A short-term rental licence in the Township of Muskoka Lakes cannot be sold, transferred or assigned. When a waterfront cottage changes hands, the seller's licence stays with the seller. The buyer starts again with a new application, a new fee and a new review. Any income projection in the listing package was earned under rules the next owner may never operate under.
That matters more this fall than it would have a year ago. Summer 2026 was the first season under the township's waterfront rental limits. The township itself treated 2026 as a year for teaching operators the rules rather than penalizing them. Full enforcement is expected in 2027. A buyer reading a seller's 2024 or 2025 booking calendar is looking at evidence from a market that no longer exists in that form.
The licence stays with the seller
The governing text is Short Term Rental Accommodation Licensing By-law 2025-049, which Council approved on April 16, 2025. Section 5.2 is short.
No Person shall: (a) Transfer or assign a License; (b) Obtain a License by providing false or incorrect information; or (c) Acquire any vested right in the continuance of a License.
Section 5.3 adds that no one may own, market or operate a rental "under any other name than Licensee identified in the License." The by-law does not say that a sale automatically voids the licence. In practice, though, the outcome is the same, because the buyer is not the named licensee and cannot become one by assignment.
A new owner who wants to keep renting files a fresh application. It must include proof of ownership, owner and responsible-person details, insurance, a site map, a floor plan and the prescribed fees. The township's operator page lists the annual fee as $1,000 for Waterfront or R4 zones and $500 for all other zones. Applications are reviewed by Building, By-law, Fire and Septic staff. A physical inspection is not automatic, but the owner pays for one if concerns need checking. The township says it cannot give an exact review timeline.
The township's FAQ says owners may generally keep operating after they apply unless a concern is identified. That guidance does not specifically address a purchaser taking over after a closing. A buyer with guest bookings carrying over past the closing date should get written confirmation from the township before relying on them.
What the new licence allows in summer
Since the buyer's licence is issued fresh, the real question is what that licence permits. For properties zoned Waterfront Residential, Community Residential (R4) or Waterbody Open Space, the summer calendar is tightly limited.
- Summer Monthly Break. In each of June, July and August, the rental must sit empty for at least seven consecutive nights.
- Summer Rental Frequency. From the Friday before Victoria Day to the Tuesday after Labour Day, only one rental group is allowed in each six-consecutive-night period.
June, July and August together have 92 nights. The monthly break removes at least 21 of them, leaving at most 71 rentable nights in the three months that carry the most demand. The frequency rule then changes what fills those nights. Two separate weekend groups in the same week are no longer allowed during the summer window, so a booking calendar built on back-to-back short stays in July would not comply today. Rentals in all other zones are exempt from both restrictions but still subject to the occupancy limits.
Occupancy is a separate constraint that comes with the property itself. Every licensed rental is capped at two people per bedroom. The township may raise that number only if the owner shows the sewage system was designed and built to the Ontario Building Code for the higher occupancy. Each premises gets one licence. All habitable buildings can be rented, including bunkies and second-storey boathouses, but they cannot go to different groups at the same time. A four-bedroom main cottage with a two-bedroom boathouse is one rental for one group. Its legal headcount depends on the septic system as much as the bedrooms.
That is why the septic permit file belongs in due diligence alongside the rental ledger. If a seller's past bookings regularly went above two per bedroom, the next owner can repeat that only if the system's documentation supports it.
Why 2026 doesn't settle the question
A buyer might reasonably treat summer 2026 as the first clean year of data under the new rules. The township's own budget documents complicate that.
The registration portal went live in July 2025, later than the original target of late 2024 or early 2025. Because of that delay, the adopted 2026 budget says 2026 "will now serve as the primary year for compliance education, and full enforcement activities are not anticipated until 2027." In September 2025, Mark Donaldson, the township's Director of Financial Services, described the program timeline as having "effectively shifted forward by one year."
The budget also shows how many operators the township expects to sign up.
| Line in the 2026 budget | Earlier 2026 outlook | Adopted figure |
|---|---|---|
| STR licence revenue | $550,000 | $341,500 |
| Fines, including administrative penalties | $190,000 | $50,000 |
Staff said the cuts reflect a lower estimate of how many short-term rental operators will take part. When the by-law was being drafted in 2024, MuskokaRegion reported that Muskoka Lakes had nearly 1,200 short-term rental properties. At $341,500, even if every licence were billed at the inland rate with the 20 percent early-application discount, the projection covers well under 900 licences. At the standard waterfront fee, it covers about 340. The township has not published an actual count of applications or licences issued. Its March 31, 2026 update said only that a number of applications were still under review.
Put together, the documents describe a waterfront rental market that the township expects to shrink. Its summer calendar is now capped by by-law, and penalties begin in earnest next year. A seller's 2025 income came before any of those limits. Their 2026 income came during a year the township set aside for education. Neither shows what a licensed operator will earn once the 2027 enforcement year begins.
A cap would be a different problem
Elsewhere in Muskoka, the limit on rental income is often the number of licences available. Huntsville caps licences at 250 on a first-come, first-served basis and requires one year of ownership. The town says it approved 224 licences in 2024. Bracebridge caps licences at 4 percent of the town's private dwellings and limits overnight occupancy to 12 people regardless of bedroom count. Its annual fee is $1,500. In Lake of Bays, the fee schedule effective January 1, 2026 sets new applications at $1,000 and renewals at $900.
No numeric cap on licences was found in Muskoka Lakes. A buyer there is not competing for a scarce permit. The limit is the calendar and the septic system. That makes the township's restriction easier to model than a cap, since the 71-night summer ceiling and the per-bedroom occupancy limit are fixed, published figures. It also means a rental pro forma for a Muskoka Lakes waterfront property can be rebuilt from the by-law instead of from the seller's history.
Timing for a fall closing
Licences issued under the township's early-application incentive ran from November 1, 2025, to November 1, 2026. Renewal notices go out by email 60 days before expiry. A renewal requires a current Licensee Acknowledgement Form, Renter's Code of Conduct, Responsible Person Declaration Form and proof of insurance, even when nothing on the property has changed. For a sale closing in October or November, the seller's licence may expire around the same time as the closing. Either way, the buyer will need a licence in their own name.
The township's public licence map shows whether a specific property is currently licensed, and new approvals are added as they are processed. Questions go to Carly Bray, the township's Licensing Officer, at 705-765-3156 ext. 357. Neighbour concerns go to the 24/7 hotline at (249) 487-2299, which launched March 31, 2026. The township has not published complaint totals from the hotline or a post-season review of the summer rules.
Quick answers
Can a seller's licence be included in the purchase price? No. Section 5.2 of By-law 2025-049 prohibits transferring or assigning a licence.
Do the summer limits apply to every Muskoka Lakes property? Only to the Waterfront Residential, R4 and Waterbody Open Space zones. Properties in other zones follow the occupancy limits but not the monthly break or frequency rule. The township directs owners to the Muskoka Geohub map to confirm a property's zoning.
Is any of this tax or legal advice? No. Confirm a specific property's licensing status and zoning with the township, and get professional advice on any purchase.
If you're weighing a Muskoka Lakes waterfront property partly on rental income, Ryan Harkin and The Birchwood Cottage Co. run their own licensed hospitality portfolio and can help you rebuild the numbers under the 2027 rules rather than the seller's past calendar. Start with a conversation at Ryan Harkin.
