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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