In May 2018, in Nice Place Property Management Limited v Paterson, the Tenancy Tribunal ordered a tenant to pay his landlord the profit derived from subletting the landlord’s property on Airbnb without the landlords’ consent, in breach of a clear clause in the tenancy agreement. The order was for what is called an “account of profits”.
Despite ordering the account of profits, we considered the Tribunal erred in calculating the gross profit earned by the tenant to be disgorged. On that basis, our client decided to appeal the decision to the District Court. The appeal was allowed, and a result is the District Court has now confirmed the availability of the equitable remedy of an account of profits is available in these circumstances.
What does the District Court’s decision mean for landlords?
We are aware that the Tenancy Tribunal has, since the time we filed the appeal, held determination of similar matters in abeyance, pending the decision of the appeal.
The Tribunal can now determine these matters with certainty, as the District Court has confirmed the place of an account of profits in such matters. A landlord faced with these circumstances can now be confident if a similar matter is brought before the Tribunal, the Tribunal is bound by the District Court’s decision to order an account of profits.
Essential points for landlords to take away from the District Court decision
In the judgment, the Court made the following findings which we consider are some of the questions a landlord should keep in mind when considering making a claim.
- Has there been a breach of contract which one can rightly view to be intentional and deceptive?In the present matter, the District Court considered one could see the breach of contract as cynical where the tenant’s activity spanned across at least six months and 55 instances, with disregard to a specific term in the agreement
- Is the term breached expressed clearly?In the present matter, the term clearly referred to the prohibition of subletting through Airbnb and the District Court considered that the term breached was as clear as a bell.
- Can the landlord be protected and/or reimbursed through any other mechanism?In the present matter, the Court considered that the maximum amount of exemplary damages under section 44 of the Residential Tenancies Act is the inadequate sum of $1,000 and it was obvious from the figures in this case that the tenant could make several hundred dollars profit each week simply by renting the apartment and then subletting it through Airbnb continuously in blatant breach of the tenancy agreement.
For more information
If you find yourself in a similar situation, it is important to be fully informed about all the remedies available, and we recommend you obtain legal advice from our experienced team.