Understanding the Residential Tenancy Bond
A residential bond is a sum of money paid by a tenant at the start of a tenancy. It is held by Tenancy Services (a government service responsible for administering tenancy laws) as security against potential breaches of the tenancy agreement, such as unpaid rent or damage to the property.
Landlords are legally required to lodge all bond money with Tenancy Services within 23 working days of receiving it [Source: Residential Tenancies Act 1986, s 18(1)]. The landlord must also provide the tenant with a receipt for the bond money [Source: Residential Tenancies Act 1986, s 19]. It is illegal for a landlord to retain bond money themselves [Source: Residential Tenancies Act 1986, s 18(4)].
Common Reasons Landlords Claim Against a Bond
Landlords may claim against a tenant's bond at the end of a tenancy for specific reasons permitted by law, generally relating to breaches of the tenancy agreement or damage to the property.
Damage Beyond Fair Wear and Tear
Tenants are responsible for any damage they cause to the premises intentionally or carelessly [Source: Residential Tenancies Act 1986, s 40(2)(a)]. However, they are not typically liable for fair wear and tear, which refers to the natural deterioration of a property that occurs through ordinary use and the passage of time. The Residential Tenancies Act 1986 does not explicitly define fair wear and tear, but its principles are applied when assessing a tenant's responsibility for damage [Source: Implied by the Residential Tenancies Act 1986, particularly s 40 and s 45]. Examples of fair wear and tear might include faded paint, worn carpets in high-traffic areas, or minor scuffs on walls. Damage beyond fair wear and tear, such as large holes in walls, broken windows, or significant stains, may be claimed against the bond.
Limitation on Liability for Careless Damage
If damage to the premises is caused by a careless act of the tenant or their guests, the tenant's liability is limited [Source: Residential Tenancies Act 1986, s 78B]. A careless act refers to damage caused due to a lack of reasonable care rather than intent. The maximum amount a tenant can be ordered to pay for careless damage is the lesser of:
- 4 weeks' rent; or
- The landlord's insurance excess.
This limitation applies only if the landlord has insurance for the premises and has provided a copy of the insurance policy, or relevant parts of it, to the tenant at the start of the tenancy [Source: Residential Tenancies Act 1986, s 78B(1)(b)]. This limitation does not apply to damage caused intentionally by the tenant or damage resulting from an act or omission that constitutes an imprisonable offence [Source: Residential Tenancies Act 1986, s 78B(2)]. For intentional damage, or damage from an imprisonable offence, tenants remain liable for the full cost of repairs.
Unpaid Rent
Tenants have a fundamental obligation to pay rent when it is due [Source: Residential Tenancies Act 1986, s 40(1)(a)]. If a tenant leaves the property with rent owing, the landlord can claim the outstanding amount from the bond [Source: Residential Tenancies Act 1986, s 78A].
Cleaning Costs
At the end of a tenancy, tenants are required to leave the premises reasonably clean and tidy, and to remove all rubbish and unwanted goods [Source: Residential Tenancies Act 1986, s 40(1)(e)]. If the property is not left in this condition, the landlord may claim the reasonable costs of cleaning from the bond to bring the property to the required standard.
Abandonment of Premises
If a tenant abandons the premises (leaves without formally ending the tenancy), the landlord may be entitled to claim for losses incurred as a result. This can include unpaid rent, costs associated with securing the property, and expenses incurred in finding a new tenant [Source: Residential Tenancies Act 1986, s 62].
The Bond Refund Process
Applying for Bond Money
Towards the end of the tenancy, either the landlord or the tenant can apply to Tenancy Services for the bond to be refunded or paid out [Source: Residential Tenancies Act 1986, s 22(1)]. If both parties agree on how the bond money should be disbursed, they can sign a joint bond refund form. Tenancy Services typically processes agreed refunds quickly.
Disputed Bond Claims
If the landlord and tenant cannot agree on how the bond should be paid out, either party can apply to Tenancy Services for the bond to be resolved. Tenancy Services will generally refer the matter to the Tenancy Tribunal for a decision if an agreement cannot be reached [Source: Residential Tenancies Act 1986, s 23(2)].
The Tenancy Tribunal is a judicial body that resolves disputes between landlords and tenants. It has the power to make binding orders regarding bond claims, including deciding how the bond money should be allocated [Source: Residential Tenancies Act 1986, s 77]. Both parties will have an opportunity to present their case and evidence to the Tribunal.
Evidence for Bond Claims and Defences
To succeed with a bond claim, or to defend against one, parties should gather and present relevant evidence. This may include:
- The signed tenancy agreement.
- Entry and exit inspection reports, signed by both parties.
- Dated photographs or videos of the property at the start and end of the tenancy.
- Receipts for rent payments, cleaning services, or repair work.
- Written communication between the landlord and tenant regarding the condition of the property or any issues.
- Any insurance policy documents relevant to the property [Source: Residential Tenancies Act 1986, s 78B(1)(b)].
When to Seek Independent Legal Advice
Individuals involved in a residential tenancy dispute, especially concerning bond claims, are encouraged to seek independent legal advice. The Tenancy Services website (tenancy.govt.nz) provides comprehensive information and resources for landlords and tenants. For free legal assistance, individuals can contact a Community Law Centre.