Tribunal made right call on Air B&B

** Wellington tenant made to pay out $2150 back to the owner for Air B&B **

More landlords should ensure their tenants expressly agree not to sublet properties via Airbnb, the New Zealand Property Investors Federation says.

The Tenancy Tribunal has ruled that Wellington tenant (Paterson) must pay his landlord the profit he made in renting his Bellagio apartment, in central Wellington, on Airbnb.

The apartment was rented for $650 a week and the landlord estimated he had made $12,450 in Airbnb takings.

The Tenancy Tribunal ruled that, after costs associated with running the property as a short-term rental and paying the base weekly rent himself were deducted, Paterson should pay his landlord the Airbnb profits, calculated at $2150.

Paterson had signed an agreement that specifically prohibited him from subletting, including on Airbnb.

That level of detail is unusual in rental agreements.

Lawyer Thomas Biss, of Henderson Reeves, said unless it was expressly prohibited, the tenant could usually sublet.

That most often happened in cases where one tenant held the lease and then rented rooms to flatmates.

New Zealand Property Investors Federation executive officer Andrew King said the Tenancy Tribunal had made the right decision

But landlords should make it clear that subletting was not allowed, he said.

There was an additional risk to property owners, he said when they did not know who was staying in their rental properties and could not vet them.

There was potential for more damage to a property with people regularly shifting in and out, he said, and the current law put most of the responsibility for paying for unintentional damage on to landlords.

“It increases the risk. There’s also a chance that if they’re letting it out, your insurance may not cover it. It’s really good that the Tenancy Tribunal said ‘you can’t profit from this’.”

Insurers generally offer no cover for methamphetamine contamination when a property is offered for short-term rent.

Without a specific “no-Airbnb” clause, some tenants might plead ignorance and say they did not realise it was prohibited, even if they signed a no-subletting clause, King said.

David Mahon, the senior solicitor at Duncan Cotterill, said the “account of profits” remedy used in this case had not been awarded by the Tenancy Tribunal in similar earlier cases.

“In the four other Tenancy Tribunal cases we are aware of that involved the use of premises by Airbnb, the Tribunal followed the more common approach of ordering that the tenant’s use of the premises for Airbnb cease, and ordered a modest sum be paid by the tenant in exemplary damages to the landlord.”

He said it was likely that a landlord could still bring a claim against a tenant, even when Airbnb had not been expressly prohibited, provided there was a general no-subletting clause.

“Such a clause is standard in most residential tenancy agreements. The takeaway point for landlords is that it is always best to be explicit in a tenancy agreement if the landlord wishes to prohibit the use of premises for Airbnb or similar commercial activity.

“For tenants, the takeaway point is that if their tenancy agreement expressly prohibits subletting that is likely to include renting or letting all or part of the property on Airbnb even if the clause does not refer expressly to Airbnb. Although it is likely only in extreme circumstances that an account of profits would be ordered, that is one possible consequence of where a tenant has breached their tenancy agreement.”

He said tenants also faced termination of the tenancy, awards of damage or orders to stop letting the property