The bond is lodged with a specific Government managed trust fund called the Government Bond Administrator and is not kept by the owner or managing agent.
If landlords and property managers do not pay the bond into the Government managed trust, they may be faced with severe penalties.
A recent example of this resulted in the owner of self-managed rental properties being fined $24,000 for the misuse of bond monies.
At the end of the tenancy, the managing agent will inspect the property to ensure it is in the same condition as at commencement of the lease (taking into consideration fair wear and tear).
This is done by comparing the state of the property against the Property Condition Report (PCR) – a mandatory document required to be completed at the start of a new tenancy.
The completed PCR is agreed to and signed by the landlord (or the managing agent on their behalf) and tenant at the commencement of the lease.
From here, tenants typically receive some or all of their bond money back, depending on the condition of the property.
Sometimes an outgoing tenant’s view of what constitutes ‘fair’ wear and tear differs to that of the owner’s or property manager’s view.
This can lead to a disagreement over how the bond is disbursed.
Sometimes, the tenant will leave smaller tasks like cleaning the oven or mowing the lawn, to the owner and give permission for the costs of rectifying them to be deducted from their bond.
Occasionally, an agreement cannot be reached and the manner in which the bond is disbursed remains in dispute.
In these situations, the PCR is relied upon to determine what damage, if any, occurred during the tenancy.
For example, if the carpet is noted as being stained at the end of the tenancy, but if not noted in the PCR, it is difficult for the tenant to disprove responsibility.
In the event of an unresolved dispute, the courts will ultimately decide the allocation of bond monies.
It is important tenants ensure the PCR is accurate at the commencement of the lease.
Make sure you agree with each item listed in the PCR and bring any items you think may have been overlooked to the attention of your property manager.
Author: REIWA President Damian Collins