‘Ghost hotels’ become commonplace in Toronto as pandemic subsides

Ghost hotels are typically condos rented out by tenants who surreptitiously sublet them on short-term rental portals like Airbnb. The COVID-19 pandemic and City of Toronto regulations that were implemented around the same time have largely killed this practice, but as the city moves closer to the post-COVID world, ghost hotels are beginning to reappear.

“Over the past couple of months, as the city has started to open up again, ghost hotels are once again becoming commonplace,” said Brett Starke, chief of the The Starke Realty Team to RARE Immobilier Inc. “As the vibrancy and culture return to Toronto weekend after weekend, and the weather gets better and better, I see this happening more and more. I see the gray or black market for short-term rentals reappearing.

Ghost hotel operators have been known to sign up to 20 leases at a time, their unwitting landlords being none the wiser, and clandestinely renting them out on Airbnb. Naturally, when landlords get wind of the practice, they try to evict unscrupulous tenants, but if the latter have only signed one or two leases, they are probably less likely to leave quietly.

“We try to protect landlords as much as possible by inserting clauses into rental agreements stating that potential tenants cannot rent the units on Airbnb for business, but we cannot legally prevent them from renting the units or sublet the unit. It’s a very, very gray area,” said the head of the Balikoti Real Estate Group at RE/MAX Ultimate Realty, Alex Balikoti. “Technically, a landlord cannot stop a tenant from doing so without solid evidence and investigation into the matter.

“We have already worked for some landlords who suffered from tenants. They rented out their units and discovered that the tenant didn’t actually live there, but rather was renting out his unit on Airbnb for profit, and that guests didn’t take great care of the units. Often the tenants who run this business rent units at discounted rates because they need to make sure they cover the rent, and the lower prices attract more guests, some of whom don’t take care of the units and they are destroyed very quickly. . Not the most pleasant experience for the owner.

Landlords are usually only notified when property management companies report numerous complaints to them, but the practice is nevertheless accepted in some buildings more than others. Plus, it’s nearly impossible to know otherwise because sites like Airbnb won’t reveal a listing’s address until the transaction is complete.

READ: Average rents for 2-bedroom units in Toronto rose 16% in March: report

Starke says ghost hotels are commonplace in some downtown Toronto towers like 300 Front St. W. and 12 and 14 York St., two sprawling skyscrapers that feature prominently in the city’s skyline . There are others also on Bremner Blvd.

The practice isn’t always brazen and unscrupulous, however. Starke says renters sometimes approach landlords and offer to handle short-term rental bookings in exchange for a monthly rental rate far above what the landlord would receive on the open market.

“There are a few big farms where that’s what people do. They know the risk and they take it into account in what they are looking for. We’ve had people bidding on properties we’ve listed telling us that’s what they intend to do. We’ve received portfolios and presentations that speak to their success,” Starke said. “But more often than not, a lot of people try to do that without the landlord’s permission, and that’s where it comes down to vetting the tenant, which is a real estate agent’s job.”

However, while people with well-paying day jobs and impeccable credit ratings typically run ghost hotels, because they have an easier time signing leases, their polar opposites have also been known to dabble in housekeeping. management of ghost hotels. But Starke says they’re easier to identify with a little detective work.

“It’s not very often, but we will see fraudulent employment letters – we saw one two weeks ago. People also create websites that look great, but when you click on them, there’s some type of font, or the person says they’ve been working for a company for five years, but the website isn’t operational for only a year. Or they say they’re part of a small four-person start-up but there’s a huge management chain on the hire letter. If something looks fishy, ​​it most often is,” Starke said, adding that landlords should visit their rentals at least twice a year to make sure everything is as it should be.

In the midst of a rental crisis, the City of Toronto has established short-term rental regulations which stipulate that only principal residences can be rented, and no more than 180 days per year. But as the city cuts through the dregs of the pandemic and grows more vibrant day by day, as evidenced extremely tight conditions on its rental marketStarke wouldn’t be surprised if the city council enforces new regulations to crack down on ghost hotel operators.

“I can see the city cracking down on these, especially as housing becomes a bigger issue,” he said. “You have no control over which tenant you rent to, and that’s where the challenge lies, because it’s no different than subletting a unit without permission, which happens all the time.”