A bond is a security deposit a tenant pays at the start of a tenancy. It is held by Tenancy Services and is paid back to the tenant at the end of the tenancy provided no money is owed to the property manager or owner for rent, damages or other costs. So when it comes to managing tenancy bond, what is involved?
The role of Tenancy Services
Tenancy Services acts as a neutral third party. By storing the bond with Tenancy Services, both landlord and tenants know that the security deposit will still be there at the end of the tenancy.
How much bond?
As a landlord, you are expected to follow the rules and regulations relating to the collection and management of a tenant’s bond. Tenancy Services states that landlords can charge up to four weeks of rent for their bond, no more, no exceptions. Under the Residential Tenancies Act 1986 you can be fined $1,000 for asking for a bond greater than four weeks. Landlords can opt to charge less than four weeks of rent for their bond (or forgo a bond altogether), but for security reasons this is not generally recommended.
It’s not unusual for tenants to renew their lease if they like living at a property. During the renewal, landlords can legally raise the rent in accordance with what the market is doing. If that is the case, the property owner can ask the tenants wishing to stay on to pay more bond. If the rent increases by $10 per week and the tenants paid three weeks’ bond in advance, you can ask them to pay another $30 in bond. On the flipside, if rents go down the tenants can apply to have that surplus bond refunded.
Bond registration process
Landlords must send Tenancy Services a bond form and the bond within 23 days of receiving it so they can acknowledge that it’s been paid. Landlords are also expected to give tenants a receipt once the bond is paid as proof of payment.
Refunding a bond
All going well, your tenant pays rent on time and takes care of the property. After signing off the final inspection, both you and your tenants should sign the bond refund form. You then need to return the completed form to Tenancy Services. Tenancy Services will refund their full bond back to the tenants. No money will be refunded unless all named tenants have signed the form.
If your tenant causes damage, falls behind on rent or ends up owing you money for any tenancy related reason, you can split the bond to cover your costs. If both parties can agree on amounts owed and sign the form, the process is a lot simpler.
If your tenant has skipped town, proves difficult to work with and simply won’t sign, you can write to the Tenancy Services withsupporting documentation like tradesperson quotes for repairs or arrears notices. Tenancy Services will do their best to track down and contact the tenants. If they agree to the charges or don’t reply by a certain date, Tenancy Services will either pay you a portion or the full bond amount to cover your costs. If the tenants dispute the money owed or the bond doesn’t cover the total amount, you may want to pursue your tenants through the Tenancy Tribunal.
If the bond isn’t filed correctly with Tenancy Services it could make the process very complicated and stressful. Not only this but the law won’t be on your side and you could be facing fines of up to $1,000. This is a serious price to pay if you forget an important date or don’t have time for follow-ups.
When dealing with large sums of money it pays to get someone in who knows what they’re doing. This is where property managers can help. They can answer your questions and deal with the issues at hand.
Being on top of how much bond and rent in advance you can charge is part of every landlord' s responsibility. For more best practice tips to help you better manage and protect your investment, download our free guide:
