Understanding Residential Tenancy Bonds in New Zealand
A bond is a sum of money paid by a tenant to a landlord as a security against damage to the property, unpaid rent, or other breaches of the tenancy agreement. This security helps ensure the performance by the tenant of their obligations under the tenancy agreement [Source: Residential Tenancies Act 1986, s 18(1)]. In New Zealand, all residential tenancy bonds must be lodged with Tenancy Services, a government agency responsible for administering the Residential Tenancies Act 1986 (RTA).
Maximum Bond Amount
A landlord is legally permitted to require a bond, but the amount of the bond cannot exceed the equivalent of four weeks' rent [Source: Residential Tenancies Act 1986, s 18(2)].
Lodging the Bond
Once a bond has been paid by a tenant, the landlord has a legal obligation to lodge the bond money with the Chief Executive of the Ministry of Business, Innovation and Employment (operating as Tenancy Services) within 23 working days of receiving it [Source: Residential Tenancies Act 1986, s 19(1)]. The Chief Executive holds the bond money in trust until it is released at the end of the tenancy [Source: Residential Tenancies Act 1986, s 21]. Failure by a landlord to lodge the bond as required by section 19(1) is an unlawful act and can result in an exemplary damages order by the Tenancy Tribunal, a judicial body that hears and determines disputes between landlords and tenants [Source: Residential Tenancies Act 1986, s 19(1) and s 103(3)(d)].
Bond Refunds at the End of a Tenancy
A bond is specific to a particular tenancy agreement and the property it relates to. When a residential tenancy ends, the process for the release and refund of the bond is initiated. An application for the refund of the bond money or any part of it must be made to the Chief Executive [Source: Residential Tenancies Act 1986, s 22(1)].
Both the landlord and the tenant, or their agents, must agree on how the bond is to be refunded. This typically involves them signing a bond refund form, which then instructs Tenancy Services on the agreed distribution of the funds. If there is an agreement, the bond is usually paid out according to the instructions within a few working days [Source: Residential Tenancies Act 1986, s 22(1)].
If the landlord and tenant cannot agree on the refund of the bond, either party may apply to the Tenancy Tribunal to have the dispute resolved [Source: Residential Tenancies Act 1986, s 22(2)]. The Tenancy Tribunal will then issue an order detailing how the bond money is to be disbursed, which Tenancy Services will follow [Source: Residential Tenancies Act 1986, s 22(3)].
Grounds for a landlord to seek payment from a bond typically relate to breaches of the tenancy agreement, such as unpaid rent, or damage to the property beyond fair wear and tear [Source: Residential Tenancies Act 1986, s 18(1) which defines a bond as security for the performance of the tenant's obligations].
Bonds for New Tenancies
For a tenant moving to a new residential property, a new tenancy agreement is established, and typically, a new bond is required by the landlord for that specific property [Source: Residential Tenancies Act 1986, s 18(1)]. The Residential Tenancies Act 1986 outlines procedures for lodging and refunding bonds, but it does not contain provisions for a direct legal 'transfer' of a bond from one property to another. Instead, bond funds from a previous tenancy typically need to be refunded before a new bond is paid for a new tenancy [Source: Residential Tenancies Act 1986, s 22(1) and s 18(1)]. Administrative processes provided by Tenancy Services may streamline the handling of bond funds when moving between tenancies, but these are distinct from a legal transfer of the bond itself.
When to Seek Independent Legal Advice
Individuals experiencing issues with bond payments, lodgement, or refunds, or those with complex tenancy disputes, should seek independent legal advice. Information on legal rights and obligations, and assistance with dispute resolution, can be obtained from official bodies like Tenancy Services, or by contacting Community Law Centres for free legal help.