Everyone seems to be renting part, or all, of their property on Airbnb these days. It has become the done thing. But if your tenants are thinking of dabbling in this Airbnb caper and subletting YOUR property, they should think again. They could end up in more hot water than a teabag, as a ruling by the Tenancy Tribunal last year illustrates.
The tenant of an apartment in Taranaki Street, Wellington thought it might be a good idea to sublet the property on Airbnb. Not once. Not twice. But 54 times. Yes, on 54 occasions in 2017, this apartment was sublet on Airbnb. The weekly rent for guests was $650, and the profit to the tenant was about $12,500. Not a bad little earner…until your landlord finds out.
Unfortunately for the tenant, the overseas-based owners did find out. They had become a little suspicious of the comings and goings in Taranaki Street. They asked their property manager to investigate. Those investigations found that the property was being sublet, in direct contravention of the tenancy agreement. In a landmark decision, the Tenancy Tribunal directed that the landlords receive all the profits made by their tenant.
After being found in breach of his agreement, the tenant abandoned his tenancy. He was also ordered to pay unpaid rent and damages for abandonment, subleasing, and for damage incurred during the tenancy period. The tenant was out of Taranaki Street, and out of pocket.
The key to the landlord receiving the profits they deserved was their tenancy agreement. It included a clause that prohibited subletting; this included activity on platforms like Airbnb.
Under the Residential Tenancies Act, the tenancy agreement can include a clause that prohibits the tenant from subletting.
If the clause is not in the agreement, then the tenant can sublet the premises only if they have the landlord’s prior written consent. Despite this implicit requirement for consent, if you don’t want your premises to be used for Airbnb or similar temporary rental accommodation, we recommend you include a specific clause which expressly prohibits use of the property for holiday or other temporary rental agreements.
The decision by the Tenancy Tribunal is one with widespread implications. It opens the door for landlords to claim profits if they encounter a similar scenario.
It also highlights the need to have a tenancy agreement that makes it clear to tenants what they can, or can’t do, in regards to subletting. If you’re a landlord, get in touch with us to discuss the sort of tenancy agreement that will protect your rights and property. And if you’re a tenant, think twice before you sublet someone else’s property. Reading the tenancy agreement is a very good place to start that thought process.