Tenant to give landlord Airbnb profits after running secret Taupo guesthouse

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A tenant who made $27,000 secretly hosting Airbnb guests at a house she didn’t live at has been ordered to give her landlord the net profit.

For 14 months, Michelle Hawthorne ran the guesthouse, against the conditions of her lease, in a leafy Taupō suburb.

Hawthorne didn’t live at the property.   She paid $380 per week in rent, but offered it for $105 per night online and had let it for 261 days over 14 months to March 2018.

A house in Taupō's prestigious Bird Area was run as an Airbnb guesthouse without the landlord's permission.
ROBERT STEVEN/STUFF
A house in Taupō’s prestigious Bird Area was run as an Airbnb guesthouse without the landlord’s permission.

Her landlord, who was managing it privately, heard about the Airbnb business from a local business person. The landlord asked tenancy manager Jane Bennett to take over management.

“I found the property on Airbnb straight away, with a photo of her (the tenant’s) face and photos of the interior,”  Bennett said.

The Property Store's Jane Bennett took over managing the Taupō property after the owner suspected it was being sublet on Airbnb.
ROBERT STEVEN/STUFF
The Property Store’s Jane Bennett took over managing the Taupō property after the owner suspected it was being sublet on Airbnb.

“She had five-star reviews and was a ‘superhost’.  The behaviour was outlandish.”

Bennett went to the rental to speak with Hawthorne, but was met by two foreigners.

“They thought I was Michelle. I called her up and told her I’d just met her Airbnb guests.”

Hawthorne’s tenancy agreement did not permit her to sublet the property.

However, she has only been ordered to pay back the net profits of her Airbnb operation – rather than the full revenue she gained from Airbnb guests.

At a Tenancy Tribunal hearing in May, Hawthorne did not deny she had sublet the Bird Area property.

However, she submitted $14,167 in rental costs and $3,000 in electricity and internet bills as the cost of running the Airbnb business.

Her lawyer asked that these costs be subtracted from the business’s gross revenue [$27,445].

The hearing adjudicator, A. Macpherson, said “tenants should not be a position whereby they retain profits derived from the commission of an unlawful act”.

However, Macpherson said she could only impose similar penalties to comparable cases in the District Court and the Court of Appeal.

Consequently, she requested Hawthorne pay only the net profit of $10,278,  as an account of profits.

In total, Hawthorne has been ordered to pay $13,311, including $2000 for compensation for “injury to feelings” and $950 in exemplary damages.

The tribunal order stated Hawthorne had acted “not in utter disregard” but more in “naive blindness”.

Bennett, who runs tenancy management company the Property Store, represented the landlord at the hearing.

“We’ve never come across this sort of thing before,” she said.

“There’s such a shortage of rental properties Taupō and she didn’t need the house – she wasn’t living there.  We could have rented the house to a deserving family.”

Bennett said the landlord’s insurance was likely to be void once the property ran as a guest house.

“For example, if the property had burned down and it was discovered to have been sublet illegally, the landlords’ insurance might not have paid out.”

At the tribunal, the tenant’s lawyer asked for the landlord to contribute to the cost of his counsel, claiming the tenant had no option but to seek legal representation given the level of compensation sought by the landlord.

The compensation claimed was originally $19,370, then $48,924, and subsequently amended to a total of $25,052, once Hawthorne revealed the value of Airbnb revenue.

The adjudicator rejected this claim, saying it was not appropriate.

Stuff has spoken with Hawthorne’s lawyer, but not yet received a reply from Hawthorne.

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