Background
The Township of Tiny, a popular Georgian Bay vacation destination in Simcoe County, enacted By-Law 22-017 in August 2022 after years of community complaints about noisy and disruptive short-term rental (STR) guests. The by-law requires STR operators to obtain an annual, non-transferable licence (initially $1,500, later raised to $1,750), caps total licences at 300, limits rentals to a maximum of 92 days per calendar year, mandates a minimum six-consecutive-day rental period during high season (April 15 to October 15), restricts occupancy to 10 renters and two per bedroom, and requires designation of an on-call emergency contact who can attend the property within 60 minutes. Complementary Official Plan and Zoning By-Law amendments confined STR operation to certain zones and prohibited STRs in accessory buildings.
The Tiny Township Association of Responsible STR Owners, formed in September 2022 in direct response to the by-law, and several individual property owners applied to the Superior Court under s. 273(1) of the Municipal Act, 2001 to quash the by-law. They argued it was enacted in bad faith, was a disguised zoning instrument, and effectively prohibited rather than regulated STRs. Justice Leibovich dismissed the application in March 2025 (2025 ONSC 1578) and ordered the applicants to pay $38,000 in costs (2025 ONSC 3241). The Association appealed on three grounds.
The Court’s Holding
Writing for the panel, Gomery J.A. dismissed the appeal in its entirety. On the first ground — that STR activity is non-commercial and therefore outside the Township’s business licensing power — the court held that the question was academic. Section 8(3) read with s. 11 of the Municipal Act authorizes a licensing scheme for any matter within a municipality’s jurisdiction, not only for businesses; s. 151(5) expressly confirms as much. The Township validly grounded the by-law in its powers over health, safety and well-being of persons and the protection of persons and property, as well as economic, social and environmental well-being. In any event, the court also held that STRs independently qualify as “businesses” under s. 150 of the Municipal Act because the statutory definition expressly extends to the hire of goods or services on an “intermittent or one-time basis” and to “transient” commercial activity — categories that plainly capture seasonal residential rentals for money.
On the second ground, the court rejected the argument that the by-law’s cumulative restrictions — the 92-day annual cap, the minimum rental period, and the 300-licence ceiling — effectively prohibited STRs. Applying the framework from Auer v. Auer, 2024 SCC 36, the court emphasized that judicial review of subordinate legislation is confined to the reasonableness of the municipality’s interpretation of its statutory power, not the wisdom or efficacy of the policy choices themselves. The application judge had found no palpable and overriding error: the cap of 300 licences remained unreached two years after enactment, demonstrating the regime was regulatory rather than prohibitory, and the restrictions were rationally connected to legitimate objectives including housing supply, consumer protection, and community well-being. Leave to appeal the $38,000 costs order was also denied.
Key Takeaways
- Ontario municipalities may license and regulate STRs under both their general licensing power (ss. 8(3) and 11 of the Municipal Act) and their specific business licensing power (ss. 150–151), and the two bases are independent — a by-law need not satisfy both.
- Intermittent or seasonal rental of residential property for money qualifies as a “business” under the Municipal Act; profitability is not required, and the residential zoning of the premises does not preclude licensing as a business activity.
- Economic harm to STR operators — even severe harm — does not transform a regulatory by-law into a de facto prohibition; courts will not second-guess policy choices made in good faith following extensive public consultation.
- A licence cap that remains unreached in practice is strong evidence that the scheme is regulatory, not prohibitory.
- Under Auer v. Auer, reviewing courts assess the reasonableness of the municipality’s interpretation of its statutory authority, not the merits of the policy itself.
Why It Matters
This decision provides a significant precedent for Ontario municipalities grappling with the social and housing impacts of platforms like Airbnb and VRBO. It confirms that a comprehensive STR licensing regime — including annual licence caps, strict day-count limits, minimum stay requirements, and occupancy restrictions — can survive an ultra vires challenge so long as it is rationally connected to legitimate statutory objectives and enacted in good faith after genuine community consultation. Municipalities are not confined to light-touch regulation; they may impose conditions that substantially reduce the commercial attractiveness of STRs without crossing the line into prohibition.
More broadly, the decision reinforces the post-Auer framework under which by-laws attract strong deference: challengers must show that no reasonable interpretation of the enabling statute supports the impugned measure, a high bar that the Association could not meet. For property owners and STR platforms, the ruling signals that Ontario courts will not use the ultra vires doctrine as a vehicle for judicial oversight of local housing policy.