Rental Bonds 101

Most of us know that when you rent a property, you have to pay quite a lot of money up front. This is usually a few weeks of rent, and also a certain amount as a bond. Those of you actively dealing with rental properties, whether as a tenant or landlord, have most likely had a conversation about bonds at the end of a lease. But what is the bond? What is it for, and when can it be accessed by the landlord? What are your rights as a landlord, and as a tenant, when it comes to the bond?

Don’t worry, we’re here to explain it to you.

What is a bond?

A bond is a security deposit made for a property, much like leaving a security deposit for renting a truck or a hotel room. Ideally, the amount is paid by the tenant/s at the start of the lease, and then released back to them at the end of the tenancy. Basically, it’s a way for real estate agents or landlords to protect themselves from potential damage to the property. In the event that someone breaks their lease without being in contact for the real estate agent, for example, it’s a pool of money available for them to use to make repairs and manage some other parts of the property, like paying unpaid bills or for cleaners.

A bond is an amount of money (typically around four weeks’ rent) paid by a renter when signing a lease to rent a property. Please note that although the bond is usually tied to the rent, in that a property with higher rent will usually require a higher bond, it is not actually a form of rent at all. This is why signing a lease will usually involve two weeks’ of rent as well as the bond: the bond is not rent.

The bond is typically organised by the landlord or property manager, but the appropriate authority (as each state has its own) will be in contact with the lodger as well as the payer (namely the tenant). a receipt number should be supplied as evidence the bond being paid and lodged. 

Who owns the bond

No one ‘owns’ the bond as such. It’s money held as a guarantee of sorts for the property. The reason why the bond is paid separately is because it is usually held by a third partyy, which in Queensland is the Residential Tenancies Authority. Other states have their own authorities that serve the same purpose. The bond still belongs to the tenant, but is held by a third party, its release contingent on the property being returned to the landlord in an acceptable condition, usually as outlined in the lease.

What can it be used for

Bonds are not common funds for property managers to ‘dip into’ if there’s a problem at the end of the tenancy that they don’t want to pay for. When the lease is ending, the process is that the bond is released back to the tenant. Provided there is no damage to the property (and we’ll talk a little more about this shortly), the amount should be returned in full to the tenant. If, however, there is a problem, such as damage, the landlord can make a claim against the bond to cover those expenses.

There is a list of approved reasons that a landlord may make a claim against the bond. These include:

  • If the rent is not up-to-date (i.e. if rent is owing, the bond can be used to pay the remaining balance). This can also include any utility bills that need to be settled before a new tenant can move in (for example, water connections are often managed by the property manager or landlord, not the tenant, so it will fall to the landlord to settle those bills if the tenant does not).
  • Damage to the property. Please note that tenants are responsible for the behaviour of their guests on the property (as specified in the lease), so even if the person who paid the bond didn’t create the damage, they are still responsible for repairs. This can include any damage to whitegoods or furniture supplied with the property.
  • Cleaning expenses. An end-of-lease clean is typically more thorough than a ‘regular’ clean for a house. If the landlord needs a cleaner to come back through to prepare the property for the next tenant, then they can access the bond to pay for that cleaner.

Note that landlords are required to account for these charges and expenses by providing estimates, receipts, quotes or invoices for the work they are claiming for.

Of course, this means that there are some things that cannot be claimed against the bond. One example is wear and tear, which is provided for with tax deductions and depreciation on the property for the owner. Reasonable wear and tear cannot be claimed against the bond.

Share houses/multiple tenants

Typically bonds are paid by all people listed on the lease—even married couples have a 50/50 split of the bond assigned to them. In a share house, each tenant on the lease will be expected to contribute their proportion of the bond to the RTA. In the event that one person leaves the property, their bond can be paid back to them once they move out and their name is taken off the lease. It then falls to the remaining tenants to either find a new tenant (who must still be approved by the landlord or property manager), or they need to contribute more money to cover the bond amount that was taken.

Bond disputes

If there is a dispute about the bond, and the landlord/property manager and tenant cannot agree on a course of action, they should consult the Residential Tenancies Authority (or relevant state authority) and follow their processes for resolution. The RTA has online resources for dispute resolution, but also offer a third-party dispute resolution process for situations where an amicable solution cannot be reached. They offer conciliation services through either a three-way telephone conversation, or what they call a ‘phone shuttle’, where the mediating party contacts the two parties in dispute separately.

Bonds are there to help ensure that neither tenants nor landlords will need to pay extra money out of pocket at the end of a tenancy. While it may be inconvenient for renters to pay so much money at the start of a lease, as the bond can be reused for new properties, it’s only an upfront issue once. For landlords, however, who face the risk of damage to their property that could well exceed the bond amount, it’s a small guarantee that they won’t need to foot the whole cleaning bill themselves. It may only be a small comfort, but it’s better than nothing. If you have any further questions about managing bonds in Queensland, it’s well worth visiting the RTA website as well. They have a wealth of free resources available that should provide answers for your questions.