RSS Feed

Bond - it is the tenant’s money

Tuesday, January 26, 2021

We generally understand and talk about bonds as security deposits; on the one hand, they give a landlord the peace of mind to rent to a stranger and on the other hand cushion a tenant against onerous financial burden should a claim be made against him at the end of the tenancy. What we tend to be less mindful of is that ultimately, the bond is the tenant’s money and the law recognises it as such.

What does this mean in practice? Most straightforwardly, it means that landlords have no automatic right to the bond. And we see that clearly play out in certain aspects of the bond process. For example, while landlords ‘collect’ the bond, we don't get to hold on to it. We are required to forward* the full amount with Tenancy Services Bond Centre within 23 working days of receipt. (Indeed, we’ve become all too familiar with shocking accounts of rogue landlords hoarding thousands of dollars worth of bond illegally only to be heavily sanctioned by the Tenancy Tribunal.) We cannot access the bond in part or in full without either the tenant’s consent (co-signed bond refund form) or pursuant to a Tribunal order.

What is more imperceptible but not less important is what happens when a tenant makes an application to the Tribunal for the bond to be refunded whilst the landlord has reason to believe that she is entitled to that same bond (in part or in whole). How will the Tribunal treat these competing claims?

If the landlord, in response to the tenant’s application, makes a cross-application to lay claim to the bond then the Tribunal will hear from both parties and adjudge their respective merits. If the landlord makes no such cross-application expecting to simply put forward her claim to the bond as a response at the hearing, she will not be heard at all. The Tribunal will award the full amount of the bond to the tenant and depending on the outcome rest of the tenant’s claim, order the landlord to reimburse the tenant’s filing fee.

Though this sounds counterintuitive and perhaps even unreasonable, it is how the Residential Tenancies Act intends:

S22B(2) of the Act states that if the tenant applies to the Tribunal and the landlord seeks payment of the bond in whole or in part, the landlord must file an application with the Tribunal that sets out the landlord’s counterclaim. We have seen instances where the Tribunal has followed s22B(2) strictly and declined to even hear the landlord’s case let alone assessing its merits.

S22B tends not to receive a lot of attention though it is no less consequential to landlords. If anything, it is a reminder that landlording is a business that necessitates good attention to detail, prompt action and sound knowledge of the Tribunal process. So if you and your outgoing tenant cannot agree on how the bond is to be apportioned and the tenant subsequently makes takes you to the Tribunal to have the bond refunded, be sure to file a cross-application within the allotted time to have your side of the story heard. 

* Correction made 27 January per Peter Lewis' comment below.


Recent Posts


bad tenant Must know buying rules education landlord Landlording watercare sale and purchas boarding house housing affordability parry v inglis rtaa2020 off the plan Editor's Choice income property value tenant CoreLogic rent increase debt enforcement ird reserve bank equity positive cash flow letting fee heat pump Gluckman development initio insulation rent arrears khh advice rental market maintenance Standards New Zealand water bill rta election2020 TCIT DTI heater capital gain ask an expert Investor story gluckman report anz robert kiyosaki mindset shortland chartered accountants trust buying house prices bankruptcy wins buyer's agent Investment tip property apprentice structure commerce commission return quiet enjoyment property CCC interest rates RBNZ asbestos tax investment strategy smoke alarm auckland council airbnb daikin Level 4 speculator market Case study relationship wealth creation kiwibuild HHS Question and answer trespass personal growth negotiation re agent p lab retaliatory notice bond form barfoot and thompson government short-term rental rent interest only shower dome Tribunal case study partners LIM lvr opes partners bond Jeff Bezos nzpif Market report RTAA 2019 termination election 2017 renovation rent control business winz meth contamination meth anti-social behaviour apia Q&A ventilation How to Property (Relationships) Act will television building early termination tenancy services tenancy issues warren buffett yield brightline subdivision housing package clnz privacy property cycle tenancy tribunal scotney williams property maintenance cgt market rent cash-flow finance property management financial advisers act HSWA Guest blog insurance productivity Holler extractor fan warm up new zealand legal Kris Pedersen Mortgages and Insurance unitary plan data security inspection interest deductibility damage ocr investor covid-19 worksafe twg report holiday house sublease principal and interest letting skill shortage mortgage ring-fencing fixed-term tenancy cat HHGA first home buying banking rta reform rental wof Sponsored post recycling equity beginner investor auckland minor dwelling sale and purchase management trademe heating Must knows legal cost housing bubble


Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo