Travellers and tourists looking for an alternative to hotels and motels at high season times when demand is great may be drawn to the online platform of Airbnb to rent a house or a room from private home owners.
While there is an opportunity to earn extra income, an owner of property looking to rent out their property as an Airbnb should also consider the myriad of issues that may arise, which includes insurance, tax, and legal implications.
Property owners should make their insurers aware that the property is being used to accommodate temporary visitors. In some cases, Airbnb rentals could be treated differently by the insurer and, therefore, may mean more expensive premiums and higher levels of excess for cover.
Whilst GST does not apply to residential rent, providing short-term rental accommodation via Airbnb is subject to GST. There are, however, thresholds that apply depending on the rental income derived, and rules about the expenses that may be claimed. A significant issue to address is whether GST becomes payable on the sale of the property in the future.
If temporary visitor accommodation is a permitted activity under the Council zoning for the property, an owner might be able to rent out their property as an Airbnb. Depending on the zoning, other owners may need to apply for resource consent and comply with Building Act requirements.
There are not many reported cases involving Airbnb in New Zealand. A recent Tenancy Tribunal case ruled on the subletting of a property in Wellington. The tenants had moved out of the property and, without the landlord’s knowledge, had sublet the property to seven different groups via Airbnb. The tenant was found to be in breach of the Residential Tenancies Act and their tenancy agreement. The tenancy agreement had specifically provided that the tenant was not to assign or sublet the tenancy without the landlord's written consent.
If a property is an apartment that falls under the Unit Titles Act, owners will be subject to body corporate rules. The body corporate may have rules that state owners wanting to let their apartment out as an Airbnb are to first seek the consent of the body corporate.
However, it could be argued that a body corporate cannot unreasonably withhold its consent or enforce rules that seek to prohibit such use. This is because leasing property out even on a short term basis is residential use, which is generally permitted under law. Until tested in the courts, it remains inconclusive whether body corporate rules restricting Airbnb use could be enforced.
There are other kinds of properties subject to occupation licence agreements; for example, properties held in company shares that may prohibit such use in their rules or constitution.
One of the few cases heard in Australia involved residents of a waterfront complex in Melbourne, who were unsuccessful in challenging owners from renting out their apartments via Airbnb. The court held that the strata rules for the complex could not displace the role of a town planner who is governed by planning laws which control the use of buildings.
While owners might feel they have the right to rent out their property as they see fit, it is important to take proper advice about the implications that arise from such renting or subletting property via Airbnb.
Source: InBrief Autumn 2018