Bond refund process shows how much the system favours landlords

Over the last month-and-a-half, I have had the great displeasure of going through Tenancy Services’ new “faster and easier” bond refund process. It resolved as I was writing this, taking nearly two months from my landlord initiating the process to me actually receiving my bond. 

The delay was excruciating, but led me to reflect on how much the system is geared towards landlords, and disadvantages renters nearly every step of the way. Let me explain.

The old bond process

The old process used a physical bond refund form, which you and your landlord would both sign. This required a negotiation of the bond ahead of it being released. 

If you and your landlord could not agree, either party could submit a form signed by only one party. Tenancy Services would then reach out to the other party, seeking the approval. If they did not agree, it would then either go to mediation or the Tenancy Tribunal for resolution. 

The “faster and easier” BondHub.

The new process looks like this:

1. The landlord has to initiate the bond refund process in BondHub
2. The landlord enters the amount to be returned to both the landlord and the tenant. 
3. The tenant is then emailed, texted, or sent a letter to log in and review the request.
   1. If a landlord is owed money, the money will be paid to them after 12 working days unless the tenant logs in and disputes.
   2. If a renter is owed money, nothing will be paid out until all renters on the Tenancy Agreement log in and agree, even after 12 working days.

How can the landlord both be the one to initiate the process, choosing the initial refund amount, and be the one who can be repaid if there is no response? Why should a renter be penalised for being unavailable when there is no penalty for a landlord?

I reached out to Tenancy Services to clarify the email I received from them and how it compares to the previous physical form. They said:

“The landlord will be paid the refund amount they requested because no tenants have responded after 12 working days. This is essentially acting as if the refund were sent as a one-party claim, because the landlord would be paid the bond after 12 working days, if no tenants responded. This will happen on all bonds where the tenancy has ended less than two months ago. If the tenancy ended over two months ago then the landlord will have to submit a new refund request or a tenancy tribunal order or mediation order.”

“This process would have happened on the old refund forms if no tenants had signed the form. If one tenant had signed then we would have to contact the other tenant, and if both tenants signed then the bond would be refunded.”

An unfair system that penalises renters

There are two key differences here between the old physical process and the new online process. The first is that the landlord was required to try and contact the renters first, to get them to sign the form. The second is that, in an instance where the landlord and renters cannot agree, either party could easily submit the form with only one signature and it would go through the one-party signature process.

This new system massively flips the script. The landlord’s time and the return of their claims section of the bond (which is paid for with the renter’s money) is prioritised, with potentially no input from the renter . 

The structural change is the most problematic. Landlords now commence the process in BondHub, effectively beginning the process as a one-party signed return by default. If no-one responds, the one-party return can pay out the landlord without the renter ever being involved.

The landlord-initiated, one-party-by-default process is especially egregious given:

• At the moment, most renters will need to call to get their tenant number (as these were only given to renters who began a tenancy after 1 December).
• Tenancy Services acknowledge themselves that they are busy and can face delays in responding to emails.
• Theoretically, a particularly unscrupulous landlord could abuse this and get a portion of the bond repaid to them, simply because a renter can’t access the services if they are overseas or unavailable,

Renters cannot easily submit a one-party return. They are required to reach out to the very busy Tenancy Services to begin this process, delaying their ability to initiate the return. Why should landlords be able to begin the refund process, and set the initial negotiating amount more easily than renters? 

Taking a step back, the real question is: why should there be any disparity in the process between landlords and renters at all? Let alone creating a system that prioritises landlords when:

• Renters often have another bond they need to go and pay.
• Landlords are likely wealthier than the tenant and don’t need access to the cash as urgently.
• If they do need access to cash, they have equity in a property they can borrow against.
• Landlords are the ones accepting risk by taking on an investment.
• The money being held in trust is not the landlords, it is the renters’. 

The fact that the system structurally disadvantages renters like this shows how far we have to go to develop a fairer rental system. We now have a system that defaults to returning the funds to landlords. 

A fairer system would flip the system, and:

• Shift the burden of proof onto the landlord, who wants to make a claim to the renter’s money.
• Require landlords to return the bond in a timely manner, with renters able to initiate the process to guarantee their money within a certain timeframe.
• Automatically pay out the bond to renters unless disputed by the landlord.

Food for thought – do we even need bonds? 

There is a legitimate question of whether or not renters should be required to pay a bond. Consider:

The Tenancy Tribunal is able to make civil rulings requiring renters to pay for damage or rent arrears above their current bond anyway. Landlords are also typically required to have insurance for damage to their properties if they have a mortgage. Why, then, should renters – who are typically more economically disadvantaged than landlords – be the ones who have to stump up the cash? 

Landlords are making an investment in property. They build equity in their property off the backs of their renters. In making this investment, they accept that there is a small risk in having renters in your property. This is the same as the risk for any other investment (market fluctuations in the share market, interest rate fluctuations for bonds). 

The rent we as renters pay is the risk premium for landlords taking on renters, and this is reduced by using some of this rent for insurance. Landlords can mitigate this risk by not having renters in the property, but the cost of this mitigation is the foregone rent. 

Is four weeks’ rent really the difference between the risk of leasing a property being acceptable and too high for a landlord, who is expecting to make substantive returns from capital gains?

It makes no sense then that we as renters should have to stump up for this risk. Perhaps it’s not only time to reconsider bonds, but for a fundamental re-think of who bears the costs of renting in Aotearoa.

About the author:

Quintin Jane

In: Uncategorized. Tags: a better future for renters, opinion, renters
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