Airbnb profits for landlord not tenant

Landlords worried about tenants sub-letting their property on Airbnb can take heart after the Tenancy Tribunal ruled against a tenant for doing just that.

Tuesday, May 22nd 2018, 10:30AM

by Miriam Bell

A Wellington landlord has been awarded the profits their tenant earned by illegally sub-leasing their rental property on Airbnb.

The tenant, whose tenancy agreement specified the property was not to be sub-let, had rented out the landlord’s Bellagio Apartment, in central Wellington, on at least 54 occasions over a six month period.

This earned the tenant over $12,450 in revenue

The Residential Tenancies Act (RTA) does not specifically allow for landlords to recover profits earned by a tenant through sub-leasing when it is in breach of their tenancy agreement.

But, on this occasion, the Tenancy Tribunal found in favour of the landlords, who are understood to be based in the US, allowing them to recover the profits from the sub-leasing activity.

On behalf of the landlords, lawyers’ Morrison Kent had sought an “account of profits”, arguing it was unreasonable to allow the tenant to profit from a breach of the tenancy agreement.

Morrison Kent senior solicitor Shehan Gunatunga says it was the first time an “account of profits” has been allowed under these circumstances in New Zealand.

The potentially precedent setting case adds further reassurance for landlords when it comes to sub-leasing breaches, Gunatunga says.

“There is now a legal basis for seeking that the profits be paid to an aggrieved landlord where a tenant sublets their rental property in breach of the tenancy agreement.

“This adds another layer of protection in situations of sub-leasing, which is becoming much easier for tenants to do.”

Along with the Airbnb profits, the Tribunal also ordered the tenant to pay unpaid rent, exemplary damages for abandonment, sub-leasing and replacing locks, and costs for door replacement.

Nice Place Property Management company director Keith Powell was contracted to manage the apartment after the owner became suspicious the tenant was sub-leasing the property.

When he discovered the tenant was sub-leasing the apartment and contacted the tenant about it, the tenant stopped all rent payments and abandoned the apartment.

Powell says that in 13 years of property management he had never seen such a blatant breach of a tenancy agreement.

“It’s unusual to see an agreement explicitly state that sub-leasing on Airbnb is prohibited.

“So, finding that in six months the tenant had done so on at least 54 separate occasions, missed rent, installed a dead bolt on the door and then disappeared, you’ve got to wonder what was going on!”

Many landlords are concerned about the potential for tenants to sub-let their property on Airbnb and this Tribunal decision appears sympathetic to those concerns.

It stands in contrast to another Airbnb sub-letting case which Powell took to the Tribunal last year.

In that case, the Tribunal ruled the tenants had breached both the RTA and their tenancy agreement by sub-letting a property on Airbnb.

But the tenants were allowed to keep the profits they made while the landlords were awarded $1,000 for mental distress.

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