TORONTO EYES PLAN TO CRACK DOWN ON AIRBNB-STYLE RENTALS
Licensing system would restrict short-term rentals to host’s main residence and require them to register, measures designed to lessen the impact on neighbourhoods and housing affordability.
Toronto Star, Mon., June 12, 2017
City staff proposals to create a licensing and registration system for Airbnb-style rentals in Toronto strike a balance that addresses many issues arising from the growing phenomenon, Mayor John Tory says.
The proposed regulations, released Monday, would prohibit short-term rentals not in a person’s main residence.
Residents would be allowed to rent out part or all of their home if they are registered with the city, pay a fee and provide emergency and safety information to guests.
Under the proposed regulations, people could rent up to three rooms within a unit or the entire dwelling, as long as it is their principal residence. Short-term rentals would also be permitted in legal secondary suites.
The proposed rules would not prevent condo boards from banning short-term rentals altogether.
The proposed regulations will be discussed at Tory’s executive committee meeting next week. Staff are expected to report back to council with final recommendations later this year.
The measures leave the short-term, web-based rental market to continue, while limiting how it operates, in an effort to minimize disruption to residents living next to dwellings where there’s a “constant shuffling of people in an out,” Tory said Monday.
A short-term rental is defined as any stay lasting up to 28 days in a row, the staff report says.
The draft regulations also crack down on absentee landlords and push badly needed long-term rental units back onto the market, Tory told a news conference.
While the population grew 9.6 per cent from 1996 to 2011, there has been little increase in the supply of rental housing.
The mayor also defended a proposal to charge Airbnb hosts an accommodation tax of up to 10 per cent, while hotels would be subject to a tax of 4 per cent. Tory noted hotels are already paying commercial property taxes substantially higher than residential taxes.
Staff found 16 websites offering short-term rentals in Toronto, but Airbnb is the largest player, at 15,869 listings related to 10,800 properties in Toronto in 2016.
Under the proposed regulations, 3,200 of those properties would not be permitted as they are not a principal residence.
Alex Dagg, Airbnb’s public policy manager, released a statement said the company welcomes Toronto’s move “toward regulation (of) home-sharing.”
“We are reviewing the city’s report in detail and look forward to providing our response and feedback to executive committee,” her statement said.
Thorben Wieditz, a spokesman with Fairbnb, a pro-regulation coalition formed by the hotel workers union, called the proposals “promising,” but cautioned he had not yet scrutinized them closely.
He suggested they have the potential to be “the cutting-edge of home-sharing regulations in North America.”
He also predicted the primary residence requirement should lead to a “drastic reduction in so-called multi-listing hosts and commercial landlords.”
One downtown Toronto resident said the regulations are long overdue.
“About time! I live in Maple Leaf Square. It has now become a three-star hotel for one-star guests. Madness. It’s our home,” Christopher Brown wrote in an email to the Star.
The staff recommendations are in response to rapid growth in the number of websites, including Airbnb, that allow people to rent accommodations on a nightly basis, often at rates lower than hotels.
Budget travellers have embraced the burgeoning short-term rental market in Toronto and in cities around the world. But the phenomenon has also raised concerns about the potential impact on condominium living, neighbourhoods, housing affordability, tourism and taxation.
Various cities have adopted different regulations, some more restrictive than others.
Under Toronto’s measures, online rental platforms, including Airbnb, would only be allowed to list properties that have a city-issued registration number, which must appear in any online listing.
The short-term rental companies would also be required to remove problem listings and pay a licensing fee.
The proposals were based on months of research and consultations with the public and stakeholders. City staff would continue to consult with the public on the recommendations.
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Klaus Fuerniss’ struggle for $3 million to buy Gibsons marina
Published on Facebook November 5, 2015
The facts in this story were obtained through three Freedom of Information requests and a number of publicly available documents. The thoughts and certain actions attributed to the characters are a figment of the authors’ imagination.
May 7, 2015, around noon. Developer Klaus Fuerniss stands on A-Dock of Gibsons Marina and looks out over the water. Another grey day. On January 26, he had agreed to buy the Marina, a property he needs for his George hotel and condo project. But the buying process has not exactly proved easy sailing. In another week, on May 15 at noon, the sale will close. But the $3 million mortgage he intends to use has run into problems.
It’s been one thing after another, he muses. He kicks at a beer can on the dock. Tell staff to clean up. But his mind is elsewhere. He ponders the email he received earlier that morning, at 10:52, from his lawyer Carol Lee.
It had all seemed so simple. The purchase of the Marina assets included the buildings, the docks and two leases: a land lease and a water lease. The 14 lots comprising the Marina lands are leased from the Town, and the Town has given permission for the lots to be used as security for the mortgage.
The water lease is a different matter. The Marina waters belong to the federal Crown and are managed and administered by the BC Ministry of Forests, Lands and Natural Resource Operations (FLNRO). The Town holds the head lease for the waters from the province; the marina operator holds a sub-lease from the Town. Both the head lease and the sub-lease clearly state that permission from the province is needed for a mortgage.
Easy. All Carol Lee, his lawyer, had to do was ask the Ministry for permission. But there is a fly in the ointment, according to her email—the Ministry refuses to deal with sub-tenants. They will only consider such a request if it comes from the Town. She has already sent the papers by express post to the Town’s lawyer, Pamela Jefcoat, so that Jefcoat can get on it.
Better be quick, Klaus thinks. Only eight days left to closure.
The next morning, May 8, the project encounters more headwind. At 9:38 a.m., Klaus Fuerniss receives another email from Carol Lee with alarming news: before Pamela Jefcoat can even act on it, Maxine Davie, Senior Portfolio Administrator responsible for signing official documents for the Ministry, has already informed Carol Lee that the Ministry is not able to consent to the mortgage for a sub-tenant. Davie has sent copies of her mail to two other senior civil servants at the Ministry: Keith Anderson and Jacqueline Cavill.
Klaus Fuerniss wastes no time. Carol Lee sets things in motion. At 10:40 that morning, Town lawyer Pamela Jefcoat sends an urgent email to Emanuel Machado, the Town’s Chief Administrative Officer (CAO). Solve the problem! Nearly six hours later, at 4:22 p.m., Machado mails the mayor to inform him of the situation. The records show no reply. Nor, unfortunately, has there been any further word from Jefcoat on how to proceed. As the weekend begins, Klaus Fuerniss is feeling a little unsettled.
By Monday morning, May 11, the situation is tense. Although the Ministry had been clear it could not deal with sub-tenants, Klaus Fuerniss’s representative Art Phillips asks Keith Anderson, Manager Resource Authorizations with the Ministry, for a consent-to-mortgage. Anderson declines.
Standard procedure at the Ministry is to charge a fee to issue a consent-to-mortgage. Klaus Fuerniss’s lawyer, Carol Lee, knows the Ministry will not deal with a sub-tenant. She decides to take a bold step: on the afternoon of May 11, she notifies Maxine Davie and Keith Anderson that she is forwarding a cheque for the consent to the Town by rush courier. The cheque does, indeed, arrive at Town Hall the following morning.
Tuesday, May 12. Only three days left. Klaus Fuerniss drinks more Timmy’s coffee than usual. Again Carol Lee contacts Keith Anderson and Maxine Davie. Maxine Davie emails back with a discouraging message: “Please note that we [the Ministry] cannot consent to a mortgage, using Crown lands and improvements as collateral between a sub-tenant and their lender.”
Wednesday. Carol Lee calls the Ministry again. More bad news. Keith Anderson tells her again that there will be no consent for a mortgage on the Marina waters.
Thursday May 14, a day before closing date. Keith Anderson wants to make sure his message is absolutely clear. At 8:45 a.m., shortly after he starts his workday, he puts down his coffee mug and composes an email to Carol Lee. “Good morning Carol,” he writes. “We cannot register a mortgage to a subtenant as the province has no relationship with the subtenant.”
An hour later, Klaus’s representative Art Phillips unfolds a letter he has received by Canada Post. It is from CAO Emanuel Machado: Keith Anderson of the Ministry has notified the Town that the province will not consider an application for a mortgage to a sub-tenant. Art Phillips grabs his phone and speed-dials Klaus Fuerniss.
With only 27 hours left before closing time, CIBC intervenes. Michael Ventresca, an associate with a law firm working for the bank, comes forward with a proposal.
“Keith,” he writes, “we act for CIBC. Will FLNRO simply ‘consent’ to a mortgage being granted by the subtenant and licensee to CIBC, acknowledging that the mortgage can’t be ‘registered’ with FLNRO? That would provide some comfort to CIBC. A letter confirming the Town consents to the subtenant and licensee granting a mortgage would be sufficient.”
An interesting technicality.
Keith Anderson does not respond. Hands are being wrung. At 3:51 p.m., with less than 20 hours left, Michael Ventresca can’t stand the suspense any longer. He fires off an email: “Keith, have you had a chance to consider our suggestion or [sic] simply consenting? Please advise as soon as you can, Michael Ventresca”
Obviously, Keith Anderson is behind his computer, because only six minutes later, at 3:57 p.m., he mails back, with cc’s to Maxine Davie and Jacqueline Cavill of the Ministry, Klaus Fuerniss and Town lawyer Pamela Jefcoat. The answer is no.
Michael Ventresca gives it another shot. At 4:28 pm, he writes to Keith Anderson: “Keith, for clarity, would the province consent to an unregistered mortgage granted by the subtenant under the sublease…? In other words, would the province simply consent to the mortgage, as head landlord and licensor, on the understanding that such a mortgage cannot be registered?”
So the province would have to consent to a mortgage that would not be registered at the Land Title Office or filed with the province. Interesting that the bank would agree to that.
Something starts to change. The records do not reveal exactly what transpired, but sometime between 4:28 p.m. and 7:02 p.m., “no” seems to have transformed into “yes.”
Because at 7:02, Carol Lee, working late, sends an urgent email to Maxine Davie: “Hi Maxine, our client’s lender (CIBC) has advised it needs to see the consents [for the mortgage] before 11 a.m. Friday morning so the internal application for funding can go in on time before the 11 a.m. cut-off time. Could you facilitate meeting this deadline by emailing the consents to all of the above parties when they are available. Thanks.”
Friday, May 15. At 10:31 a.m., Carol Lee sends an email to Maxine Davie. “Hi Maxine, I am asking Pamela to call you as soon as possible to address the Town’s query with respect to the sub tenure.” The records do not show what the Town’s query was.
Maxine Davie is working on a copy of the Provincial Consent to Sub-Lease document. At 10:56 a.m., with only four minutes to spare before CIBC needs the consent-to-mortgage, Maxine Davie sends an email to Carol Lee. “Carol, what is or will be the effective date or reference date for the sub-lease I need it to put in the consent – the document I have is blank right now.”
The one-page document in front of Maxine Davie has 4 sections. There is no mention of a consent-to-mortgage. Section 2 explicitly forbids a mortgage without consent of the province. But there is white space at the bottom, ready for an extra sentence.
At 11:01 a.m., Carol Lee replies: “Today’s date, thanks.”
A few minutes after 11 a.m., the official document reads:
Provincial Consent to Sub-Lease. Lease no 242098, File # 0356286, Disposition # 893721.
At the bottom, a sentence is added:
“The Province’s consent to mortgage given on May 15, 2015 and will expire on February 27, 2042 or an earlier date as requested by the Lessee.
The document looks strange and unusual. Trouble is coming.
But on May 15, with minutes to spare, CIBC grants the $3 million mortgage and the sale closes. In Gibsons, Klaus Fuerniss breathes a sigh of relief. With cameras clicking, he shakes hands with former owner Art McGinnis. Gibsons Marina is officially part of Klaus Fuerniss Enterprises Limited. “We are really very excited to jump in and get started,” he tells the Coast Reporter.
May 15 is a long day, and there is more business to attend to.
At 2:05 p.m., Town lawyer Pamela Jefcoat sends an email to Emanuel Machado: “Please see the attached Release and Indemnity Agreement. Please let me know if you have any comments at your earliest convenience.”
Apparently, the Town wants assurances that KFE and Marina Hotel Holdings (MHHL) will indemnify the Town in case of a default on the $3 million mortgage.
“Good as is,” Machado replies at 3:05 p.m. But a few minutes later, he gets an urgent phone call from Jefcoat. There is a problem with the agreement. She follows up with an email at 3:22 p.m. “Importance: High. Further to our discussion, please find attached a revised blacklined draft of the Indemnity. Could you please confirm whether these changes are acceptable to the Town.”
There is some back and forth, most of it censored in the records obtained, but finally, at 4:20 p.m., the Agreement has been signed by Klaus Fuerniss on behalf of KFE and MHHL and by Mayor Wayne Rowe for the Town. Gibsons corporate officer Selina Williams signs a few days later.
Surprisingly, after the revision(s), the Indemnity and Release Agreement still states that there is no provincial consent to the mortgage: “Pursuant to Section 7.1 of the Head Lease, the Town and MHHL have requested the Provincial Crown’s consent to MHHL’s mortgage of its leasehold interest in the Sublease but the Provincial Crown has not provided such consent as of the date of this Indemnity and Release agreement.”
Yet Maxine Davie had officially signed a consent-to-mortgage several hours earlier.
In September 2015, several concerned citizens take the consent-to-mortgage document to a lawyer. After studying it carefully, he repeatedly raps his desk with his knuckles. He slowly leans back in his chair, gives them an inquiring look, and says, “Is this a forgery?”
On September 30, the citizens scan the document and mail it to Kevin Haberl, FLNRO’s Acting Director Authorizations South Coast. Is this an authentic document?
Yes, this is an authentic document, he replies. But, he says, the province cannot provide consent for a mortgage to a sub-lessee. And the province had made that very clear to the sub-tenant (Klaus Fuerniss).
The citizens are stumped. If the province cannot give its consent, how can this be an authentic document? they ask.
The answer arrives within minutes. “The provisions of Article 7 in the Lease restricting the Lessee from assigning, mortgaging, subletting or transferring the Lease without the prior written consent of the Province remain in full force and effect.”
Further emails with questions remain unanswered. The citizens decide to make a Freedom of Information request. Can the Ministry please provide more information about this mysterious consent-to-mortgage document?
They receive a surprising answer. On October 2, 2015, two days after they had shown the document to Kevin Haberl, Maxine Davie has officially revoked the consent-to-mortgage she signed in May. The documents are enclosed in the FOI package.
“REPLACED” the page with the consent-to-mortgage says in big letters. “Consent cancelled May 15/15 MD.”
“Dear Emanuel Machado,” Maxine Davie wrote in an accompanying letter. “It came to our attention that the consent to Sub-Lease sent to you in May of this year contained an administrative error [Italics ours]. The last paragraph of the Consent to Sub-Lease that was sent to you in May stated ‘the Province’s consent to mortgage hereby given’. The word mortgage was an error. [Italics ours] The error has been corrected. Please replace the Consent to Sub-Lease sent to you in May with the attached Consent to Sub-Lease dated October 2, 2015. The sub-lease consent forms an integral part of your Lease document and must be attached thereto.
Yours truly, Maxine Davie, Senior Portfolio Administrator”
The new consent-to-sub-lease does not contain a consent-to-mortgage.
Yet Gibsons Marina has a $3 million mortgage, which was still active according to Land Title Office records as of February 9, 2016. The mortgage has a variable rate equal to the Prime rate plus 5 per cent per year. The documents are available at the Land Title Office under number CA4407749.
There is no record of CAO Machado having notified Klaus Fuerniss of the replacement.
It is not known whether CIBC knows about the revoked document, or whether the bank even cares as long as mortgage payments are made. Klaus Fuerniss has several mortgages with CIBC. One is for 689 Winn Rd ($550,000), the other for 407 Gower Point Road ($1,000,000), at the proposed site of the George. A mortgage on 397 Gower Point Road, the George Information Center, is held by Hyak Marine Services, a Klaus Fuerniss enterprise. The amount is unknown.
The Release and Indemnity Agreement protects the Town from financial liability in case of default. Klaus Fuerniss signed on behalf of two limited companies (Klaus Fuerniss Enterprises Ltd and Marina Hotel Holdings Ltd), and therefore Klaus Fuerniss is not personally liable for any debt in case of bankruptcy. If the companies go bankrupt, what happens? There is no indication that The Town is responsible for paying the $3 million mortgage.
In the event of a default on the mortgage, CIBC can sell the Marina to the highest bidder.
Under the B.C. Community Charter, the Town should have notified the public that a third party was obtaining a mortgage on a lease on lands owned by the Town.
Nicholas Simons, MLA for the Sunshine Coast, examined the possibility of corruption within the provincial government. Was Maxine Davie possibly told to sign the document to make the mortgage happen? If so, by whom? He abandoned the idea.
A corporate lawyer in Vancouver was impressed when he reviewed how this $3 million mortgage came about. “They made it happen,” he said. “A really clever deal.”
In the end, Klaus Fuerniss stands on A-dock of his Marina and looks out over the water. The tide has come in. He smiles.