What was Tenancy Tribunal case 4878199 about?

The tribunal order states: Graham McCormick, Lara McCormick and Aspire Pro Enterprises Limited must

How much money was awarded in case 4878199?

Account For Profits Air BnB: $2,922.08 awarded to landlord; Compensation: Plumbing As Per Quote: $384.01 awarded to tenant; Property Damage: $1,000.00 awarded to landlord; Filing Fee: $20.44 awarded to landlord; Meth Testing: $339.00 awarded to landlord; Property Damage: $25.00 awarded to landlord; To Furniture: $600.00 awarded to landlord

What type of tenancy dispute was case 4878199?

The primary dispute was Exemplary damages. Related themes: Property damage.

Where can I read the official tribunal order for case 4878199?

The official Ministry of Justice published order is available at https://forms.justice.govt.nz/search/Documents/TTV2/PDF/10837039-Tribunal_Order_Redacted.pdf.

What was Tenancy Tribunal case 4878199 about?

The tribunal order states: Graham McCormick, Lara McCormick and Aspire Pro Enterprises Limited must

How much money was awarded in case 4878199?

Account For Profits Air BnB: $2,922.08 awarded to landlord; Compensation: Plumbing As Per Quote: $384.01 awarded to tenant; Property Damage: $1,000.00 awarded to landlord; Filing Fee: $20.44 awarded to landlord; Meth Testing: $339.00 awarded to landlord; Property Damage: $25.00 awarded to landlord; To Furniture: $600.00 awarded to landlord

What type of tenancy dispute was case 4878199?

The primary dispute was Exemplary damages. Related themes: Property damage.

Where can I read the official tribunal order for case 4878199?

The official Ministry of Justice published order is available at https://forms.justice.govt.nz/search/Documents/TTV2/PDF/10837039-Tribunal_Order_Redacted.pdf.

New Zealand Tenancy Tribunal Case 4878199 — Exemplary damages

Tenantcheck Insights

Reasons

Claims and awards in Tenancy Tribunal application 4878199 — net $2,202.51 NZD. Amounts reconciled from the published order (claims sum and net total). Verify on MoJ.
Claim	Landlord	Tenant	Reason
Repairs: to furniture	$600.00		Repairs: to furniture
Lock/key replacement	$25.00		Lock/key replacement
Meth testing	$339.00		Meth testing
Account for profits Air BnB	$2,922.08		Account for profits Air BnB
Exemplary damages subletting	$1,000.00		Exemplary damages subletting
Filing fee reimbursement	$20.44		Filing fee reimbursement
Compensation: plumbing as per quote		$384.01	plumbing as per quote
Total award	$4,906.52	$384.01
Net award	$2,202.51
Total payable by Tenant to Landlord	$2,202.51

The landlord’s representatives [The landlord’s representatives] and Lara McCormick (for all tenants) attended two hearings in this matter.

The first hearing dealt with the ending of the tenancy (by consent). I also made an order that the tenants immediately stop subletting the premises.

The second hearing related to financial claims made by both parties.

The landlord seeks compensation and exemplary damages, being:- a. Profits earned from unauthorised subletting, b. Expenses for re-letting the premises, c. The cost of methamphetamine testing due to occupation by unauthorised persons, d. Reinstatement of furniture to its original condition, e. Exemplary damages for subletting the premises without the prior written approval of the landlord. A proven breach is an unlawful act for which exemplary damages may be awarded up to a maximum of $1,500.00. See section 44(2A)(b) and Schedule 1A Residential Tenancies Act 1986.

The tenants have applied for:- a. Compensation for plumbing repairs, b. Loss caused by the landlord unreasonably declining approval for an alternative occupant, and c. They dispute the landlord’s claims.

The parties have agreed that the tenant will compensate the landlord $600.00 for the cost to reinstate furniture in the premises to its original condition and $25.00 for a key fob.

During the hearing the parties came to further agreement that the landlord would compensate the tenant $384.01 for plumbing repairs (based on a quote from the landlord’s plumber for the same work) and withdraw the claims for re- letting expenses except the cost of $339.00 for baseline methamphetamine testing which the tenants agree to pay.

I have recorded the agreed orders. Background

The parties entered into a tenancy which started on 27 February 2024 with the documented fixed term due to end on 4 August 2024.

The landlord suspected the premises were being rented out for short-stay accommodation (such as on AirBnB) and issued the tenants a breach notice requiring this to stop by 23 April 2024.

The landlord says the tenants did not stop and applied to the Tribunal to terminate the tenancy for this breach and for compensation.

Who are the tenants?

The parties agree that Graham McCormick, Lara McCormick, Aspire Pro Enterprises Limited are the tenants.

Aspire Pro Enterprises Limited (“Aspire”) is described by Lara McCormick as a residential property investment company which undertakes short-term renting of accommodation as part of its business activities. Unauthorised sub-letting of the premises

The law says that a tenancy agreement may prohibit a tenant from subletting or parting with possession during a tenancy. In the absence of an express prohibition, a tenant may do so with the prior written consent of the landlord and in accordance with any conditions the landlord attaches to that consent; section 44 Residential Tenancies Act 1986 (RTA).

A landlord must not withhold their consent unreasonably or attach any unreasonable conditions to the consent; s44(3) RTA.

The tenancy agreement prohibits sub-letting unless approved in writing by the landlord. 1

The tenancy agreement allows the premises to be occupied by any of three named initial occupants or by any subsequent occupant approved by the landlord (who shall be employees or contractors of Aspire).

Lara McCormick acknowledged in the first hearing that:- a. the approved occupants never lived in the premises, b. that PB lived in the premises some of the time, and c. the premises were being let to short-stay guests for some of the time.

The above admissions are an acknowledgement by the tenants that they did breach the tenancy agreement and the RTA by sub-letting the premises without the prior approval of the landlord. This is a breach of s44 RTA and an unlawful act.

The landlord sought an order prohibiting the premises being sub-let and I made this order on 13 June 2024.

What are the issues to be decided?

1 The clause in the tenancy agreement says: ASSIGNMENT The Tenant shall not assign, sub-let, or part with possession of the Property and the chattels (if any) or any part thereof during the term of the tenancy without prior written approval of the Landlord.

The issues to be decided are:- a. Did the tenants make a profit from the unauthorised sub-letting and if, so, should some or all of this be paid to the landlord? b. Should the tenants be required to pay exemplary damages for the unlawful act of unauthorised subletting? c. Did the tenants suffer loss caused by the landlord unreasonably declining approval for an alternative occupant? Did the tenants make a profit from the unauthorised sub-letting and if, so, should some or all of this be paid to the landlord?

The landlord says that if the tenants have made a profit from the unauthorised subletting, then this should be paid to the landlord.

An “account of profits” is a remedy that may be available in breach of contract cases, in exceptional circumstances; see Attorney-General v Blake [2001] 1 AC 268 HL.

A District Court decision decided that it was appropriate that a tenant return profit earned to the landlord in that case because the tenant had cynically breached a clear term in the agreement, had vacated the premises to make the whole of the premises available for Air BnB guests, and had done so on 55 occasions at $249.00 per night ($13,695.00). It was also relevant that this intentional breach could not be adequately remedied by an award of exemplary damages. See Nice Place Property Management Ltd v Paterson [2018] NZDC 20936.

After considering the evidence in this case, I find that the tenants did make a deliberate decision to rent out the premises in breach of the tenancy agreement. More than this, I find it probable that this was their intention all along and that this is the type of case where it is appropriate to award a return of some or all of any profit earned.

The evidence that leads me to conclude that the subletting was deliberate and probably intended from the outset is:- a. That the approved occupants have never lived in the premises and the landlord was not told that their intentions had changed. b. Ms McCormick initially said that her family had intended to live at the apartment on weekdays but, when asked, agreed that they in fact rented a home elsewhere in Hamilton for the whole duration of the tenancy. c. Lara McCormick consistently spoke of the apartment and the renting arrangements as a business and the Profit and Loss statement (“P&L”) provided by her supports this. For example, she said it was a “corporate tenancy” and that the interior furnishings were modernised to make the apartment more presentable. This was referred to in the P&L as “property staging”. d. The first short-stay rental was on 14 March 2024 which is just 2 weeks after the tenancy started. e. The premises have been let for short-stay accommodation for 78 of the 107 nights from the start of the tenancy up to the date of the order prohibiting any further sub-letting (27 February 2024 to 13 June 2024). f. The nightly rate was around $200.00 to $250.00 per night which indicates an intention to profit.

The landlord has supplied a Profit and Loss statement and information about the earnings and outgoings related to subletting the premises.

There was discussion in the hearing about how to account for the various expenses. My decision is that it is fair to deduct the fees/commissions charged by AirBnB (or similar agency) and the cleaning and laundry costs.

I do not deduct:- a. Utilities (phone, internet, power, gas) as these are a normal residential expense that benefit the authorised residential use. b. “Staging” or what are described as “consumables” (linen, keys, panel heater) as these are assets now owned by Aspire.

The District Court in the Nice Place Property Management Ltd case clarified that the proper calculation of the rental expense is the nightly rate for the number of nights that the premises are sub-let. It is not the total rent expense over the tenancy. This is because the premises remain available to the tenants for authorised residential use on the nights that it is vacant.

I calculate that the net profit from the subletting (exclusive of GST) is $2,922.08. Rental income 12,744.93 Less fees/commissions to AirBnB or similar agency1,799.70 Cleaning and laundry1,560.07 Rental expense 78 nights(at $82.86 per night)6,463.08 Total expenses- 9,822.85 Net profit$2,922.08

I award the net profit to be paid to the landlord in compensation for the unauthorised subletting. Should the tenants be required to pay exemplary damages for the unlawful act of unauthorised subletting?

The Residential Tenancies Act specifies that subletting or parting with possession of premises without the prior written consent of the landlord is an unlawful act; s44(2A) RTA.

The landlord has applied for exemplary damages. These are like a fine or a penalty and can only be awarded when the Tribunal is satisfied that an unlawful act is intentional. The maximum penalty is $1,500.00; Schedule 1A RTA.

The Tribunal must also determine that it is just to award these after considering the breaching party’s intent, the effect of the act, the interests of the innocent party, and the public interest; see s109(3) RTA.

The tenant intentionally sub-let the premises and continued to do so even after being given a notice of breach. The intent was clearly to make profit.

The effect of the unlawful subletting was to put the landlord’s property at risk. There is more risk of damage, insurance may be invalidated, and a higher, commercial land rate may be applied by the local authority. The owners had previously lived in the premises and their agent said they were upset that unvetted people had been allowed to live in the property.

The interests of the landlord are that it has control over who resides in its premises. This control is removed when the premises are sub-let without consent.

There is public interest in ensuring tenants do not sub-let premises, especially for short-term stays to numerous people, without the clear consent of the landlord.

It is just to award exemplary damages and I do so in the amount of $1,000.00. The breach was intentional and continuing. Did the tenants suffer loss caused by the landlord unreasonably declining approval for an alternative occupant?

The tenants applied for compensation as they say the landlord unreasonably refused consent for a cleaning contractor to occupy the premises between the first and second hearings.

I dismiss this claim. Lara McCormick acknowledged that the intended occupant would not have paid rent so there is no loss. Filing fee and suppression of name

The landlord has succeeded in the claim, so I award the filing fee and suppress its name as sought. There are no grounds to suppress the tenants’ names. In fact, the contrary applies.

The bond is refunded to the landlord. The tenants are required to pay the amount owing to the landlord immediately.

Reasons

Claims and awards in Tenancy Tribunal application 4878199 — net $2,202.51 NZD. Amounts reconciled from the published order (claims sum and net total). Verify on MoJ.
Claim	Landlord	Tenant	Reason
Repairs: to furniture	$600.00		Repairs: to furniture
Lock/key replacement	$25.00		Lock/key replacement
Meth testing	$339.00		Meth testing
Account for profits Air BnB	$2,922.08		Account for profits Air BnB
Exemplary damages subletting	$1,000.00		Exemplary damages subletting
Filing fee reimbursement	$20.44		Filing fee reimbursement
Compensation: plumbing as per quote		$384.01	plumbing as per quote
Total award	$4,906.52	$384.01
Net award	$2,202.51
Total payable by Tenant to Landlord	$2,202.51