedly sublet their unit to various individuals, it can result in:

• security concerns;
• health risks, such as leading to the spread of COVID-19;
• additional wear and tear on the unit and building; and
• excessive administrative work.

The difficulty is that tenants have an automatic right to sublet their unit pursuant to the Residential Tenancies Act. A landlord may only deny a tenant’s request to sublet a unit if the denial is reasonable and not arbitrary in the circumstances. More specifically, s. 9B of the Act states:

9B (1)   A tenant may assign, sublet or otherwise part with possession of the residential premises, subject to the consent of a landlord.

(2)   A landlord may not arbitrarily or unreasonably withhold consent or charge for consent sought under subsection (1) unless the landlord has actually incurred expense in respect of the grant of consent.

Fortunately, the Nova Scotia Small Claims Court in CAPREIT v. Wagstaff, 2020 NSSM 27 recently overturned the order of the Director of Residential Tenancies and affirmed that landlords can protect themselves and their other tenants against the negative consequences of frequent, short term subleases.

The tenant, Mr. Wagstaff, was absent from his unit for 6-8 weeks at a time for his employment. Mr. Wagstaff sought to sublet his unit using Airbnb for one or two nights at a time when he was away. Potentially, this could have resulted in up to 56 different sublets per absence.

The landlord withheld its consent on the basis that it would raise untenable security, operational, and cost consequences for the landlord and other tenants. Adjudicator O’Hara held that the landlord’s concerns were reasonable and not arbitrary, stating:

I cannot conclude that the Landlord’s position here in denying short term Airbnb rentals was unreasonable.  To the contrary, there is a credible rationale behind that position.  Practically and functionally, the Tenant’s request here would, if acceded to, have the effect of converting his unit and perhaps others by result, into hotel units for periods of four to six weeks or longer while he was at sea.  That is a significant change and one that is inconsistent with the Landlord’s reasonable concerns and, by extension, to the reasonable concerns of other tenants in the building.

Critically, Adjudicator O’Hara recognized the negative impacts of frequent, short-term sublets, and ensured that the landlord’s legitimate concerns were guarded. Landlords are in the business of operating long-term, residential units, not hotels. Adjudicator O’Hara’s closing comments, however, emphasize that every case turns on its specific facts – this decision is not a blanket prohibition against short-term subleases.

In order for landlords to protect their legitimate concerns, landlords must include protections in their leases, and should have polices in place for sub-tenant applications.

Cox and Palmer’s lawyers are available to assist with any questions regarding residential tenancies, or to further discuss how frequent, short-term subleases may impact your business.