It is not imperative for landlords to go for a rental bond or lodge bond. Many landlords do so because they are not sure of the tenants and their intent or ability to honour all commitments. If a landlord is diligent in tenant screening and only chooses the most desirable tenants, then there is no need for rental bonds. However, as a landlord, you need to know what a rental bond is:
- The rental bond, lodge bond or tenant bond needs to be signed at the outset. It marks the beginning of tenancy. The rental bond is filed with the RTA and it will remain as such till the end of the term of the lease or tenancy. If the lease agreement is renewed, then the same lodge bond may be renewed or a new one may be put in place bearing in mind the changes in rent and other terms.
- A lodge bond or rental bond is essentially a security deposit. The tenant is expected to pay the full rent as per the agreed upon schedule and using the payment system as decided by both parties and mentioned in the agreement. Should the tenant fail to pay the rent or attend to any of their duties, then the rental bond can be used to pay the landlord whatever the legitimate dues are. If the tenant pays rent on time and caters to all their duties or obligations, then the amount of the rental bond is returned to the tenant at the end of the tenancy.
- The rental bond comes as a rescue or safety net for landlords who don’t get all pending rents, if there are damages to the property and hence costs of repairs or any other cost that the landlord may have to bear owing to the fault of the tenant.
- A rental bond is not confined to rents and damages to property. It may also include expenses towards utilities. Many rental properties use utilities that are in the name of the landlord and the landlord keeps paying those bills, which is obviously factored into the rent or in addition to the rental amount but agreed upon by the tenant. The rental bond also covers the costs of such utilities should the tenant not pay for them, either within the rent or separately.
Rental bonds must not be confused with homeowner’s or landlord’s insurance. A rental bond usually covers all the terms in the lease or tenancy agreement and will be enforceable if there is a breach of any of those terms.
