The Landlord's Guide To
Part 5 - Rental Bond
A Rental Bond is paid by a tenant at the start of a
If the tenant leaves the property damaged, or if the
tenant does not pay the rent,
the landlord can make a rental bond claim.
This newsletter sets out the rules around rental bond
What is payable as a rental bond?
4 weeks rent is the maximum rental bond a landlord can
request under the Tenancy Law:
- Even if a landlord agrees to pets, a landlord cannot request
an extra bond as a pet bond to cover steam cleaning of the
carpet and scratch marks. But if the tenant offers extra
bond money for permission to keep a pet, landlord can accept
- Even if the premises are furnished, a landlord cannot
request an extra furniture bond.
Because the rental bond is payable to the Rental Bond Board
within 14 days of receipt, it is not available to a landlord
without a rental bond claim.
Advance rent provides extra security for a tenant default.
But under the Tenancy Law, 2 weeks rent is the maximum
amount of rent in advance that a landlord can request.
Tenants are allowed to offer more rent in advance to secure
a property. In a tight rental market, tenants who offer up
to 6 months in advance are not unheard of.
What tenant damage can be claimed against the tenant /
The tenant damage to be claimed should be described in the
final Condition Report.
The final (outgoing or exit) Condition Report will show the
condition of each item in the premises as either clean
or undamaged or working, compared with the condition in the
initial (ingoing or entry) Condition Report. The landlord
should give a copy of the final Condition Report to the
tenant, and in a joint final inspection, both will sign it.
These are common examples of tenant damage and make good
which can be claimed:
House cleaning If the tenant does not leave the premises in
a reasonably clean condition, the Tribunal has awarded from
$200 up to $1,260 for house cleaning.
Stove In Decision 2012/110, the final Condition Report
showed a crack in the glass cook top; the initial Condition
Report had it ‘undamaged’. The Tribunal rejected the
tenant’s argument that the crack was not their fault - that
it may have been a manufacturing fault, and awarded the
landlord $700 to replace the cook top. In Decision 2012/298,
cooking residue had become ingrained on two aluminium burner
heads that were new at the start of the tenancy. The
Tribunal ordered the tenant to pay 50% of the replacement
Carpet The tenant must leave the carpet clean. But the
landlord cannot insist upon the tenant having the carpet
professionally cleaned unless a pet has been kept in the
Damaged Carpet In Decision 2012/20, the Tribunal set out
these rules: if the carpet is damaged by the tenant, and
there is sufficient original carpet available, the tenant is
responsible to pay for the cost of patching, provided that
it gives an acceptable appearance. Otherwise, the tenant
will be responsible for the replacement cost, less 10% for
each year since the carpet had been laid. In this Decision,
the Tribunal took 30% off the replacement cost because the
carpet was 3 years old.
Damaged Floorboards If the floorboards are gouged, the cost
of re-sanding can be high - $4,326 was awarded in one case.
If they are scratched, it may be fair wear and tear.
Fixtures and fittings Kitchen cupboards, stove, vanity
units, shower screens, toilets and built-ins are examples of
landlord’s fixtures and fittings.
If they are damaged but can be repaired, the landlord’s
claim is the cost of repair. If they are damaged beyond
repair, the landlord’s claim is the depreciated value of the
fixture or fitting. The depreciation rate is usually between
6.6% and 20% per year, according to the ‘effective life of
the depreciating asset’ – see ATO Taxation Ruling 2009/4
(Residential property operators). According to Decision
2012/94, if the damaged item has exceeded its depreciated
life, there is no loss to the landlord because the item has
Hooks and shelving The cost of patching and painting the
holes in the walls and doors where the tenant has installed
picture hooks and clothing hooks, hanging rods, shelving and
light fittings is the tenant’s cost, unless the landlord has
given consent and does not require removal at the end of the
Keys The cost of re-keying, replacement of keys and opening
devices is claimable.
Garden The cost of mowing the lawn, re-turfing and
reinstating the garden is claimable. In Decision 2012/135,
the cost recovered was $1,500 to remove a vegetable garden
which had been built with numerous old railway sleepers.
Rubbish removal The cost is claimable, provided it is
Some landlords will look to claim on their landlord’s
insurance if the cost of the damage exceeds the rental bond.
They will be disappointed because normally, damage caused by
tenants is not covered. But if an insurance claim is made
and accepted, the excess can be claimed from the tenant if
the tenant was at fault (see Decision 2012/162).
Experienced landlords will regularly check the condition of
the premises – they can inspect up to 4 times a year with 7
days notice. This way, they do not need to wait until the
end of the lease to ask the tenant to repair any tenant
damage. If a rental manager carries out the inspection, they
will prepare a condition report.
What is fair wear and tear?
Tenants are not liable for damage to an item caused by
natural causes or normal use. This kind of damage is known
as fair wear and tear.
NSW Fair Trading has produced this guide to help
landlords and tenants distinguish between tenant damage
which can be claimed from a rental bond, and
lesser damage - fair wear and tear which cannot
be claimed from a tenant –
|Fair wear and tear (not claimable)
||Damage (claimable from the tenant)
|Faded curtains or frayed cords
||Missing curtains or torn by the tenant's cat
|Furniture indentations and traffic marks on the
||Stains or burn marks on the carpet
|Scuffed up wooden floors
||Badly scratched or gouged wooden floors
|Faded, chipped or cracked paint
||Unapproved paint job
|Worn kitchen bench top
||Burns or cuts in bench top
|Loose hinges or handles on doors or windows and
worn sliding tracks
||Broken glass from one of your children hitting a
ball through the window
|Cracks in the walls from movement
||Holes in walls left by tenant removing picture
hooks or shelves they had installed
|Water stain on carpet from rain through leaking
roof or bad plumbing
||Water stain on carpet caused by overflowing bath
or indoor pot plants
Idyllic country residence
No Rental Bond required
Tenant claims for
compensation at the end of a lease
Some tenants will try to reduce the amount they owe to
the landlord by claiming compensation for failing to keep
the property in habitable repair or reduction of facilities.
|2011/511 Full use of the balcony of the home
unit was not available because of remedial works to
the building; the dishwasher was broken for 3
||The tenancy had ended. A lump sum of $1,000 was
|2012/138 Rainwater leaks in the ceilings of the
bedroom, bathroom and sunroom (some 2 ˝, others 5
months); two out of four hotplates on the stove not
working; rat infestation; clothes line poorly
||The tenancy had ended after 7 years. The rent of
$480 pw was excessive. A lump sum award of $4,000.
Regular inspections during a tenancy will identify
repairs that a landlord should carry out to avoid tenant
claims such as these at the end of the tenancy.
Making a rental bond claim
At the end of the tenancy, the tenant will ask for a
rental bond refund; and the landlord will tally up the rent
arrears, water usage charges, the cost of replacement keys
and locks, cleaning, rubbish removal and the cost of
repairing or replacing damaged items.
Usually, the landlord and tenant will agree on the release
of the rental bond after the final inspection. They will
complete the Claim for Refund of Bond Money form with how
the rental bond is to be disbursed and sign it. According to
the Rental Bond Board, in 48% of cases, the rental bond is
refunded in full to the tenant, in 41% it is split, and in
11% of cases, it is paid in full to the landlord.
Renting Services will process the rental bond release form
electronically, to enable the tenant to immediately transfer
the rental bond to their new premises.
If the dispute goes to the Tribunal, the landlord must prove
the claim because the rental bond money is the tenant’s
money. The required proof is – the initial and outgoing
Condition Reports, quotations for repair, invoices and dated
The Rental Bond Board pays interest on the rental bond at
the rate payable under the Commonwealth Bank Everyday Access
Account. This sounds fair until you find that the interest
rate is a peppercorn interest rate of 0.01% pa – i.e.
1/100th of 1%, which means that a rental bond of $2,800 will
earn 28˘ per annum in interest!
Because 4 weeks rental bond is inadequate security
against tenant default, choosing the right tenant is very
important – most landlords regard good tenant selection as
their single most important task.
Tenant Databases help tenant selection because they contain
records of tenants who have ‘black marks’ against their name
– such as vacating with rent arrears or having had their
tenancy terminated by the Tribunal because of default.
Listings remain current for 3 years.
Managing agents can turn away prospective tenants based on
the information in a Residential Tenancy Database without
being accused of discrimination, in much the same way as
Banks can use defaults in credit files as a reason to
decline loan applications.
Other useful tools in tenant selection include checking the
tenant’s current rental ledger, personal and business
references, income verification and affordability tests.
The Landlord’s Guide to Renting has been produced by
Cordato Partners Lawyers, as part of its Property Law
practice. It contains a brief outline of the Tenancy Law.
Because it is a general guide, is not intended to be
relied upon for any specific tenancy situation. For those
situations professional advice should be obtained.
If you would like to receive the Guide as a pdf email
attachment rather than as a hard copy, or would like further
hard copies of the Guide to distribute to clients, friends
and relatives -
Contact us by email –
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