Archive for February, 2016

Renting on AirBnB? Things to Think About

Wednesday, February 24th, 2016

I watched a webcast today of a series of lectures on the law and temporary accommodation rental – renting through AirBnB and similar companies.  It is clear that with the advent of social media and the explosion in “online” business, that non-traditional methods of making money have grown.  Whether it is Uber for transportation or AirBnB for accomodation, times are changing – but that doesn’t mean that the law has changed.  And that was the topic of the lectures given on the webcast.

I should say at the outset that I use AirBnB all the time when I am travelling and I think it’s a great idea and I have had nothing but good things to say about the company.  I should also mention that AirBnB isn’t the only company doing this type of business, but I will mention it’s name only because it’s the name most people have heard of.

If you are thinking about renting out property through AirBnB or a similar service, then some of the things you should think about (as mentioned in the lectures) are:

1. Are you renting your place?  If so, then you may have problems with either the landlord or the other tenants in the building or with the authorities.  Examples include:

  • your lease could prohibit running a “commercial” venture in your residential apartment
  • subsection 134(3)(a) of the Residential Tenancies Act prohibits a tenant from subleasing a unit to a subtenant (and a temporary rental to a traveller would in most instances count as a subtenancy) for an amount greater than the rent which the tenant is paying.  So, if you are renting and paying rent to your landlord for $900 a month, for example, and in that month there are 30 days, then you are paying $30 a day in rent.  If you rent out your apartment through AirBnB or a similar service for, say, $40 a day, then you are in contravention of ss. 134(3)(a) of the Act.  This can mean, in accordance with paragraph 234(l) of the Act, that you can be charged with an offence and subject to a fine of up to $25,000 (as provided in section 238 of the Act)
  • if your “commercial” activity is discovered, the landlord could have reason to evict you simply because of this fact – even if you are not disturbing anyone
  • the landlord could also evict you if it turns out that your “guests” through AirBnB either cause damage to the property or disturb the other tenants

2. If you do not rent but you own your apartment, is it in a condominium?  If it is, then you could have problems with:

  • a term of the condominium declaration that restricts your ability to carry on this activity.  For example, the declaration could say that owners are only to use their units for single-family residential dwellings, or it might say that no commercial activities are permitted.
  • a term of the condominium’s by-laws
  • a term of the condominium’s rules

3. If you own your apartment, whether it is in a condominium or not, you could also have problems with:

  • existing zoning by-laws – for example, your house may be in a zoned residential area that does not permit commercial activities
  • existing licensing by-laws – you may be required to have a valid licence to carry on business and the failure to do so breaches the by-law
  • existing property standard by-laws

Now, when it comes to by-laws, lots of people think “well, as long as the City doesn’t know about it, I’m fine” or “what the heck, the City’s not going to do anything about this, they have bigger problems to deal with than my renting to some travellers from time to time.”  That may well be true, but Section 440 of the Ontario Municipal Act allows any taxpayer to bring an application to stop the breach of the by-law.  So, even if the City doesn’t do anything, your neighbour or neighbours who aren’t happy that there’s a parade of travellers going to and from your apartment or home and making noise, etc. can sue you for breach of the applicable by-law.

4. Will your insurance cover the situation?  Many “home” insurance policies cover only damage resulting from residential activities.  More importantly, many policies will expressly say that the insurance does not cover commercial activities.  If Mr. X is at your place because he has paid you to stay there, and then he damages something, there is a good chance that your insurer could deny coverage.  It’s probably not a big deal if Mr. X damages your couch.  It’s something completely different if Mr. X leaves the bathtub running and floods your place and the 3 neighbouring apartments immediately below you – that’s when you don’t want to hear that your insurance policy doesn’t cover the situation.

So, while it may be a good idea to make some money through renting your place out from time to time with services like AirBnB, it is also something that you should look into more closely to ensure that the money you make on the side doesn’t cost you more in the end than you expected.

Something to think about.

CALC

 

The Courts Can Rescue Your Contract … But Try to Avoid the Need for This (If You Can)

Monday, February 22nd, 2016

There has been a growing trend in contract litigation lately – the courts are more willing to step in and help an unfortunate party.

Example #1:  In the Supreme Court of Canada’s decision in Bhasin at the end of 2014, the Court held that there was a duty of good faith performance of contracts.  In that case, which can be found here, the plaintiff had a contract with the defendant which was automatically renewable unless notice of termination was given at least 6 months before the expiry of the existing term.  The defendant was found to have pressured the plaintiff to merge with a competitor and the trial court (and then the Supreme Court) found that when the plaintiff did not give in to the pressure and the defendant gave notice of termination (in accordance with the contract terms), that the defendant was not acting in good faith.  In doing so, the Supreme Court held that there was an implied term in all contracts that the parties would exercise their contractual rights in good faith.  [For more on this case, you can go to it or you can see my blog post from November 2014 on the case.]

Example #2: In May of last year, the Ontario Court of Appeal had a claim on a “guarantee” in Global Food Traders.  The “guarantee” was found in the following wording at the end of one paragraph:

“The Purchase Price shall be payable in 50 equal monthly installments of $10,000 commencing April 30, 2012 by post-dated cheques. If Mr. Massalin’s obligations are called upon pursuant to this Section he shall within three days provide the Seller with immediately available funds to cover any bounced or NSF cheques.”

The word “guarantee” does not appear anywhere in this wording and, accordingly, Mr. Massalin argued that this wasn’t an actual guarantee and he shouldn’t be found liable.  The Court of Appeal in its decision, which can be found here, did not have significant concern about the lack of the word “guarantee” and essentially found that it was clear that this was a guarantee obligation and that if there was any other possible understanding of this wording, Mr. Massalin had failed to provide what that possible understanding might be.

Example #3:  I had a trial last week in which my client said that there was a contract in which the defendants had agreed to share expenses 2/3 for them and 1/3 for him and this included payments on various leases that totaled approximately $100,000.  This was the arrangement, although only my client was named on the lease.  A few months into the leases, the other two companies refused to pay on the leases (one of them even shutting down business) and took the position that their names were not on the leases, so they had no obligation to pay.  Unfortunately for my client, there was nothing clearly setting out in writing that there was the agreement to pay.  Instead, I had to show (through both my client’s evidence and through cross-examination of the main officer/director of the defendant companies) that there were enough other documents indicating that there must have been such an agreement to pay (or else why would these documents say what they said).  Thankfully, the court agreed that there was, in fact, a verbal contract and gave judgment in favour of my client.

Whichever example you consider, the result is that the Court had to come to the rescue of one of the contracting parties.  This is not necessarily a new phenomenon.  What appears to be new, however, is the fact that the courts are more inclined to rescue unfortunate parties from their predicaments.  So what does this mean?  Firstly, it means that the days of strict reliance and interpretation of contracts is probably going (if not already having gone) the way of the Dodo bird.  I used to be able to say to clients that if the contract says X, then the result is X.  Now I have to say, if the contract says X, then the starting point is that the result will be X – but have you done or said anything that might cause a court to consider that the result should be something other than X?  Secondly, even if the courts have the power to come to the rescue and are willing to do so, that still shouldn’t be a cause for celebration.  Yes, my client had the court confirm that there was a valid verbal contract.  That is wonderful.  How much would it have cost my client to have the verbal contract put into writing?  Whatever the answer is, you can be absolutely guaranteed that the amount is nothing compared to the cost he spent on legal fees to have the issue litigated in court to get to the same result.  Similarly, if Global Food Traders had simply added a few words (including the word “guarantee”) to its agreement, they could have saved litigation through two levels of court.  And in all other cases, adding specific wording to address not only the anticipated “good” results of an agreement, but also taking a few moments to add wording to address any “what if something goes wrong” results of an agreement can save the need for a court to have to determine whether the other side performed its side of the deal in good faith or otherwise.

So, the courts can rescue your contract if something has gone wrong but, as always, an ounce of prevention is worth more than a pound of cure and it would be better to try and avoid having the court rescue your situation if that is possible.

Something to think about.

CALC

 

But Can You Prove It?

Monday, February 1st, 2016

I was at a pre-trial conference last week.  The situation was one where something fell down and the plaintiff said that it must have been one of 4 different defendants that did or failed to do something that caused the fall.  Not surprisingly, each defendant (including my client) all said “not me!”  The bigger problem, however, was the fact that the plaintiff could not definitely show that it was one or the other of the defendants.  And therein lies the plaintiff’s problem (and an issue with the legal system – unless you happen to be the defendant in this particular case).

The pre-trial judge made mention of a case in the English House of Lords which he cited incorrectly but it is the case of Rhesa Shipping Co SA v. Edmunds, [1985] 1 WLR 948 (commonly known as the “Popi M” case – being the name of the ship at issue).  The ship sank and the question was what was the cause.  All of the “usual” or “normal” potential causes were considered and rejected for one reason or another.  Ultimately, the conclusion was that it “had to be” that a submarine caused the damage because (a) submarines were known to be in those waters; (b) contact with a submarine could have caused that type of damage; and (c) it was not unknown for submarines to “hide” under commercial ships to avoid detection.  This, however, wasn’t good enough for the House of Lords.

Citing a passage from Sherlock Holmes to the effect that if you can eliminate all other possibilities, then the only remaining possibility (no matter how odd or improbable it may seem) must be the truth of the situation.  The House of Lords said that that may be good enough for Mr. Holmes and fiction, but it’s not good enough for the court.  That being the case, a plaintiff must not prove that it “makes sense” that what it says happened actually happened, but there must be at least some proof to substantiate such a conclusion.

Going back to my pre-trial.  The best that the plaintiff appears able to do is to say “well, it had to have been one of the defendants who screwed up and caused the damage, so we should get money from someone.”  That’s not good enough and if everyone says “it wasn’t me”, then the plaintiff still has to be able to show something to say “yes it was”.  Without that, the plaintiff will lose the lawsuit.

This is also something to consider when you think that two or more people have done something to harm you.  This is known as the tort of conspiracy and it is one of the hardest torts to prove in court (because nobody is usually dumb enough to admit that, yes, he/she was acting in concert with someone else to harm you).  But if you do not have at least something to show a court to prove that the defendants were acting to harm you, then you will lose (and have to pay significant court costs to the defendants in the process).

I say to my clients quite often “that’s all well and good, but can you prove it?”  If the answer is “no”, then the likely result (as indicated once again in my recent pre-trial conference) is a loss after a trial.

Something to think about.

CALC