Rental Bonds Policy
Last published 01 Nov 2018
Tenants can expect the Department of Family and Community Services (FACS) to comply with the rights and obligations of a landlord under the Residential Tenancies Act 2010. FACS expects tenants to comply with the terms of their tenancy agreement including meeting all payment responsibilities and maintaining the property to a reasonable standard.
The majority of FACS tenants look after their properties and fulfil these responsibilities. However, some tenants cause property damage or leave their tenancy with outstanding debts including for damage. These outstanding debts can lead to increased costs for FACS.
The introduction of rental bonds in public housing and Aboriginal Housing Office (AHO) tenancies (hereafter called FACS tenancies) aims to support the sustainability of social housing in NSW by reducing costs for FACS for the repair of properties following tenant damage. It reinforces responsibility for property care and aims to reduce the amount of damage caused by a minority of tenants.
As in the private market, a rental bond is an amount of money paid or payable by the tenant or another person as security against any failure by a tenant to comply with the terms of a residential tenancy agreement such as causing damage to a property or falling into rental arrears.
In public or AHO housing, a bond can apply at the beginning of the tenancy or during the tenancy if one does not already exist.
The intent of this policy is to outline how FACS manages rental bonds for FACS tenancies. The FACS Housing Ministerial Guidelines Rental Bonds 2018
2.Scope 3.Policy statement
Tenant damage is intentional damage or neglect, or failure to keep the premises in a reasonably clean condition after allowing for fair wear and tear. For further information refer to Tenant Repair Costs Policy.
FACS can claim the bond through NSW Fair Trading (NSWFT) in the same way as an agent in the private sector, after a tenancy ends, if the tenant causes damage or has other outstanding tenancy charges such as for rent and water. Tenants who pay a bond have a vested interest in their bond being returned to them, in full, at the end of their tenancy.
Under current legislation:
- FACS, on behalf of the Land and Housing Corporation (LAHC) and the AHO, can seek a bond from FACS tenants of up to four weeks market rent as a condition of their tenancy at the commencement of the tenancy agreement.
- FACS is able to charge a bond to current tenants during the term of a tenancy agreement in certain circumstances without the need to terminate or re-sign a lease agreement.
- If payment of a bond is a term of the tenancy agreement, non-payment is a breach of the tenancy agreement.
- FACS may issue a termination notice to a tenant if the tenant fails to pay all or part of a rental bond.
Where there is a breach of the tenancy agreement, NSW Civil and Administrative Tribunal (NCAT) orders can be sought, including performance orders and issuing Notices of Termination. FACS will ensure that any such action will not place children at risk. FACS aims to support tenants to understand their obligations and sustain their tenancies, including through the provision of clear information and referral to support agencies where appropriate.
Holding of bonds
FACS will engage NSWFT to administer the FACS bonds scheme, including holding the funds and refunding claims as it does for the private rental sector.
FACS will remit the tenant’s bond payments to NSWFT on a regular basis in line with the provisions of the Residential Tenancies Act 2010.
Who is required to pay a bond?
The following tenants will be required to pay a bond:
a) Current FACS tenants on fixed term or continuous leases at any time after a tenancy agreement has commenced
Current tenants who have not paid a rental bond at the commencement of their tenancy and who cause damage to a FACS-managed property may be required to pay a rental bond at any time during the tenancy. This will apply where the tenant causes significant damage to their property on or from the date of publication of the Ministerial Guidelines or where the tenant has not reported damage for which they are or were responsible before the date of publication of the Ministerial Guidelines.
Tenant damage is intentional damage or neglect, or failure to keep the premises in a reasonably clean condition, after allowing for fair wear and tear.
A rental bond will be required where the costs to repair the tenant damage are assessed at $500 or more in a single instance, where:
- The tenant accepts responsibility for the cost of damage, in writing, or
- NCAT has ruled that the tenant has caused damage of $500 or more in a single instance.
A single instance of damage means damage that is discovered and assessed at a single point of time. This may include multiple tenant damaged items that have occurred across a period of time, which are identified and charged at a single point in time. It does not include repairs arising from fair wear and tear.
(b) Former tenants returning to FACS-managed housing
Tenants who have previously caused damage to a FACS-managed property, where the repair costs are assessed at $500 or more in a single instance, will be required to pay a rental bond as a condition of signing a new tenancy agreement.
The damage must have occurred in the six years prior to their new lease being signed.
A rental bond will be required regardless of whether the previous debt was paid or a current payment arrangement is in place to repay the debt.
The following tenants will not have to pay a bond:
- Tenants where damage was the result of domestic and family violence. Victims of domestic and family violence will not be charged for damage caused by perpetrators of violence.
- Tenants over 80 years of age.
- Tenants who are in receipt of a Veteran’s Affairs benefit.
- Tenants that are not required to pay a tenancy damage charge in accordance with FACS’ Tenant Repair Costs Policy, including where FACS agrees that ill health or inability to maintain the premises has contributed to the damage.
- Clients approved for Emergency Temporary Accommodation. These clients are not eligible for social housing but are approved for emergency temporary accommodation in public housing for a period of up to three months due to being in crisis (as set out in the Eligibility for Social Housing Policy).
- Tenants relocated by FACS on portfolio or tenancy management grounds with a tenant damage debt which is older than six years; or the tenant damage debt was incurred prior to the commencement of the policy. FACS initiated relocations may occur for reasons that include:
- Where LAHC intends to sell or demolish a property.
- The property has features (for example, modifications for people with a disability) that are no longer needed by the people living in the property.
- Where LAHC intends to carry out substantial upgrading work on the property and the property needs to be vacant for the work to be done.
- Tenants who are relocated to downsize to a smaller property, either at the request of FACS or the tenant.
- Tenants in the Social Housing Management Transfer Program in whole of location areas.
- Other tenants whom FACS assesses should be exempt from paying a rental bond because of extenuating circumstances.
Bond charges and payments
The bond amount charged will be based on four weeks market rent, capped at a maximum payment of $1,400 (indexed annually at the same rate used by Centrelink).
For example, if the market rent of the property is $400 per week, the bond payable will be $1,400.
Bonds will apply to joint tenancies under the same provisions as any other tenancy. As with any of the other tenancy charges, the responsibility for the bond remains with the joint tenants.
When FACS places a charge on a current tenant’s account for damage of $500 or more in one instance, FACS will write to the tenant to advise them of its decision to charge a bond. There will be no need for current tenants’ leases to be terminated and re-signed.
If the tenant lodges an appeal against the tenant damage charge, no arrears action will be taken until the outcome of the appeal is determined. For further information on tenant damages refer to Tenant Repair Costs Policy.
A public or AHO housing rental bond cannot be financed through a RentStart Bond Loan.
For former tenants returning to public or AHO housing who are required to pay a bond, the bond amount will be applied from the start date of the tenancy.
For current tenants who are required to pay a bond, the bond amount will be applied when it is confirmed that any damage discovered after the date of commencement of the policy is the responsibility of the tenant, either because the tenant has accepted liability or there has been a ruling by the NCAT to that effect.
FACS will issue the tenant a written notice specifying the amount of the rental bond payable and the day by which it must be paid. The notice will be issued at least 14 calendar days before the rental bond is payable.
Payment of the bond will be a condition of the residential tenancy agreement.
If the market rent changes during the term of the bond instalment plan as a result of market rent reviews, the bond amount will not change.
Tenants will have two options for payment:
- Paying upfront (at a 20% discount)
- Paying by a scheduled instalment plan of between 24 and 36 months.
Where a tenant is waiting for a bond refund from the private sector, allowances will be made for the payment to be made when the refund is paid to the tenant.
If the tenant pays upfront (within 8 weeks of the bond being applied) they will receive a 20% discount.
Paying by instalments
If the tenant pays by a scheduled instalment plan the instalments will be interest free.
At the time the tenant is required to pay a bond, FACS will assess the length of the bond instalment payment plan based on the household income.
Where a household exceeds 30% of their total household income on rent and bond payments on a 24 month plan, FACS will recalculate the instalment plan over a payment period of 36 months. For those clients who are already paying 30% household income in rent because they have a higher household income, FACS will adjust instalments so that they will not pay more than 35% of their household income.
A 36 month plan is the maximum instalment period that will be applied.
It is important that the tenant provides up-to-date income details for the total household so that the rental rebate and bond affordability can be calculated accurately.
Upon calculation of the instalment plan (24 or 36 months), tenants will receive a written bond instalment payment plan that includes:
- The total amount of bond to be paid
- The total period of the payment plan (including final payment date)
- The instalment payment amount.
Tenants will be able to use the same payment methods to pay their rental bond as for other FACS Housing payments such as rent and water charges.
Sometimes households’ circumstances change during the lifespan of the tenancy. For tenants on a 24 month instalment plan, FACS will re-assess the most appropriate bond instalment payment plan if the client presents details of a change of circumstances that requires a subsidy review.
FACS will re-calculate the affordability of the 24 month instalment plan and apply a 36 month scheduled instalment plan if the tenant meets the following criteria:
- The total household income has reduced since the first 24 month scheduled instalment plan was calculated and;
- The current 24 month fortnightly bond instalment payment plus rent payment now exceed 30% (or 35% in the circumstances described above) of the tenant’s household gross income.
Instalment payments will not increase if the household income increases.
The recalculated 36 month instalment plan will start from the date of the original 24 months fortnightly bond instalment payment plan.
Extenuating circumstances and deferrals
FACS will protect vulnerable tenants facing financial hardship or with other extenuating circumstances with payment options to ensure tenancies are sustainable.
FACS will grant a payment deferral of a rental bond, or a rental bond instalment, if it is satisfied that the tenant has experienced an increase in costs (and therefore a reduction in housing affordability) due to extenuating circumstances such as:
- An existing tenant who has relocated due to extenuating circumstances and has to re-establish themselves and/or their family
- A new tenant who was rough sleeping or was homeless for a long period
- Exiting prison or a medical facility.
FACS does not consider increased expenses such as debts relating to personal loans (i.e. car loans, store loans), credit card debt or discretionary expenditure to be extenuating circumstances.
The tenant must be able to provide evidence to support their request for deferral of payments.
FACS may agree to a tenant deferring their bond payments for a three month period. Deferrals can be applied to the tenancy at any point. A tenant can be granted up to three deferrals per tenancy, equivalent to nine months in total. A third deferral will only be granted in exceptional circumstances.
FACS will automatically reinstate the client’s rental bond payments when a deferral period ends. The bond instalments will recommence at the same fortnightly rate and instalment term.
Minimum $5 rent and account rent limit
Some tenants are on a $5 minimum rent or an account rent limit for a period during their tenancy (for example, due to being in rehabilitation, custody, hospital or respite care or for management purposes). In these cases, bond instalments will be suspended until the minimum rent or account rent limit period has ended. For more information, see Tenancy Charges and Account Management Policy Supplement.
Missed instalments on a bond account
Similar to other tenancy charges, making payments on the bond account is a condition of the lease. If the tenant misses scheduled instalments, their instalment plan will fall behind schedule. FACS will act quickly to ensure instalments are paid on time by making contact with the tenant to ensure that tenants are supported to address breaches to the tenancy agreement and prevent action to terminate the tenancy.
Tenants are expected to enter into a reasonable repayment arrangement to repay any missed payments in addition to their regular fortnightly payments.
Failure to pay bond instalments will be treated in a similar way to failure to pay rent. FACS will take action to recover any non-payment relating to the bond and this may include requesting a Specific Performance Order (SPO) at NCAT. FACS may also seek a SPO at NCAT if the tenant refuses to pay the bond.
If the tenant pays the outstanding rental bond or enters into a repayment plan after being given a termination notice or order, they will not be required to vacate the premises and the residential tenancy agreement will not be terminated.
For more information on managing arrears, see Account Management Policy.
Bond claims and refunds
Bonds can only be claimed at the end of a tenancy unless FACS is managing a payment error of more than $500, due to the tenant paying the bond into the incorrect account. In this case FACS will make a claim on behalf of the tenant to correct the error.
NSWFT will manage the claim of any bond as per the current process for private sector tenancies.
A bond can be claimed by the tenant or FACS. The tenant can submit a claim through FACS or directly with NSWFT. Should the tenant have no debt owing to FACS at the end of the tenancy, the tenant will receive the bond back. This also includes any instalments that they may have made before the end of their tenancy.
FACS will claim the bond for any outstanding charges incurred during the term of that agreement. The claim may relate to charges accrued since the commencement of the agreement including charges before the rental bond became payable.
FACS will reconcile all tenancy accounts to see if there are any credits that can be transferred across the tenancy accounts before making a claim. After reconciliation is complete, if money is still owed, FACS will claim the bond through NSWFT. NSWFT will refund the bond money into the rental bond account.
For easier and faster bond refund resolution when the tenancy is ending, FACS will encourage the vacating tenant to discuss the claim with a client service officer and agree on the bond refund amount. In doing so, refunds of bond monies paid can be handled quickly by NSWFT.
FACS can only claim on the amount of the bond which has actually been paid. If the bond money paid does not cover the full amount of claim (for example, there is $2,000 worth of tenant damage but only $800 bond paid) then FACS may seek an NCAT order to recover the remaining tenancy charges.
To ensure a bond refund, the tenant will need to:
- Notify FACS in advance of their intention to vacate the premises
- Communicate an appropriate forwarding address, current contact details (such as mobile telephone number, email address) and bank details so that NSWFT can arrange any refund in a timely manner
- Return the keys to FACS on the day of vacating the property
- Be available for a property inspection
- Return the property in good order and a clean condition with no remaining possessions or rubbish.
FACS will make tenants aware of the process for claiming their bond when they advise FACS of their intention to vacate, including details of advocacy services that can assist them if required where these are available.
- Schedule a property inspection (this allows FACS to communicate with the tenant on any outstanding damage or cleaning requirements to help reduce possible tenancy charges, but is dependent on the tenant giving enough notice)
- Record the tenant’s forwarding address and current contact details
- Calculate any depreciation applicable for tenant charges due to fair wear and tear and discuss the bond refund with the tenant. At the same time, they can request the tenant to complete the bond claim form and agree on any refund amount to be paid to FACS
- Encourage the tenant to have a support person such as a case worker, a tenancy advocate or family member with them to help resolve bond claims on the day.
Claims when both parties agree
When a claim is agreed and signed by both parties, FACS will lodge the claim with NSWFT. NSWFT will provide the bond refund to the tenant and/or FACS. The tenant’s bond refund will be deposited into the tenants’ nominated bank account.
It is important for the tenant to:
- Provide the correct details for an Australian bank, credit union or building society account. As per the NSWFT process, direct deposits cannot be made to credit card accounts or to card numbers
- Provide appropriate contact details on the claim form, which will ensure NSWFT can make contact with the tenant should there be any issues with the payment.
Claims when a tenant cannot be contacted
FACS will lodge a claim to NSWFT without the signature of the tenant and send a copy of all the evidence relating to the claim to the tenant’s last known address, within seven days of lodging the claim.
NSWFT will provide the tenant with written notice (to the last known address) that FACS has lodged the claim. The tenant will then have 14 calendar days from the date the written notice was received to apply for an NCAT hearing to dispute the claim using the ‘Rental Bond Application’ form from NCAT.
If the tenant does not notify NSWFT in writing that they are disputing the claim within 14 calendar days, the full claim will be paid to FACS.
In the case of bond claim disputes, the NCAT will decide how the bond will be paid out for both parties.
If there is no agreement from the tenant on the claim, FACS will lodge a claim with NSWFT. FACS must then send a copy of the evidence relating to the claim to the tenant.
NSWFT will provide the tenant with written notice (to the last known address) that FACS has lodged the claim. The tenant will then have 14 calendar days from the date the written notice was received to apply for an NCAT hearing to dispute the claim using the ‘Rental Bond Application’ form from NCAT. This is the required process with any bond claim, be it in social or private housing.
If the tenant does not notify NSWFT in writing that they are disputing the claim within this 14 calendar days, the full claim will be paid to FACS.
Where the tenant lodges a claim for refund that FACS does not agree with, FACS has 14 calendar days to respond and dispute the claim at NCAT, in the same way as a tenant.
Tenants can still apply to NCAT for a refund of all or part of the bond, even if NSWFT has paid the claim to FACS. Tenants must apply within six months after the bond has been paid out.
Claims where the there is a transfer or change of tenancy
When a tenant is relocating to a new tenancy and they have an existing bond (whether they have made full or part payment), FACS will claim against the bond for any outstanding tenancy debts.
If a bond applies in the relocated tenancy, a new bond account is created. Any remaining bond credit on the former tenancy, after the claim process has been finalised, will be refunded by NSWFT to the tenant.
The relocated tenant can chose to make a lump sum payment against their new tenancy bond (at a 20% discount) or commence payment by instalments on the new bond.
The tenant will be allowed enough time to receive the refund of the first bond and apply it to the new tenancy without losing the discount for upfront payment.
For more information about NSWFT, see www.fairtrading.nsw.gov.au.
For more information on transfers, see Transfer Policy.
Claims when debt exceeds the bond amount
If the total money owing at the end of a tenancy exceeds the bond that can be claimed, then FACS will seek an NCAT order to pursue the remaining tenancy debt.
Appeals and review of decisions
If a tenant has any concerns about decisions relating to rental bonds they are encouraged to speak to their client service officer to seek a resolution of those concerns.
A tenant can appeal a FACS decision relating to a request for a deferral on their rental bond instalments. Rental bond appeals are managed under an accelerated appeal process.
If the tenant disagrees with the instalment plan length, they can appeal the rent subsidy calculation as the instalment plan is based on the household income.
Some decisions made by FACS cannot be appealed through the Housing Appeals Committee. These include:
- FACS’ claim on the rental bond
- The amount of the claim
- Issuing a Notice of Termination for a breach of not paying the tenancy bond
- The amount of the bond or market rent
- Where a claim has been settled by NCAT and either party lodges an appeal within 6 months of the bond being paid out by NSWFT.
In all of these cases, the tenant can apply to NCAT to have FACS’ decision reviewed.
Legislation and compliance