Landlords paid for unnecessary methamphetamine tests and decontamination after being wrongly advised by a Government service they would be able to reclaim the money from tenants.
Tenancy Services told rental owners and property managers they could still claim compensation if miniscule traces of methamphetamine were detected in their properties - despite a landmark report last year saying there was no health risk at these levels.
Their claims were rejected at the Tenancy Tribunal, leaving them with the cost of the meth tests and the clean-up.
The Ministry of Business, Innovation and Employment, which runs Tenancy Services, said it aimed to provide the best information available at the time, but it did not constitute legal advice.
"It is up to a landlord to choose whether they test for meth or decontaminate their properties, and whether they make a claim to the Tenancy Tribunal," said spokeswoman Jennifer Sykes.
A report by the former Chief Science Advisor Sir Peter Gluckman last May debunked the official meth testing standard, which had been used to penalise hundreds of tenants.
The report said meth testing levels of 1.5mcg/100cm2 should not signal a health risk and even exposure to levels of contamination 10 times higher (15mcg/100cm2) would be unlikely to have any adverse effects.
Housing NZ and the Real Estate Authority immediately began applying the higher standard of 15mcg/100cm2. The Tenancy Tribunal also began requiring a higher level of contamination for damage claims.
But it appears Tenancy Services kept using the debunked standard even after Gluckman's report.
In August, Auckland-based company Impression Real Estate took a former tenant, Terence Hemepo, to the Tenancy Tribunal over damage to a rental property in Birkdale.
In a ruling released earlier this month, the company failed to recoup the costs for meth testing and decontamination. Adjudicator Philip McKinstry said the level of meth contamination at the property did not pose a health risk.
"The safety margin, even in the Gluckman report, is many magnitudes below an observable effect," he said.
McKinstry noted that Tenancy Services' advice to the property managers to make a claim for meth damage was "an unfortunate sidebar" in the case.
"The agent says they had been told by Tenancy Services that so long as the levels of meth were above 1.5mcg/100cm2 they could make a claim for decontamination and hence why the decontamination was done."
Sykes said Tenancy Services now advised homeowners about both the old guidelines and Gluckman's guidelines.
Impression Real Estate managing director Aaron Tunstall said he felt sorry for the landlords of the Birkdale house, who were left with a bill of around $1200 for the testing and decontamination work.
In a further sign of the confusion around meth testing standards, the landlords' insurance company covered some of this cost because it was still sticking with the conservative, debunked standard. The landlords' court fees were also waived because their claim was mostly successful.
While the tribunal is rejecting damage claims based on meth use, landlords are finding other ways to get compensation from tenants who have used drugs within a property.
In some cases, the tribunal has allowed landlords to claim exemplary damages from tenants on the grounds that smoking meth in a rental property breaches tenancy laws. In a ruling released last week, a landlord for a West Harbour property successfully claimed $800 in exemplary damages from a tenant who was found to have smoked meth in the property.