Sub-letting a rental property on Airbnb breaches the Residential Tenancies Act, according to a precedent-setting Tenancy Tribunal ruling in favour of the landlord.
By Miriam Bell
In the first case of its kind in New Zealand, the Tenancy Tribunal has ruled that two Wellington tenants breached both the RTA and their tenancy agreement by sub-leasing their rental property via Airbnb.
The tenants, who made $1,568 from “hosting” guests from Airbnb, were in a fixed-term lease for four months, but found a house and tried to get out of their lease early.
However, the property manager did not let them out of their agreement early because it was not in the best interests of the owners.
The tenants turned to Airbnb and sub-let the fully furnished property to over seven different groups.
When he found out, the property manager Keith Powell, from Nice Place Property Management, went to the Tribunal.
The Tribunal awarded $1,000 to the property owners for “mental distress” plus exemplary damages of $300 as a deterrent from doing it in the future.
But Powell said the deterrent didn’t go far enough as the tenants broke the law and breached their tenancy agreement which was devastating for the property owners.
The tenants had made over $1,500 and were not required to pay back the full sum, he said.
“If tenants are knowingly putting the accommodation in the hands of groups that have not signed the tenancy agreement, and making a profit, then I don’t think a $300 fine is going to stop anyone.
“At the very least they should be required to pay the revenue back they made from Airbnb.”
Powell said that in cases where the landlord has been in breach of the RTA tenants have been awarded a full refund of their rent, bond and, in some cases, damages as well.
“But in cases where tenants have breached the RTA, the same penalties are not imposed.”
For landlords, it pays to know that there are some major consequences from tenants sub-letting rental properties on Airbnb.
RealiQ property management expert David Faulkner said there are serious insurance implications for landlords that aren’t aware their properties are on Airbnb.
If serious damage does occur to a property, insurance companies might not cover the damage as the property is not being used as a principal place of residence by the tenants, he said.
“The likelihood is that the liability would fall back on the tenant as they intentionally breached their tenancy agreement by subletting without the consent of the landlord.”
Given current uncertainties around tenant liability for damage, this could result in a minefield.
Thanks for this! I have yet to find a place where tenants subletting is legal actually …
I find myself wondering why these tenants were not allowed to break their lease (for a fee naturally).
By the way … your title is inaccurate as it’s not just been declared illegal this is merely a case that confirms its illegal.
I am delighted to see this sort of result. I would be beyond furious if I discovered any of my LTR’s being sublet. I manage them myself and usually drive past them every day, I like to see if there are strange cars or any obvious red flags.
I’m glad this has happened too. I know so much of my competition is subletting so hopefully this deters them and they back off Airbnb!
Does anybody else get the feeling that this is (or could easily be) covered by tenant/landlord contracts? A no-subletting clause is pretty common in leasing agreements. If a tenant is subletting on AirBnB or in another way, they are in breach of contract and can be booted. Of course, if you’re in a tenant-friendly state like California, New York, or Illinois, you could breach your leasing agreement every day of the year and still leave there…
Lots of rentals in New Zealand don’t seem to have proper rental agreements. Often it’s just a bond which is held by the government
It is covered by the tenant / landlord contract. Letting a whole property on Airbnb when you’re renting isn’t usually allowed in your contract but I guess there are exceptions as lots do it on here.
I know, because I have rented in New Zealand and sometimes even these contracts just don’t have a sublet clause. Sometimes you don’t even have a contract. It’s not like in the UK where when you lease a place you normally have a flat inventory and a very well written, no subleasing clause, in the contract.
I don’t know that it’s illegal vis a vis the state or municipality regulations in the U.S. But it’s certainly a breach of contract with most landlord-tenant contracts.
If I ever LTR my place, I would be adamant that no Airbnb activity go on in the rental!!
If the contracts don’t state you can’t do it then you’re not breaking any rules… or contracts to be precise. I can only assume in this case there was a contract in place that said the tenant couldn’t do it otherwise there’s no breach of contract.
I think it would be dodgy to just do Air without telling the landlord. Even if it was not in the contract, they could still kick you out.
They absolutely can’t, at least not in the UK. There are very strict laws here that mean landlords cannot just kick tenants out.
Well yes of course but like I said and what I have experienced in New Zealand - one place we leased had no contract it was a verbal agreement and an email to the landlord. The other place - no mention of subletting. It’s much more laid back. Besides from having a contract or not there are strict laws under the residential tenancies act - so if you had no formal contract with the landlord and only relied on the act I don’t believe you could just kick someone out. The law is more on the tenents side in New Zealand.
Here, you can just give 45 days notice to vacate for any reason at all. Not doubting you, as I know things are different in differing countries.
There are laws in Nz regarding tenancy even without a contract. Both parties are protected by the residential tenancies act. More info at tenancy.govt.nz
Whether or not this includes subletting I do not know. Quite possibly.