There’s plenty of horror stories about the chaos that can result from the Illegal sub-letting of a rental property by a tenant. And, in many of them, the landlord has little chance for recourse as their tenancy agreement didn’t prohibit it.

If a tenancy agreement does feature a “no sub-letting” clause, the situation can be starkly different. A recent Tenancy Tribunal decision, Barfoot & Thompson v Syed [2019], provides a spectacular example of this.

Acting for the landlord, Barfoot & Thompson rented a Mangere East property to Zain Syed from July 20, 2018 to January 20, 2019, at a weekly rent of $500. In the tenancy agreement it stated that the tenant couldn’t sub-let the property without the landlord’s permission.

However, between August 16 and December 6, 2018, Syed sub-let the property without the landlord’s permission to clients of the Ministry of Social Development (MSD) – which pays for emergency accommodation.

Over that period of time, MSD paid $60,800 to Syed. He paid $8,000 in rent to Barfoot & Thompson. During a property inspection Barfoot & Thompson realised the property was being sub-let. They issued a notice to remedy unlawful subletting of the property in February 2019 and applied to the Tribunal for an account of profits.

The Tribunal found that an account of profits, which is an order for payment of the net profits, has been put forward by the District Court as a remedy when a residential property has been wrongfully sub-let.

It also found that, as the property was sub-let without permission, and earned Syed over $60,000, he was in breach of the contract. The Tribunal said it was appropriate that he pay Barfoot & Thompson an award of $52,800 in net profit: $60,800 less the $8,000 he paid in rent.

The Tribunal’s jurisdiction is limited to $50,000 so it made an order for payment of $50.000 to the landlord.