Bond matters. Charging your tenant a bond: How to get it right.

Bond Matters

Property Guide 360 Bond Matters

It is common practice to find landlords charge the tenant a bond when they sign a rental agreement. Standard practice is to require a tenant to pay a bond equivalent to four weeks rent and one week’s rent in advance.

There are rules and procedures as set out in the Residential Tenancies Act which must be followed.

What is a bond?

A bond is a sum of money which the tenant pays to the landlord or property manager. The landlord or property manager will lodge the bond with Tenancy Services (which is a department under the Ministry of Business and Innovation). It is held under a trust account and at the end of the tenancy, if there is no rent outstanding or no damages, then the landlord will authorise Tenancy Services to the tenant.

 

What is the maximum amount of bond a landlord can charge?

Landlords can require a bond that is equivalent to four weeks rent. The bond cannot be more than this.

 

Can landlords require the tenant to provide security in addition to the bond?

No. Except for the bond and a guarantee, Landlords cannot require the tenant to put up additional security in order to rent the house.

This means landlords cannot get the tenant to put their car and belongings as security or collateral. The landlord can however request the tenant to get someone to guarantee the rent.

 

How to lodge a bond with Tenancy Services?

There are 2 options:

    1. Complete the Bond lodgement form online
    2. Download and complete the paper version of the Bond-lodgement-form and post to Tenancy Services. If you are paying by cheque, write it to:

Tenancy Services, PO BOX 50445, Porirua. Postcode is 5240.

The bond is held in a trust account by Tenancy Services.

Refunding the bond

At the end of the tenancy, the landlord and tenant should inspect the property together. A template of a property inspection checklist can be found in this post.

If damages are found, then both the tenant and the landlord need to agree on the cost of repairs. This amount can be deducted from the bond.

Once everything is finalised, you will fill out the Bond Refund form. You can find a copy here.

If damages were found, then the landlord will complete section 4 with the amount agreed on by the tenant.

Bond refund form extract

 

If no damages were found, the landlord will authorise the refund of the entire bond to the tenant.

 

What happens if the tenant disputes the damages?

If the landlord and tenant cannot agree on the amount of damages to be deducted from the bond, the disagreement can be resolved by the Tenancy Tribunal. It is always best to come to a resolution yourselves rather than going to Tribunal to save time and money.

 

I am a tenant. If I want to transfer the bond from my old tenancy to my new tenancy, can I do this?

Yes. You will need to fill out a Bond-transfer-form.

 

What happens if I don’t claim for the bond at the end of the tenancy?

You have up to six years to claim the bond after the tenancy ends. If bond is not claimed for six years after the tenancy ends, the bond automatically becomes the property of the Crown i.e. the Government gets to keep it.

 

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