Are you thinking of buying a Property in Kelowna, which will give you the flexibility to undertake Short Term Rentals?
This article gives you details of some of the things you need to think about before making your Purchase.
Information is current as of August 2018, but you will need to check the local City of Kelowna Website https://www.kelowna.ca/our-community/planning-projects/current-planning-initiatives/short-term-rentals & Government websites, at the time you decide to buy for the latest legislation that may affect you.
The City of Kelowna - Current Position on Short Term Rentals
At the present time, Short Term Rentals, of less than 30 days, are not permitted in any Residential Area in Kelowna, despite the fact that we regularly see properties for rent on such websites as Airbnb and Vacation Rentals by Owner.
There are specific pockets of the City and zoning which do permit Short Term Rentals - such as the Discovery Bay and Sunset Waterfront Resort Condo Complexes in Sunset Drive, Playa Del Sol on Cook Road, together with Pinnacle Pointe in the Quail Ridge Golf Course Community, which has a specific Covenant which permits Short Term Rentals.
As the current situation is potentially threatening the long-term rental market stock, and there is currently a shortage of Rentals in Kelowna, the City is completing a full review and over the coming months & into 2019 we should expect to see some new guidelines emerge, which will definitely affect those undertaking short-term rentals.
It is strongly recommended that you keep up to date with these changes if you currently have or are thinking of purchasing a Property for Short Term Rental purposes.
Other Municipalities are already employing companies to monitor Short-Term rental advertising to ensure people have the correct Business Licences and we can expect to see future fines and other sanctions against those who do not comply with the local By-Law requirements.
Here is a timetable of the current process.
Public Opinion Survey
Fall 2017 - COMPLETE
Council Reviews Guiding Principles &
Public Survey Results
Summer 2018 - COMPLETE
Draft Regs & Stakeholder Engagement
Summer & Fall 2018
Staff Policy Recommendations
New Level of Fines in BC Strata Corporations coming November 30, 2018.
Strata corporations can create a By-Law, with 3/4 vote of Owners, to limit or ban short-term rentals.
On July 18, 2018, strata regulation 7.1 (OIC 418-2018) was amended to allow strata corporations to impose a fine of up to $1,000 a day for owners or residents not complying with a strata bylaw limiting or banning short-term rentals. The previous allowable fine of $200 a week was not a sufficient deterrent. This new level of fine only applies to short-term rental bylaws.
This new fine level is effective November 30, 2018, allowing short-term rental hosts time to comply with strata bylaws limiting or banning short-term rentals.
BC Provincial Government Agreement with Airbnb re Tax Collection - 2018
On February 8, 2018 the Province established an agreement with Airbnb to collect up to 11% in taxes on short-term rentals. The taxes include the 8% provincial sales tax (PST) and, where applicable, a municipal and regional district tax (MRDT) of up to 3% on accommodations.
Is a Business Licence Required in your Municipality?
It important for you to check whether a Business Licence is required.
Should you be prepared to proceed with an application for a business license, you will need to appreciate that:
- licence approval takes time (which may impact subject conditions to an offer to purchase) and, in most cases, must be renewed annually for a fee.
- Further, with the operation of a business comes the requirement to pay all applicable federal and provincial taxes, which may include a hotel tax.
- Further, many municipalities are contemplating whether businesses operating rental properties will be required to pay real estate property taxes at a commercial rate. This may have a significant impact on the applicable residential tax rate
Are you willing to apply for Re-Zoning of your Property?
A zoning bylaw will stipulate whether a property may be employed for business purposes, such as for rental accommodation. Local governments have recently commenced a process of reviewing their bylaws to either allow, restrict, or prohibit short-term rentals, in particular. You may face penalties in the case where you market or lease property in a zone that prohibits this use.
Vacation rentals are not currently permitted in the City of Kelowna in residential zones other than the RM6 - High-Density Residential zone. In all other zones, the minimum tenancy period is 30 days. Enforcement is keenly applied, and the City’s Bylaw Services team responds to and investigates properties suspected of operating short-term rental accommodation on a complaint basis. Annually, Bylaw Services staff receive approximately 50 complaints related to the short-term rental of residential homes (City of Kelowna, Report to Council, August 22, 2016).
During Late 2016, the City of Kelowna started investigating possible amendments to its zoning and business license bylaw. If passed, the amendments would create “subzone” short-term rental areas. Under the proposal, homeowners wishing to let their homes, on a short-term basis, would be required by the City of Kelowna to apply to rezone their property. Zoning applications take time, effort, and money.
In addition to reviewing applicable bylaws, it is important that you and your Lawyer review a title search for the property for any charges, liens, and interests registered against the land.
The title certificate will inform you of many important pieces of information including whether a statutory building scheme is registered. These schemes may affect the use of the property by prohibiting the construction of secondary suites or laneway houses, irrespective of zoning. Breach of a statutory building scheme may be enforced through the civil courts, by the original developer (for as long as the developer maintains an interest in the property) or by any other owner whose property is subject to the same scheme.
Future Tax Implications when you sell your Property.
If the Property is your Principal Residence, a change in the use of a property, from principal residence to rental or business property, may also expose you to capital gains tax in certain instances. Other tax obligations, such as payment of GST will also be triggered on all commercial activities.
It is essential to get advice from your Tax advisor before making such a purchase or if you do this at a later date, then check before you apply to make the change.
This Blog post is designed as a' guide only' to some of the things you need to think about and be aware of.
It is not a substitute for consulting with your Professional Advisors such as your Accountant and Lawyer, as everyone's circumstances may be different.