Cottage rentals suffer financially under ban as market demand soars

Cottage Rental Photo by Shutterstock/Daxiao Productions

Despite the province enacting phase one of the economic reopening, short-term rentals continue to be banned in Ontario. The ban was implemented on April 4 under the Emergency Management and Civil Protection Act, stating that short-term rentals booked after April 4 can only be provided to individuals in need of housing during the emergency period. Violating this regulation is hefty, and can cost individuals up to $100,000 and corporations up to $10,000,000.

When can I rent a cottage in Ontario?

There has been confusion around the wording in the act, whether the April 4 date refers to the date the reservation was made or the date of the stay. “Logically, one would think that it applies where the date of the stay is after April 4 and not whether the reservation was booked after April 4,” says Robert Eisenberg, a property development and commercial leasing lawyer with WeirFoulds LLP. “Allowing a person to go occupy a short term rental booking during the state of emergency simply because it was booked prior to April 4 would undermine the purpose of the regulation: closing non-essential businesses and preventing the spread of COVID-19 in Ontario.”

Cottage rentals fall under the definition of a short-term rental. For seasonal operators, the majority of their revenue is earned during the summer months. By having to refuse bookings, many are finding themselves in dire financial situations.

In an email to Lisa MacLeod, Ontario’s minister of tourism, culture, and sport, Debra Park and Steven Mack, operators of the Oaks Cottages—a seasonal rental business in Tichborne, Ont.—wrote: “Prior to the pandemic we were on track to earn $134,000+ for the 2020 season. With the closure of the USA/Canada border and the Province of Ontario’s State of Emergency Restrictions our income is nil.”

Currently, Park and Mack are being forced to pay back deposits on cancelled bookings, but they say much of this money has already been spent on fixed costs and seasonal workers. To offset the losses, they’re asking the minister to allow cottage rentals to operate during July and August, a time when Oak Cottages makes 85 per cent of its revenue.

J.T. Lowes, owner of All-Season Cottage Rentals in Haliburton, Ont., says his business is in a similar predicament. It had been accepting June bookings but has since had to cancel them. “As of now, we have suspended all bookings until June 26,” he says. “We’re still accepting applications for the summertime. The difference being is that while we’re accepting the applications; going through the screening process, and completing rental agreements, we’re not accepting payments until we know exactly when rentals are able to resume.”

During a press conference, Ontario Premier Doug Ford was asked about when short-term rentals would be allowed to reopen. Ford replied that it would be during phase two or three of Ontario’s reopening plan. Lowes, however, points out that we’re now three weeks into phase one with new COVID-19 cases consistently hovering around 400 a day and no word on phase two.

Lowes says having no confirmed date for reopening has been frustrating, especially as leads pour in. “Market demand has been incredibly high. These past two, three weeks have been the busiest weeks we’ve seen in the reservation office ever. That’s including peak booking season.” Most of these inquiries have been from single families looking to get out of the city. “I suspect that the demand will carry on for the next couple years,” Lowes says. “I can see a big shift from international travel to more local travel.”

What is considered a short-term rental?

Despite the interest, All-Season Cottage Rentals still can’t legally accept these bookings and therefore isn’t making any money off of them. To bypass this, some short-term rentals have been exploiting the vague wording in the April 4 regulations, converting their properties to mid- and long-term rentals. “The term [short-term rentals] is not defined in the regulations,” explains Eisenberg.

“Toronto, Oakville and Niagara-on-the-Lake consider rentals of 28 consecutive days or less to be a short-term rental, whereas other Ontario municipalities, such as Mississauga, Ottawa, the Town of the Blue Mountains, Fort Erie, Prince Edward County, and Huntsville, use the standard of 30 consecutive days or less. A week-long cottage rental would very likely be considered a short-term rental, but when it comes to a cottage rental lasting one month or more, the answer is not clear. In any event, it would depend on the rules of the local municipality.”

Lowes has received requests for month-long rentals, but because bookings start back in December and January, many of their properties are filled with short-term bookings throughout the summer. That isn’t to say he’s not open to the idea, though. “We do have a big waiting list of people that are willing to book for the month, so in the event that the rental restrictions are extended into the summer, we would be cancelling [short-term] bookings and then reaching out to those people,” he says.

The Province of Ontario has extended the state of emergency order until June 30.

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