Winter is almost over – time to rent the bach out

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Like many Northlanders, you may be looking to rent the family bach out for some of the warmer months of the year. However, in addition to mopping the floors and mowing the lawns, it is important you are up to date with your rights and obligations as a landlord.

The emergence of websites and apps such as Air BnB creates a risk for landlords as tenants may look to capitalise on your property this summer by subleasing space without your permission.

While being considered the first case of its kind to be brought to the Tenancy Tribunal in New Zealand, the case Nice Place Property Management Limited v Paterson highlights a common scenario, likely occurring throughout New Zealand.

The facts

A Wellington couple had entered into a general residential tenancy agreement with the landlord of the property. In this agreement, sub-leasing was expressly prohibited. Over a period of six months however, the couple had hosted seven groups from the website Air BnB for a profit totalling $1,568. Eventually, the property manager discovered what was happening, and a case was lodged with the Tenancy Tribunal.

The result

The Tenancy Tribunal found that the tenants were in breach of their tenancy agreement. What made this ruling particularly interesting is that under the Residential Tenancies Act 1986, a landlord is not specifically entitled to the recovery of profits made by a tenant through illegal subletting. However, in this case the tenants were ordered to pay the Landlord an “account of profits”, and exemplary damages. As a landlord this now means that you may be able to recover some of the profits obtained by tenants who have illegally sublet your property. In the past this was seldom seen.

Steps landlords can take to protect themselves

It is important to note that the Residential Tenancies Act 1986, states that a tenant “may” sublet and assign a lease unless expressly prohibited.

If you are a landlord looking to rent your bach out during the summer, it is important that the agreement you use expressly states subleasing is expressly prohibited, unless written consent is given.

If you discover your property is being subleased without your permission, immediately terminate the arrangement as you may be voiding your insurance policy.  You may also want to look at bringing a claim to the Tenancy Tribunal.

If you would like advice on your tenancy agreements or the actions of your tenants, please contact our property team, who will be happy to help.