Understanding Tenancy Bonds When Tenants Change
When one tenant moves out of a shared residential tenancy in New Zealand while other tenants remain, the handling of the tenancy bond requires specific procedures to ensure all parties' rights and obligations are met under the Residential Tenancies Act 1986 (the Act).
What is a Tenancy Bond?
A tenancy bond is a sum of money paid by a tenant to a landlord at the start of a tenancy agreement as security. This security covers potential 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)]. The maximum amount a landlord can request for a bond is the equivalent of four weeks' rent [Source: Residential Tenancies Act 1986, s 19].
Once received, the landlord must pay the bond money to the Chief Executive of the Ministry of Business, Innovation and Employment (MBIE), who administers Tenancy Services, within 23 calendar days [Source: Residential Tenancies Act 1986, s 21]. The Chief Executive holds the bond until the tenancy ends or until an agreement is reached or an order is made regarding its disbursement.
Joint and Several Liability in Shared Tenancies
When multiple individuals sign a single tenancy agreement (a contract between a landlord and tenant that sets out the terms of the tenancy) as tenants, they are generally considered to have joint and several liability. This means that each tenant is individually responsible for ensuring that all obligations under the tenancy agreement and the Act are met, including the payment of the entire rent and the proper care of the premises [Source: Residential Tenancies Act 1986, s 9]. Therefore, if one tenant causes damage or fails to pay their share of the rent, the landlord can hold all other tenants equally responsible for the full amount.
The Bond Stays with the Tenancy
Crucially, a tenancy bond is paid for the tenancy agreement itself, not for individual tenants. This means that when one tenant leaves a shared tenancy, their share of the bond money is not automatically refunded by Tenancy Services. The full bond continues to be held by the Chief Executive for the duration of the tenancy, securing the obligations of the remaining tenants.
Changing Tenants: The Official Process
For an outgoing tenant to recover their bond contribution, or for a new tenant to formally take on bond liability, a formal process must be followed:
Agreement of All Parties: The outgoing tenant, the remaining tenants, and the landlord must all agree on how the bond will be managed. This typically involves an arrangement for the outgoing tenant to receive their share of the bond directly from the incoming tenant or the remaining tenants. The landlord's consent is required for any change to the tenancy agreement, including changes in tenants [Source: Residential Tenancies Act 1986, s 12].
Using the 'Change of Tenant' Form: Tenancy Services provides a specific 'Change of Tenant' form (previously known as the 'Bond Change' form) to notify them of changes to the parties responsible for a tenancy bond. This form updates the official records held by the Chief Executive, reflecting who is liable for the bond money [Source: Tenancy Services website, 'Change of Tenant' form]. All parties (outgoing tenants, incoming tenants, remaining tenants, and the landlord) must sign this form to authorise the change.
- Outgoing Tenant's Bond Share: If a new tenant replaces the outgoing one, the new tenant typically pays the outgoing tenant their share of the bond directly. The 'Change of Tenant' form then transfers responsibility for that share to the new tenant within the existing bond record.
- No New Tenant: If no new tenant replaces the outgoing one, the remaining tenants may need to pay the outgoing tenant their share of the bond. The 'Change of Tenant' form would then remove the outgoing tenant from the bond record, with the remaining tenants becoming solely responsible for the full original bond amount.
Application for Payment of Bond Money: Applications for the payment or refund of bond money are made to the Chief Executive by one or more of the tenants or by the landlord [Source: Residential Tenancies Act 1986, s 22A]. In the case of a tenant leaving, the 'Change of Tenant' form serves to formalise the agreed transfer of liability rather than triggering a full bond refund, which usually occurs at the end of the entire tenancy.
Consequences of Not Following the Process
Failure to formally update the bond record through Tenancy Services can lead to complications:
- Outgoing Tenant Liability: An outgoing tenant who has not been formally removed from the bond record may still be considered jointly liable for any damages or unpaid rent at the end of the tenancy, even if they have moved out [Source: Residential Tenancies Act 1986, s 9].
- Incoming Tenant Rights: An incoming tenant who has paid their share of the bond but is not recorded by Tenancy Services may face difficulties recovering their contribution if disputes arise later.
- Disputes: If disputes arise over bond money when a tenant leaves, the Tenancy Tribunal may be required to make a decision [Source: Residential Tenancies Act 1986, s 77]. However, having correctly completed the 'Change of Tenant' form significantly simplifies such situations.
When to Seek Independent Legal Advice
When a tenant is leaving a shared tenancy, it is recommended that all parties involved consult Community Law Centres (https://communitylaw.org.nz/) for free legal advice, or seek independent legal advice if there are disagreements or complex situations regarding the tenancy agreement or bond arrangements. Information provided here is for general understanding of New Zealand law only and does not constitute legal advice. Individuals should consult with a legal professional for advice tailored to their specific circumstances.
Key Resources
- Tenancy Services: https://www.tenancy.govt.nz
- Residential Tenancies Act 1986: https://www.legislation.govt.nz/act/public/1986/0120/latest/whole.html
- Community Law Centres O Aotearoa: https://communitylaw.org.nz/