Leverage encountered a situation where a tenant was placed into a property. The landlord indicated to Fair Trading that no bond had been taken. It was all rent in advance. The rent in advance was six weeks. We referred the matter to the Office of Fair Trading because our client was a partner in a townhouse development where his partner had rented the property out without his approval. To protect him against any future investigations, we lodged the complaint with Fair Trading for them to investigate.

All we knew is that six weeks rent had been taken up front and put into the company account. Logically, this looked like four weeks bond and two week’s rent in advance, as permitted by the Residential Tenancies Act 2010. No bond was ever lodged with the Rental Bond Board and we felt that it was absolutely vital that Fair Trading had a look at it.

Fair Trading said there was no need for investigation because it was all rent in advance and consented to by the tenant. They closed their file.

This got me thinking! If a tenant signs a document saying that they have requested no bond be paid, but they pay more rent in advance, is this the way of getting around the Rental Bond Board? What about taking extra rent which includes a maintenance levy? Is this illegal?

The decision by Fair Trading to not investigate this matter opens a Pandora’s Box. If we don’t have to take a bond, and we can accept more money than what is suggested under the Residential Tenancies Act 2010, we might be able to look at a number of regimes.

I can just see landlords now starting to tell people who need to enter into a property, “we can make your entry cheaper if you agree to pay an increased rent”. In other words, in lieu of a bond, higher rents can be taken.

You may think this is farfetched. Due to the increase of rental prices within the Sydney market, just entering a property is getting too expensive. If a bond is spread over the length of the tenancy and forms part of the rent, you can reduce this price. Moreover, you can reduce the need to lodge with the Rental Bond Board.

The other significant part of this complaint is that, it was an individual landlord. The standards which are being imposed on self-represented landlords is very different to that which is being imposed by the agents. The agents are being required to comply with a certain process, where private landlords are being permitted to undertake different strategies.

It was an interesting experience. Certainly, food for thought!

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.