bond - rental

A sum of money paid by a tenant and held by the relevant government body to ensure against losses from non­payment of rent and damage done to property. The money is held as a bond and is intended to cover the lessor's or agent's immediate loss if a tenant leaves owing rent or damage to the property. It may not cover all of the lessor's or agent's losses and they may pursue recovery of additional costs through other avenues such as the Small Claims Court. The appropriate amount is usually spelt out in the legislation.

The lessor or agent does not have to take a bond from the tenant. If they do, they cannot ask for more than four weeks rent. They must also give the tenant a receipt as proof of payment of the bond. The money is lodged with a bond lodgement form.

Taking a bond in NSW 

Information for landlords

A rental bond is money paid by the tenant as a form of security in case they breach the tenancy agreement. A bond should not be treated as a substitute for careful selection of prospective tenants. All bonds must be lodged with Fair Trading and you can make a claim against the bond for certain reasons after the tenancy ends.

Most tenants do the right thing and get their bond back at the end of the tenancy. However, sometimes a bond does not cover the damage and rent owed by a tenant. If you are concerned about this risk, consider taking out landlord insurance.

Amount of rental bond

While not compulsory, taking a rental bonds is highly recommended unless there is a good reason not to.

Be aware that a rental bond:

  • cannot be an amount more than 4 weeks' rent. This is paid at the start of the tenancy and applies to all NSW rental properties, whether furnished or unfurnished. Higher bonds cannot be charged for tenants with pets, children or for any other reason. Also, you cannot request or receive additional bond payments ('top–ups') during the tenancy.
  • must be in money, not in a form such as personal goods or a written guarantee from the tenant's friends or relatives. The only exception is for Tenancy Guarantees issued by Housing NSW. These guarantees (of up to $1000 over and above any bond paid) help those with a limited or poor rental history to rent a place in the private rental market.
  • does not need to be paid before signing the tenancy agreement. This includes applicants for the tenancy and those who have paid a holding fee. The tenant may decide to transfer the bond into a bank account before signing the tenancy agreement but they are not obliged to do so.
  • is for the whole tenancy: if there is more than one tenant, you cannot take a separate bond from each of them. 
  • can be paid in instalments if you as the landlord allow this. Learn more in the ‘Bond instalments’ section below.

Rent in advance

At the beginning of the tenancy, the tenant can be required to pay the first 2 weeks' rent. This is not another form of bond. The tenant is simply paying their rent in advance, meaning that no rent is due until 2 weeks have passed. Besides a rental bond and 2 weeks' rent in advance, you cannot ask the tenant for any other money at the start of a tenancy.

Bond lodgement

If you have employed an agent to manage your property, they should lodge the bond on your behalf. However, if you are acting as a self-managing landlord, you are responsible for lodging the bond with NSW Fair Trading.

When a bond is taken from a tenant they must receive a receipt or record of the payment details on the tenancy agreement. The bond must be lodged with NSW Fair Trading. A landlord or agent cannot keep the money or put it into an account in the tenant’s name.

You can currently lodge a bond either through a paper-based process or through Rental Bonds Online. Rental Bonds Online was introduced in July 2015 and is a new service for tenants, agents and private landlords to lodge, manage and refund rental bond money more securely and easily. You can visit the Rental Bonds Online for private landlords web page for further information.

Paper based process

You can complete the bond lodgement using the paper-based method as follows:

  1. Obtain a Rental Bond Lodgement form from any Service NSW Centre or by calling 13 32 20. As each Lodgement form has a unique barcode they cannot be downloaded from this website
  2. Fill out and get the tenant to sign a Rental Bond Lodgement form.
  3. Post a Lodgement Form along with a cheque/money order for the amount of the bond to the address on the form, or lodge it in person at any Service NSW Centre.

If letting and managing the property yourself, you have 10 working days to lodge the bond with Fair Trading. You will receive confirmation (with the bond number) from Fair Trading once the bond is processed.

If you have employed an agent, they will lodge the bond and handle the paperwork. Agents have 10 working days from the end of each month to lodge all bonds received during that month. These are maximum timeframes and you can lodge a bond sooner.

You are advised to accept bond payments in either cash, bank cheque or bank transfer from the tenant's account.

Fair Trading does not accept liability for a tenant's dishonoured personal bond cheque. If the cheque bounces, this means you have no bond or security. You will need to try to collect the money again and re-lodge the bond or issue a termination notice for breach of the tenancy agreement.

Rental Bonds Online (RBO)

If you are using an agent registered to use RBO and your tenant has agreed to use the service, the agent will manage this process for you.

If you are a self-managing landlord you will need to be set up on RBO. For more details visit the Rental Bonds Online – For landlords web page.

Once you are a registered user and if you have agreed with the tenant to use the online service, the bond can be paid by the tenant direct to Fair Trading by credit card or BPAY. Fair Trading will notify you by email or SMS when the bond is held, allowing you to arrange for the tenancy agreement to be signed.

If the tenant pays the bond online by credit card, you will be immediately notified that the bond is held by Fair Trading. BPAY payments may take up to 3 days before the tenant’s bank advises Fair Trading that the bond is held.

Bond instalments

Most landlords request the tenant to pay the bond in one lump sum before handing over the keys to the property. However, landlords may allow a tenant to pay in instalments.

If you agree to this, you can keep the part payments until the whole bond is paid then lodge the bond with NSW Fair Trading in one amount. However, if this takes more than 3 months, you will need to lodge what you have received no later than every three months.

If you and the tenant are Rental Bonds Online(RBO) users and have initially agreed that the bond can be paid in instalments, you can request that the tenant pay a bond instalment using RBO. An email will be sent to the tenant. This will prompt them to log on to their RBO account and pay the instalment. You will be notified when the tenant pays the instalment. Once paid, the instalment amount is included in the full bond amount held. For further information on RBO visit theRental Bonds Online for private landlords web page. 

Penalties apply

Fair Trading can take you to court or issue fines if you do not follow the bond rules. This includes taking more than 4 weeks' rent as a bond or not lodging a bond on time.

Updating bond records

If the name of the landlord, agent or co-tenants changes during the tenancy, a Change of Shared Tenancy Arrangement or Change of Managing Agent/Owner form will need to be completed and lodged with NSW Fair Trading.