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Wellington landlord awarded profits from tenant’s illegal airbnb

News release from Nice Place
For what is likely the first time in New Zealand, a landlord has successfully been awarded the profits earned by a tenant illegally sub-leasing a rental property on Airbnb. The tenant had been sub-leasing his rented Bellagio Apartment in central Wellington on at least 54 occasions over a 6-month period, making over $12,450 in revenue.

The Residential Tenancies Act does not specifically allow for landlords to recover profits earned by a tenant through sub-leasing when it’s in breach of their Tenancy Agreement, and it is understood that it has never been achieved, up until now.

Keith Powell of Nice Place Property Management took over management of the Bellagio Apartment property since the initial suspicion from the property owner that his apartment was being sub-leased. The property owner contacted Mr Powell, who’s been successful in the Tenancy Tribunal on another Airbnb case, to investigate further.

Upon discovering that the suspicion was correct, Mr Powell contacted the tenant to address the breach. The tenant then stopped all rent payments and abandoned the apartment.

Mr Powell said in his 13 years of property management he had never seen such a blatant breach of the Tenancy Agreement.

“It’s unusual to see the Tenancy Agreement explicitly state that sub-leasing on Airbnb is prohibited. So, finding that in just 6-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,” says Mr Powell.

Shehan Gunatunga from Morrison Kent Lawyers, representing Mr Powell, successfully sought an “account of profits” by demonstrating it was unreasonable to allow the tenant to profit from a breach of the tenancy agreement. Accordingly, the Tribunal found the landlord could recover the profits from the sub-leasing activity.

Morrison Kent in Wellington believes this to be the first time an “account of profits” has been allowed under these circumstances in New Zealand.

Mr Gunatunga said this potentially precedent setting case adds further reassurance for landlords when it comes to sub-leasing breaches.

“Being able to recover the profits from the sub-leasing activity sets a precedent, meaning 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,” said Mr Gunatunga.

In addition to the profits from sub-leasing the apartment on Airbnb, the tenant was also ordered to pay unpaid rent, exemplary damages for abandonment, sub-leasing and replacing locks, as well as costs for door replacement.