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Temporary lettings: what you should know before getting started

By Isabelle Ladouceur-Séguin|5 min|October 2021

Updated on: October 20, 2021

Renting out your home for the short or medium term can be a good way to increase your income. But before you take the plunge, it's best to know what to expect.

There are certain constraints that could add to your administrative burden... or even nip your project in the bud. On the other hand, the benefits may outweigh any negatives. To help you make the right decision, we've put together some key information.

Profitability

Wondering what kind of income you can expect with temporary rentals? As with long-term rentals, this depends on a number of factors. For example, the location of the unit, its size, its quality or even the time of year.

However, one thing is for sure: temporary accommodations rent for a higher price than comparable standard accommodations. Why is this? The rental price takes into account several factors that are specific to temporary rentals. Here are the main ones.

Uncertainty

With temporary rentals, you have no guarantee that your accommodation will be rented 100% of the time. For example, tourists usually book for a few days or weeks at a time.

The risk of having empty accommodation is lower with other clienteles. In particular, disaster victims, whom insurers often have to relocate for several months.

But in any case, there is no such thing as no risk.

To compensate, you can easily increase your price by several percentage points. This is what hotels do, charging the equivalent of a week's rent per night in some cases. Conversely, the longer you rent out your unit, the less you charge for it.

Housekeeping

Unlike a standard lease, you are responsible for cleaning the unit between rentals. If you do it yourself, you'll want to be paid for your time. If you delegate this task to professionals, you'll have to account for the additional costs.

Amenities

Temporary accommodation should offer a range of amenities:

  • furniture
  • appliances
  • electricity and heating
  • kitchen equipment
  • internet connection
  • bedding and towels
  • household products
  • etc.

But furnishing and equipping a home comes at a cost - and your rental price should reflect that.

Insurance

The risk of theft and damage is higher with short-term rentals. This means your home insurance costs could increase if you choose that route. A higher rental price will help offset these extra costs.

Regulation

In Quebec, short-term rentals are often regulated. The rules vary depending on the type of clientele (e.g., tourists or others), the municipality, zoning, etc.

Here are some important regulations to know.

The Act respecting tourist accommodation establishments

This law applies to you if:

  • you offer accommodation to tourists
  • in return for payment
  • for periods not exceeding 31 days
  • on any medium

The Act defines a tourist as:

"a person who takes a leisure or business trip, or a trip to carry out remunerated work, of not less than one night nor more than one year outside the municipality where the person’s place of residence is located and who uses private or commercial accommodation services."

If you rent to other types of clients - disaster victims, for example - this law doesn't apply to you.

But if it does, you will need to get a classification certificate and an establishment number. Usually, this involves sending an application to the Corporation de l'industrie touristique du Québec (CITQ) and paying the required fee.

If you meet the criteria, the CITQ will give you a temporary attestation. It allows you to rent your accommodation while waiting for a visit from a classifier. Once your establishment is classified, you'll receive a sign that specifies its category. You have to display it publicly, usually at the main entrance.

You must also display the establishment number on any advertisement or website used to operate the establishment.

Zoning

A municipality's zoning bylaws specify how a building within its boundaries can be used. In some areas, short-term rentals are not allowed. For example, if the zoning by-law prohibits commercial activities.

Before you start renting temporarily, contact your municipality. The city clerk's office or urban planning department can tell you about any regulations.

If short-term rentals are not allowed in the area, the CITQ will have to deny your request for a certificate anyway. So it's best to know before you start the process.

Permits

Your municipality or borough may also ask you for a permit to rent out your accommodation on a temporary basis. Check if this is the case before taking any steps.

Authorization

If you own your building, you don't need any other permission to start renting out your property temporarily. But it's different if you are a tenant or a condo owner (divided co-ownership).

Tenants

You must notify the landlord that you want to sublet your unit and specify the following:

  • the name of the sub-tenant
  • his or her address

Your landlord then has 15 days to reply. He or she cannot refuse the sublet without a serious reason. If your landlord doesn't respond, he or she is assumed to have accepted the sublease.

Condo owners

Check your co-ownership agreement to see if there are any restrictions on temporary rentals. Even if there are not, the law requires you to give the names of the tenants to your condominium corporation.

Insurance

Before you rent your home on a temporary basis, inform your insurer. They may have to increase your insurance premiums and/or change your coverage.

Also note that to obtain the CITQ classification certificate, you must have $2 million in liability insurance.

Tax obligations

Tax on lodging

If you wish to rent to tourists on a short-term basis, you need to register for the tax on lodging. The only exception is if your accommodation is located in the Nunavik tourism region. Once registered, you must collect the tax (usually 3.5% of the rental price) and remit it to the authorities.

Note that some online tourist rental platforms can do this for you.

Sales taxes

If you sell for more than $30,000 per year, you must collect sales taxes and remit them to the proper authorities. To do this, you must be registered for the GST and QST.

Income taxes

When the time comes to do your taxes, don't forget to declare your rental income. It is added to your other income and is taxable.

Remember to set aside a portion of the amount of each transaction. This way, you won't be caught short if you owe money to the tax authorities at the end of the year. Also keep a record of your transactions and the dates when your accommodation was rented. This will help you file your taxes.

Being informed pays off!

Offering your home for temporary rental is not a decision to be taken lightly. As we have seen, it can have financial, fiscal and/or administrative implications.

However, you should be aware that some markets are less restrictive than others. Disaster accommodation, for example, is not governed by the Act respecting tourist accommodation establishments. And it offers revenues that are similar to tourist rentals. This might be worth exploring!

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