When taking on a residential tenancy, the owner normally requires the tenant to pay a security bond equivalent to four weeks’ rent. The law forbids owners from requiring an amount higher than this figure but it is not mandatory that one be paid.
The bond must be paid to the government run Bond Administrator as soon as possible after the payment is made and within 14 days and there are penalties for those that fail to comply with this provision. An owner who self-managed his properties was recently fined $24,000 for misuse of bond monies. Obviously, the purpose of the bond is to provide the property owner an opportunity to mitigate any losses endured at the hand of the tenant during the tenancy such as damage to the premises or non payment of rent.
At the end of the tenancy, either the owner or their agent inspects the property to ensure the property has been left in the same state and condition it was at the commencement of the lease whilst taking into account reasonable fair wear and tear.
Often, an outgoing tenant’s view of what constitutes fair depreciation and that of the owner’s differs and disagreement over how the bond is disbursed between them arises. Importantly, if after a bond inspection it is revealed that, for example, the tenant has failed to clean the oven or mow the grass the tenant ought to be given the opportunity to make good. Sometimes, the tenant leaves such items to the owner and is happy to have the costs of making good deducted from their bond.
Occasionally however, agreement cannot be reached and the manner in which the bond is disbursed remains in dispute. In such situations the Property Condition Report (PCR) – a mandatory document required for each new tenancy – its content agreed to by both landlord and tenant at the start of the lease, is relied upon to determine whether, for example, the carpet was stained during the term of the tenancy. It may have been stained prior but if not noted in the PCR, it is difficult for the tenant to disprove responsibility.
Ultimately, the courts decide allocation of bond monies in the event of an unresolved dispute. However, tenants must ensure the PCR is accurate at the commencement of their lease and make every effort to return the property to the owner in the best possible manner at the end of the tenancy in order to guarantee a full refund of the bond.
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