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How Rental Bonds Work and What They Mean for Tenants

By RealtyBiz News | January 26, 2023

When you sign a lease agreement to rent a property, the landlord will ask for what is called a rental bond. This is an amount of money that the tenant pays to the landlord as security against any damage they may do to the property during their tenancy. In this blog post, we will explain what rental bonds are and what they mean for tenants.

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What Are Rental Bonds and Why Are They Important?

Rental bonds are amounts of money paid by a tenant to the rental property owner at the start of a new tenancy. This money acts as a security deposit and is held by the relevant state or territory agency in case repairs are needed, or damage is caused while living in the rental property.

It's essential that all tenants understand and know their rights, obligations, and responsibilities regarding rental bonds. Aside from protecting landlords, completing accurate paperwork and signing contracts help tenants ensure they don't experience any financial hardship if something goes wrong during the tenancy – such as unpaid rent or breakages – leading to them needing to apply for a refund of their rental bond back in full or partially.

It's a good thing that things like Jacaranda rental bond loans exist. As long as you meet their requirements, they will lend you what is required for your rental bond. 

It's important to remember that when signing a tenancy agreement, you and the landlord/agent agree on what condition the property should be returned in when the lease ends; this includes what items are allowed to remain in the house or apartment and what should be removed. This means it's wise to document in detail what condition the property was in when you first moved in and what changes were made during your tenancy.

At the end of a tenancy, both tenants and landlords/agents can apply for the return of a rental bond through their relevant state or territory agency – this is to cover any repairs or damage that might have happened during the tenant's stay. It's important to note that tenants aren't always entitled to a full refund, so it's best for them to take their responsibility seriously by looking after the property and double-checking what costs may or may not be deducted from the bond at the end of the tenancy.

What Happens When Tenants Don't Take a Proactive Approach To Understanding Rental Bonds?

One of the biggest mistakes that tenants make is not taking the initiative to learn what their rental bonds mean. A rental bond is a sum of money paid by tenants as security when they sign a lease agreement and move into a dwelling. The amount depends on the state, but it typically ranges from 4-6 weeks' rent in most states.

Below are the things that could happen if tenants don't understand what a rental bond is and what it means:

Tenants May Not Be Aware of the Obligation To Repay the Bond When They Move Out

Tenants are often unaware that when the time comes for them to move out of their rental property, they may be obliged to repay a bond in order to satisfy any financial obligations between tenant and landlord. The Australian Residential Tenancies Authority recommends that tenants should be informed as part of their tenancy agreement that they will be required to exercise due diligence when it comes to repaying the bond or facing a penalty.

This is so they know upfront of their responsibilities and are aware of returns that might affect their credit rating. As soon as the tenant provides a vacate notice, they should ensure they ensure all outstanding bills and money owed is paid back before the termination date of the agreement. This will allow them to get back the security bond without delay when leaving.

Tenants May Not Know That They Can Claim Interest on Their Bond Money

Many tenants might not be aware of their legal rights when it comes to the return of their bond money. In certain places, landlords are required to return the tenant's full bond money after they have vacated the property, provided that all damage has been paid for. Even if bond monies are returned in a timely manner, tenants may find that they can receive interest on their security deposit if they choose to pursue it.

Depending on the region, this could amount to a significant sum of extra cash for the tenant, which would represent much-needed financial relief. Tenants should weigh up this opportunity when considering how best to handle the closing down of their rental contract.

Tenants May Not Know How To Handle Issues With Their Landlord

Another danger of not understanding what a rental bond means is that tenants may find themselves in an awkward position when it comes to dealing with their landlord. In the event of a dispute, a tenant should always be sure to have all documentation available that can prove what was agreed upon during their tenancy. This can include the original lease agreement, any notices given to the landlord about damage or other issues, and receipts for payments made.

Wrapping Up

It is important for tenants to be aware of what a rental bond is and what it means for them when they move out of their rental property. Understanding what this money represents can help to make sure that tenants receive what they are entitled to in terms of payments and interest at the end of the tenancy period. Being prepared with documentation will be essential in any disagreement between the tenant and landlord when it comes to returning this money.

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