1351231 Ontario – Tax Court of Canada finds that an Airbnb rental property is similar to a motel, lodging house etc. so that, with its short-term rentals, it cannot qualify as a residential complex

The Appellant used a condo unit for the first nine years after purchase for long-term residential rentals and then listed it on Airbnb and rented it out for succession of short-term rentals (under 60 days and sometimes for only one night) before its sale.

Before concluding that the condo unit was excluded from being a residential complex, so that its sale was a taxable supply for GST/HST purposes, D’Arcy J found that, at the time of the sale, the unit was similar premises to a hotel, a motel, an inn, a boarding house and a lodging house given that it along with the listed items represented “premises that are regularly supplied as accommodations to third parties on a short‑term basis for a fee” and provided furnished accommodation.

Furthermore, at the time of sale, “all or substantially all of the leases, under which the Condominium was supplied, provided, or were expected to provide, for periods of continuous possession or use of less than 60 days.” In rejecting the Appellant’s submission that this test was satisfied because over the whole period of its ownership, the condo was leased for over 90% of that period in long-term rentals, D’Arcy J found that the substantially all test was a “point in time” test.

The above conclusion was reinforced by the change-in-use rule in s. 206(2), which applied, by virtue of s. 141.1(3)(a), when the property was first listed on Airbnb, so that there was a deemed acquisition by the Appellant of the property. Since the only use after the property’s deemed acquisition was for making short-term rentals, the same conclusion would be reached without applying a point-in-time test.

Neal Armstrong. Summaries of 1351231 Ontario Inc. v. The King, 2024 TCC 37 under ETA s. 123(1) – residential complex, and s. 206(2).