AI-altered property images can mislead prospective tenants and breach the Fair Trading Act 1986 (FTA) if they are inaccurate. Advertisers remain responsible for ensuring listings accurately reflect the property - even when using AI or virtual staging.

What is “housefishing” and why does it matter?

Generative AI, virtual-staging software, and other image-editing tools can make almost any property look picture-perfect. But when those tools make a home appear materially different from what prospective tenants encounter in person, the result is increasingly described as “housefishing”.

Not every edited image is misleading. Routine adjustments such as correcting lighting or straightening a photograph may help viewers see the property more clearly. The risk arises when an edit, or the selective use of cropping or outdated images, changes the property’s apparent condition, conceals a defect, or distorts a feature that could influence a prospective tenant’s decision.

When can AI-altered property images breach New Zealand law?

The FTA applies where a person advertising a property for rent or sale is acting “in trade”. This will include professional property managers and landlords carrying on a rental business.

The FTA focuses on the overall impression created by a rental listing, not just the accuracy of each individual word or image. Section 9 contains the general prohibition against misleading or deceptive conduct. Section 14 is more specific: it prohibits false or misleading representations and misleading conduct concerning land, including representations about the nature, characteristics, location, use or benefits of an interest in land.

An AI-altered image may therefore breach the Act if it changes the overall impression that a reasonable prospective tenant would form of the property. An intention to mislead is not required for section 9 to apply, and the issue can arise before a prospective tenant signs a tenancy agreement or suffers financial loss.

The Advertising Standards Code from the Advertising Standards Authority (ASA), the self-regulatory industry body for the advertising industry, reinforces this position by requiring advertisements to be truthful and not misleading. Its guidance on AI use confirms that advertisers remain responsible for AI-generated or AI-enhanced content and for substantiating the claims and depictions used in their advertisements.

So, where is the line? The key distinction is between polishing the presentation and changing the substance. Removing a rubbish bin or loose cable is unlikely to affect a tenant’s decision. By contrast, adding a renovated kitchen or ocean view that does not exist, concealing a defect, or shrinking furniture to make a room appear materially larger may create a misleading impression.

What are the breach consequences?

The consequences of breaching the FTA can be significant. Offences currently carry maximum fines of $600,000 for a company and $200,000 for an individual. If the Fair Trading Amendment Bill is passed, the proposed maximum for an individual is $1 million and for a company could be up to $5 million. Depending on the circumstances, other consequences of a breach could include injunctions, corrective advertising, and compensation-related orders for consumers who are harmed by the misleading images. Misleading images can also trigger complaints, reputational harm, and disputes with prospective tenants.

A misleading listing may also attract a complaint to the ASA. Although the ASA process is separate from FTA enforcement and does not impose financial penalties, an upheld complaint may result in the advertisement being amended or removed and cause further reputational harm.

Additionally, outsourcing the photography or marketing does not necessarily shift that responsibility. Advertisers should review final images against the property’s current condition and correct any misleading image before it is published.

Should advertisers disclose when AI has altered a property image?

The safest approach is to use images that accurately reflect the property. If an advertiser materially alters an image using AI, the alteration should be clearly disclosed. The disclosure should appear on or immediately beside the image, explain what has been changed and, where practicable, provide access to the original. For example: “Digitally staged: furniture has been added. Room dimensions and permanent property features have not been altered.”

A generic statement buried at the bottom of a listing may not correct an otherwise misleading impression. Disclosure is not a safe harbour. An altered image may still breach the FTA if it materially misrepresents the property.

Similarly, the ASA’s AI guidance indicates that disclosure may be needed where AI use could materially influence how consumers understand or interpret an advertisement, but a label does not cure an image whose overall impression is misleading. Any disclosure should therefore be prominent, specific and close to the altered image. Advertisers should also retain source material and records showing what was changed so they can substantiate the listing if challenged.

Overseas developments point to a broader trend towards transparency rather than an outright ban on digital alteration. Since 1 January 2026, California has required licensed real estate agents to clearly disclose digitally altered images used to market properties for sale and, in online advertisements, provide access to the originals. New South Wales has passed legislation, which will come into force in early 2027, which requires disclosure of digitally modified or AI-generated images used in rental advertising. The legislation targets images capable of misleading prospective tenants, such as by concealing property damage or misrepresenting room size, and provides for maximum penalties of $5,500 for individuals and $22,000 for organisations.

Please let one of our experts below know if you have any questions regarding advertising for a property and whether it is ok under the FTA and the ASA code.

Special thanks to Charlotte Fox and Jenna Bernstein for their assistance in preparing this article.