December 3, 2012

Rental bonds and pet bonds - Queensland

Below is the draft policy response to the RTRA Act review from Real Estate Excellence. The total review response from Real Estate Excellence will be provided to Members in the January 2013 Member Update.

The commentary (draft) is in response to RTA Discussion paper Item 1.3 - Maximum rental bonds - allowing for one week's extra bond for properties with pets, furnished or with pools.


Item 1.3 Maximum rental bond amounts s 112 and s 146

For many years, the Real Estate Industry have expressed frustration over bond amounts and limitation on amounts that can be charged to tenants. This has mainly been due to the fact that it generally takes over 4 weeks to terminate a tenancy if a tenant falls into rent arrears and or breaches the agreement. Regrettably it is quite common in these situations that monies are generally owed by tenants in addition to rent for cleaning, carpet cleaning and other matters such as possible damages.
Real Estate Excellence welcomes the Government option 1.3 to allow for additional week’s rent for properties that have pets, furnished or a pool.  

Pets in rental properties have long had a stigma attached and there is general fear of damage and extra possible costs to investors should a pet owner (the tenant) not maintain their responsibilities. The allowance of increase in bond in this regard can only be a positive move in assisting overcoming barriers and assisting tenants with pets and their families to find suitable homes. The question to be asked though is ‘the one week’s rent enough’ to overcome this barrier by tenants for renting? It is generally thought that in the short term the one week’s rent would have a positive impact to all sectors involved and is a negotiating tool to be used between the parties.

The medium to long term view is that one week’s rent will not be enough. Possible damage caused by pets in some situations have been far more than one week’s rent to rectify; examples include urine stains and smell inside properties, damage to walls and skirting boards due to animals plus damage to yards caused by pets.

Real Estate Excellence supports this policy however believes that the extra bond allowed for pets should be at least two week’s rent.

It is also questioned in relation to this policy as to whether it will be three week’s extra bond allowed if the property has a pool, is fully furnished and allows pets? Though this would be unusual, there is no doubt clarity is needed in this regard should this policy initiative proceed.

An issue for investors and the real estate industry is the limitation on bonds currently and as mentioned in the discussion paper. The bond amount for rental properties under $700 per week has long been a concern and a risk to investors.

Real Estate Excellence strongly encourages the Government to review the maximum bond amounts in general and or review time lines for breach of tenancy.

Given the meaning of bonds under section 111 of the RTRA Act which includes a bond is intended to be available for the financial protection of the lessor against the tenant breaching the agreement ; lessors are in difficult positions quite often whereby tenants are in breach of their agreement for either rent arrears or other breaches. The current time frames for breaches are not reasonable considering the tenant’s other obligations at the end of the tenancy under section 188 (4) of the RTRA Act.

Once a breach is in place and is not rectified, 4 week’s bond is very easily consumed. This fact is not taking into account the pressure of Tribunal application and time frames.

A policy recommendation for Government consideration is to extend maximum bond amounts to six weeks rent. Pet bonds are recommended to be the two weeks on top of the maximum bond. It is considered reasonable that the six weeks bond would include pools and furnished property.

Whilst this matter may still be a concern to the investor (again given the meaning of a rental bond) it is considered a more reasonable situation for all parties.  The parties could always negotiate lesser amounts of bond dependent on circumstances.

111 Meaning of rental bond

(1) A rental bond, for an agreement, is an amount—

(a) paid by or for the tenant under the agreement; and

(b) intended to be available for the financial protection of

the lessor against the tenant breaching the agreement.

(2) However, a rental bond does not include rent paid in advance.

(3) In deciding whether an amount is a rental bond, it does not

matter—

(a) when the amount is paid; or

(b) if the amount is paid directly to the authority; or

(c) to or by whom the amount is paid; or

(d) how the amount is described in the agreement or

arrangement about the payment of the amount.

(4) A rental bond includes a part of a rental bond.
 

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