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Bonds and rent

Bonds

A lessor manager can ask tenants to pay a security bond in advance to cover any costs that may be outstanding at the end of the tenancy. These costs might relate to damage the tenant caused to the premises or contents, water charges or unpaid rent.Australian notes fanned out

The bond money is paid to the lessor.  From 1 July 2013, all new bonds must be lodged with Consumer Protection’s bond administrator to hold until the end of the tenancy. Failure by the lessor to lodge the bond money with the Bond Administrator can result in a $20,000 fine.

The bond cannot be more than four weeks’ rent, with the following exceptions:

  • where the weekly rent is more than $1,200 (any amount of bond can be requested - check how much it is before agreeing to the tenancy); 
  • where the tenant has a cat, dog (but not a guide dog), or any other pet capable of carrying parasites that can affect humans (in this case an extra $260 may be charged to meet the cost of fumigating the premises at the end of the tenancy).

Who holds the bond?

When a tenant pays the bond, the lessor must give a receipt on the spot, showing the name of the person/s who paid, the amount, date and address of the rental premises.

From 1 July 2013, the lessor must pay the bond to Consumer Protection’s bond administrator as soon as possible and within 14 days of receiving it. A Lodgement of security bond money form must be lodged and signed by the tenant or the person who paid, and the lessor. This form can also be completed online .

If more than one person has paid the bond (eg in a shared house), it is important the names of all the parties appear on the lodgement form, to protect everyone’s share.

The bond administrator will send a record of payment of security bond directly to the tenant/s.  If tenants don’t receive the record from the bond administrator within one month of paying the bond money to the lessor they can check their bond has been lodged by contacting the bond administrator by calling 9282 0829 or email.

Transfer of Bonds in financial institutions

Bonds received by lessors before 1 July 2013 and held in financial institution must be transferred to the Bond Administrator within 18 months of 1 July 2013.

What if the signatories change?

If the owner of the rental property changes, both the tenant/s and the bond administrator must be advised and the owners signatures changed over in the bond administrator’s records. A Notice of variation of security bond form can be used to notify the bond administrator. The form should contain the full name and address of the new owner/lessor or property manager and must be signed by both the new and the previous owner/lessor/s.

Where joint tenants are named on the tenancy agreement and one or more decide to leave or are replaced by new joint tenants, all parties can agree to change the lease agreement and have the bond paid out, then replaced by a new bond. Alternatively the Notice of variation of security bond form can be used to notify the bond administrator of the change of tenants so that at the end of the tenancy, the bond can be paid out to you and the current tenants. The incoming tenant can pay the departing tenant their share of the bond.

Refund of bond money

At the end of a tenancy, bond money will only be paid out if the tenants and the lessor agree, or if a court order is obtained from the Magistrates Court.

If there is no dispute over the condition of the property on handing it back to the lessor, or both of the tenant/s have agreed how the bond money should be divided to pay for any damage etc., a Joint application for disposal of security bond must be signed by the tenant/s and the lessor and given to the bond administrator.

The form should show the amount to be returned to the tenant/s and/or the lessor and/or to be refunded to the Department of Housing if the tenant/s have received bond assistance.

Important: The tenant/s must not be asked to sign a bond disposal form before the tenancy has ended. The amount to be refunded must be written into the form before the tenant/s sign it.

Disputes with the lessor over bond pay-outs

If a dispute arises over how the bond money should be paid out, the tenant/s can resolve it by negotiating with the lessor, or the issue can be taken to the Magistrates Court

The tenant/s will need to complete a Magistrates Court Form 6: Application for disposal of bond money. Once the form is lodged, the court will send a copy to the lessor, who has three options.  The lessor can:

If a dispute goes to court at the end of a tenancy, the Registrar/Magistrate will make an order as to how the bond money is to be paid out.

Going to court doesn’t mean the tenant/s will face high costs, but it will require the tenant/s to gather documents, including the property condition report and any other evidence to support the tenant/s claim.  Remember, it is an offence for tenant/s to stop paying rent with the intention this amount will be taken out of the bond.

Disputes between tenants over the bond

Sometimes disputes occur between tenants named on the same tenancy agreement about money which has been paid to the lessor.  If a tenant pays another tenant’s portion of these costs, such as their part of the bond, the first tenant can apply to the Magistrates Court to seek an order for the money to be paid to them by the other tenant. The court can order the payment of compensation too.

Rent

A lessor cannot ask for more than two weeks’ rent in advance before or during the tenancy. A tenant can choose to pay more eg monthly or any other period that is agreed although this cannot be a term of the tenancy agreement.

The tenant/s must pay rent on time or the lessor may issue a notice of termination and, if the rent is still not paid in full and the tenant/s have not moved out of the premises, the lessor may take action through the courts to evict the tenant/s.

Receipts and records

Receipts for rent paid must be issued by the lessor within three days of receiving it. The receipt must show the:

  • tenant/s name,
  • date received,
  • amount paid,
  • address of the premises and
  • rental period covered by the payment.

A receipt is not required if the rent is paid by agreement directly into an account at a bank or other financial institution.

Lessors must keep records of the rent a tenant has paid.  The tenant should also keep all the receipts just in case there is a dispute in the future about rent still owing.

Rent increases

The laws relating to rent increases vary and will depend on the type of tenancy:

In a periodic tenancy (no pre-determined finish date) rent may not be increased within the first six months of the tenancy.  After that, increases can occur at six-monthly intervals (but no sooner) and tenant/s must be given at least 60 days notice in writing, with details of the amount of the rise and the day it will take effect. The lessor must use Form 10 or Form 11. You only have to pay the increase if proper notice has been given.

In a fixed-term tenancy (specific start and finish dates) the agreement will not automatically terminate on the end date unless either the tenant or the lessor gives 30 days’ notice of intention not to renew the agreement.  If less then 30 days notice is given before the fixed term expires, the day the tenant needs to move out is extended so 30 days notice is given.  Lessor must use the Notice of termination (Form 1C, option 5).  Tenants can write a letter or use the Notice of termination from tenant to lessor (Form 22).

Rent in a fixed-term tenancy can only be increased if the written agreement specifies how much the rent increase will be or the method of calculating the rent increase is shown (eg by CPI). If the rent is able to be increased, it can take effect no sooner than six months after the commencement of the tenancy agreement and the date of the last increase. The lessor must give at least 60 days’ notice of the increase.

More information: Rent increase FAQ

Increasing the rent at the end of a fixed term tenancy agreement

If it is agreed that the tenant/s will keep renting the same property at the end of the fixed term tenancy agreement and the lessor wants to increase the rent, the rent cannot increase for the first 30 days of the new agreement.

Note: If the rent is calculated by reference to the tenant/s income (eg the tenant/s employer provides the rental premises and the rent is set as a percentage of the tenant/s income), a notice of rent increase is only required if the method of calculating the rent is changed.

Excessive rent – paying too much?

The amount of rent charged at the start of a new tenancy is generally controlled by market forces, but if the tenant/s believe the rent is too high they can apply to the Magistrates Court requesting a reduction, or to argue against a proposed increase.

The court will consider a range of things, including:

  • if the rent remains comparable with other properties in the area;
  • the estimated value of the premises;
  • the cost of upkeep of the property paid by the lessor;
  • the cost of services provided by the lessor (or tenant);
  • the value of the contents provided by the lessor for the tenants use; 
  • the state of repair and general condition of the property; and
  • any other considerations (eg if the lessor is putting up the rent simply to force the tenant out).

If the rent is overdue

The tenancy may end if the rent falls behind. If the tenant/s have a problem making the payments, they should explain their financial situation to the lessor and make alternative arrangements to pay the arrears in full.

If the tenant/s are behind in rent payments, the lessor is entitled to follow the procedures described in the notices page.  If the tenant/s receive a notice to end the tenancy because their rent is overdue and they do not move out, the lessor can apply to the Magistrates Court and get a court order for the tenant/s to move out. The lessor cannot seize the tenant/s belongings in return for any rent owed.

If the tenant/s reasonably believe they are not behind in rent payments, they can remain in the premises while the matter is sorted out by negotiation, or until the lessor applies for an eviction hearing in the Magistrates Court.  If this happens both the tenant/s and the lessor will have the opportunity to present their cases (see ending a tenancy).

Additional fees and charges

Tenants cannot be asked to pay any additional money other than rent and security bond during a tenancy agreement. The lessor cannot ask tenant/s to pay any administration fees, re-inspection fees or charges for sending tenant/s utility invoices or breach notices.

The lessor can request compensation if the tenant/s breach the agreement and it can be shown this has directly resulted in additional costs that would not have been there if they had kept to the rental agreement.

If the tenant/s are asked to pay compensation to the lessor, it must be shown that the cost is justified and is allowed under the law. If the tenant/s dispute this charge, they are entitled to have the matter determined by the Magistrates Court.

If you are uncertain about any fees or charges, contact the Department of Commerce on 1300 30 40 54 for advice.