I'm about to move into my first rental property...how does the whole bond thing work?

When it comes to moving into a new rental property, there are a few costs involved which can add up and leave you out of pocket if you haven't got any savings. The cost that seems to cause the most confusion is the rental bond.

 

Now for those of you who are new to the rental game and don't know what a bond is, it's very simple. A bond is a sum of money that your landlord can claim if you violate your lease agreement and they suffer a financial loss because of that violation. This money is paid when you sign your lease agreement. Providing no violations have occurred, you can claim your bond back at the end of the rental period stated on your lease agreement.

 

Bond amount can vary from rental property to rental property, but there are a few guidelines that are handy to remember so you can be sure you're not getting taken for a ride. If your weekly rent is $500 or less, the maximum amount of bond your landlord can charge is equal to four weeks rent. For rent that is greater than $500 per week there is no limit on how much bond can be charged, so in this situation you can negotiate it with the landlord.

 

If you are a sub-tenant, the person in the role of 'head tenant', like the landlord, is entitled to ask you for a bond payment based on your weekly rent amount. This protects them from any financial losses due to violation of the sub-tenancy agreement.

 

While it isn't compulsory for a landlord to charge a bond, it is compulsory for them to lodge any bond that is charged with the Residential Tenancies Authority (RTA) within 10 days of receipt. As a self-governing and impartial government organization that assists both tenants and landlords to understand their legal rights and responsibilities, the RTA acts as a middle man that ensures that both parties adhere to the policies stated in the Residential Tenancy Act 1994.

 

What if I can't afford my bond?

 

It's not unusual to be unable to pay your bond (especially as it can be up to $2000 required to be paid in one lump sum). Some landlords may let you pay in installments, or alternately you can apply for a bond loan from your state's Department of Housing.

 

This organization provides interest free loans for people are unable to pay a full rental bond to move into private accommodation. There are a number of criteria that must be met in order to receive this loan:

 

You must:

-           Not be currently living in the property for which the bond is required

-          Be an Australian citizen, permanent resident, or have temporary protection or bridging visa.

-          Meet the current income limits (which can be viewed on the Department of Housing website)

-          Not own any live-in property that is permanently connected to normal household utilities.

-          Not have any outstanding debts with the Department of Housing

-          Meet the cash and savings limit of $2500 (this is a combined total for all occupants not including dependants)

-          Choose a rental property where the rent is no more than 60% of the total combined household gross weekly income.

NB: The only exception to this criteria is if the tenancy comes under the Residential Services Act 2002, where the rent covers food service, personal care, and other services, along with accommodation.

 

How do I apply?

 

To apply for a bond loan you must fill out a Private Rental Assistance Household Application form, a Private Rental Assistance Individual Details form (each household member) and an Employers Declaration form verifying your income (each household member). These can all be downloaded from the Department of Housing website.

 

Along with these forms, each household member must supply two forms of identification. Once all the required documents have been collected you must make an appointment for an interview with your local Department of Housing Office. All tenants must attend this meeting. Once your bond loan application has been processed you will be informed in writing as to whether or not your application was successful.

 

If you are successful in your application, your landlord will send the Bond Lodgment form the Residential Tenancies Authority, who will then notify the Department of Housing, who will then pay your bond for you.

 

What happens next?

 

Upon receipt of the bond and the form, the RTA will send an Official Receipt to both you and the landlord. This receipt contains a Rental Bond Number that identifies the details of the tenancy. It is important that you file this receipt as it required in all communications with the RTA, and is also your proof that you have paid your bond.

 

Your lease is up, now what?

 

At this point you have two options - obtain a bond refund or transfer your bond to your new lease agreement.   The bond refund process is really very simple. First you must fill out a Refund of Rental Bond form (which is available from the RTA or the local Post Office), this needs to be signed by all tenants and the landlord, and must also include all tenants' bank details in the household in order to be processed.   Once the RTA has approved the form the bond will be refunded into each tenants' bank account via direct debit.

With a bond transfer, instead of refunding your bond the RTA will hold onto it and just change the details attached to the payment so that it refers to the lease on your new rental property.

 

Both of these options are very convenient for both you and the landlord for a number of reasons.   For a start, very little money handling occurs so everything is much more secure. It also means you don't have to spend time waiting in lines at the bank or post office, and much less paperwork as notifications are sent via email.

 

If there is a dispute between any of the parties on the lease, the RTA will process the first claim they receive and then issue a Notice of Claim to all other parties. This notice gives all other parties 14 days in which to dispute the claim. If it is not disputed within that time the full bond refund will go to the person who claimed the refund.

 

There is a plenty of information to take in but if things are amicable between the parties involved, issues regarding Rental Bonds can be very simple. For more information visit the Residential Tenancies Authority website, where you can find all documents and information concerning tenants and landlords.

 

 

 

 

 

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