A bond is a payment made by one party to another as a guarantee that the payer will perform a specified service or duty.
In tenancy agreements a bond is paid by the tenant as a guarantee that they will meet their obligations under the agreement, and if they don't, to compensate the landlord out of the bond money for any costs to the landlord, eg, unpaid rent, or damage or loss caused by the tenant that has to be fixed when the tenancy ends (s 2 RTA).
How much bond has to be paid?
Landlords are able to require a bond equivalent to four weeks’ rent (s 18(1) RTA) and can require this bond to be paid up front at the beginning of the tenancy. This money is held by Tenancy Services until the end of the tenancy. There are separate bond rules that relate to boarding houses.
The landlord can decide to ask for less than four weeks’ rent as a bond, but they are not able to require more than four weeks’, even if they call it something else, eg, a separate "pet bond" is not allowed.
The bond amount can be increased if the rent goes up, and refunded if it goes down, so that it remains equivalent to four weeks’ rent. Any additional bond paid needs to be receipted and lodged with the Bond Centre.
If a tenant pays their rent, does not damage the property (or remedies any damage), they should expect to get the bond refunded at the end of the tenancy. If, however, there is any unpaid rent, damage to the property or any other claims relating to the tenancy, the landlord can request reimbursement out of the bond money.
Lodging the bond
On receiving the bond from the tenant, the landlord is legally required to provide the tenant with a receipt (s 19 RTA).
They also must lodge the bond with the Bond Centre, which is part of Tenancy Services, within 23 working days. This is an important requirement because it ensures that the bond does not become the landlord's by default. It means that any disputes about whether the bond should be released to the tenant, or kept by the landlord, are dealt with fairly and lawfully.
It is unlawful for a landlord to charge too much or try to avoid paying the bond to the Bond Centre. The Tenancy Tribunal may make a landlord pay up to $1000 exemplary damages if there is proof that they intended to do this (s 18(4) RTA, s 19(2) RTA and Schedule 1A RTA). Unfortunately, a large number of tenant applications to the Tenancy Tribunal are about landlords not lodging the bond with the Bond Centre.
For further information see:
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