Published tribunal order
Tenancy Tribunal case 4662529 — Property damage at 3 Clarke Grove, Richmond Heights, Taupo 3330
Decided 27 Nov 2023 · Published 27 Nov 2023 · Application 4662529
Landlord favoured
- Property damage
- Exemplary damages
Order
- Courtney Haitana is to pay Tremaine Rentals Ltd the sum of $2,093.00 immediately.
Reasons
- Both parties attended the reconvened hearing. The property owner could not be contacted so did not attend.
- The hearing had been adjourned part heard so that financial information confirming the exact income received from Air B n B for the renting/subletting of the premises as an Air B n B operation could be provided and considered.
- Ms Haitana provided the Air B n B financial information which shows she received $6,273.63 for renting the property as a short-term rental for the 19 week period between 25 February and 5 August 2023. Over this period of time, she paid $9,500 in rent. Relevant Background
- Ms Haitana’s tenancy began in November 2016. The agreement had a clause prohibiting subletting without the consent of the landlord.
- In October 2017 Ms Haitana requested permission to have a flatmate or boarder as she was struggling to pay the rent (she is a solo mother; caregiver to one son and the property has four bedrooms).
- The landlord agreed that a flatmate or boarder was acceptable, the number of additional occupants permitted as part of this variation, was not limited to one.
- The landlord requested the tenant advise the name of the additional occupants, but this was not followed up on by successive property managers.
- Ms Haitana said she then had a string of flatmates; some of whom were more suitable than others but there was a steady stream of different occupants.
- She decided earlier this year to advertise the property on Air B n B to generate additional rental income rather than have a flatmate.
- The first guests stayed in February and all or part of the property was rented until early August.
- The property owner does not want the business to operate from his rental property. He was concerned that he would have had no insurance and there were various issues regarding the Air B n B listing he had issue with.
- Pets were permitted and the listing said longer term rental options would be considered. He was also concerned about additional wear and tear generally.
- The parties have subsequently been unable to agree about any variation of the tenancy terms and conditions going forward.
- The property manager advises that the rent is about $200 per week less than market rent and would have been increased even if Ms Haitana had stayed on.
- Ms Haitana cannot afford to pay any increased rent and a tenancy end date of 4 December was agreed to at the first hearing on 17 October.
- At that hearing a claim for exemplary damages was dismissed and the compensatory damages claim adjourned so that the additional Air b n b income could be provided, and final submissions made. Landlord submissions
- The owner submits that the full amount of $6,273 earned from the Air b n b rental should be awarded as compensation. The reasons for this are as follows; • Ms Haitana did not obtain permission for operating the Air b n b, • While she was permitted to have a flatmate/s she was not permitted to operate a business from the owner’s property. • The owner would not have had insurance if anything went wrong. • He did not want pets at the property and was angry that the listing permitted pets. • There would have been increased wear and tear at the property and this should be compensated. Tenant submissions.
- In reply Ms Haitana said that; • She did not know she was doing anything wrong with having Air b n b guests as opposed to flatmates. • Only 2 guests had a dog and both of them kept the dog outside. She does not believe either dog caused damage. • She believes the Air b n b guest would have caused less wear and tear as they really only stayed overnight. By contrast flatmates treated the house as their own and were there all the time. • She never had guests that did not respect the place and look after it. One lot of guests had the neighbour ask them to turn music down at 10pm, but she does not believe they were partying as there was no empty bottles or sign of that. She just thinks they were sitting outside enjoying music, which they turned down when asked. • While she acknowledges she needs to pay compensation she does not believe a full refund of the profits would be fair. How compensation is calculated
- I have carefully considered the parties submissions. There is limited case law assisting.
- The District Court considered the issue in the case of Nice Place Property Management Ltd v Paterson [2018] NZDC 20936 where the landlord was arguing that the appropriate method for calculating compensation was to award the gross revenue received from the Air b n b. The District Court said that was not fair and the correct method was to award the net and not gross profit, after allowing for rental paid for the nights the property was let as an Air b n b. The court said that “An account of profits is "designed not to penalise the defendant but to prevent unjust enrichment", requiring "the defendant to give up the gains made to the party whose rights have been infringed". As acknowledged by the Court of Appeal in Adlam v Savage, an order for an account of profits is a requirement the defendant pay the net profits and not the gross profits gained.
- That case can also be distinguished as the breach in that case, was described as “cynical” and “deliberate” as the tenancy agreement prohibited all subletting. In this case Ms Haitana had specifically sought and obtained permission to sub- let as she needed help with paying the rental. In her naivety she did not consider the difference in the subletting to Air b n b guests to be relevant let alone a breach. She had not been asked by previous property managers for the names of her flat mates and did not consider there was much difference with short term accommodation.
- It is relevant that there has been no damage to the property, and it appears that the risk was therefore perceived rather than actual.
- I have therefore calculated compensation for the subletting to Air b n b guests, which was a breach of the tenancy agreement, by deducting from the $6,273 Air b n b profits the $4,180 that Ms Haitana would have received from flatmates occupying the room for the 19 weeks which was specifically permitted ($220 per week) and the $2,093 awarded is the resulting compensation.
- The parties will discuss how the amount awarded is to be paid when they meet for the final inspection next week.