What is a rental bond and how does it work?

Many people are renting different places for a variety of purposes, and it has become common these days. It is estimated that there are over 1,022,984 rental apartments worldwide. The number increases to a large extent by including all the rental properties worldwide. Renting a property provides many advantages to both the landlords and the tenants, and it is the reason why rental properties are gaining so much importance. In this article, read about What is a rental bond and how does it work? 

What is a rental bond and how does it work?

A tenant takes over a rental property for many reasons, like opening a new shop or market, starting a business organization, etc. They rent an apartment mainly for a stay (like a home). Not all people in the world can be trusted easily, even if it is a landlord or a tenant, and there comes the need for a rental agreement. Paying the rental bond is one of the primary things that have to be done before a tenant moves into a rental apartment. 

All about rental bond

The primary thing to know before the rental bond is a rental or lease agreement. A rental/lease agreement is a contract or an agreement that is made between a landlord and the tenant based on both their terms and conditions. A tenant possesses a rental property for a short-term period (tenancy period) by paying a monthly or weekly rent to the landlord. There are chances that either the tenant or landlord can do some malpractices, which will undoubtedly lead them to a conflict. A rental or lease agreement is used to avoid such issues so that the landlord and tenant will keep their word. It involves certain terms and conditions regarding the term of the tenancy, amount of monthly rent, due date, security deposit details, and many others. Both the landlord and the tenant will have to sign the agreement before the property is rented, in the presence of witnesses. Thus, they are not able to break the agreement (in most of all cases), and breaking it will be considered a crime (they will be charged with a fine).

Read More: When to See a Fertility Specialist: Top 10 Signs

A rental bond is the security deposit that a tenant (or another person who stands as the security for the tenant) has to pay to rent a property from a landlord. It is a security measure taken by the landlord to avoid risks of losing money unnecessarily, with certain problems created or caused by the tenant. Sometimes, the tenant fails to pay the rent, creates any damages to the rental property (knowingly or unknowingly), or fails to comply with the terms and conditions provided in the lease agreement. The landlords will have to face a lot of losses during all these problems; thus, the security deposit helps them to reduce or avoid them. The amount of money that has to be paid will be mentioned in the rental or lease agreement made by them. After the tenancy period, the landlord will inspect the rental property for any damages or issues and then refund the security deposit to the tenant (only if there are no damages). If the tenants have caused any damages to the property, the repairing cost will be taken from the security deposit, and the rest will be refunded.

How does a rental bond work?

As mentioned earlier rental bond is a security deposit that stands as a guarantee, in favor of the landlord, that the tenant will correctly follow the terms and conditions in the rental agreement.

How a landlord uses a rental bond? 

Helps the landlord to reduce losses due to unpaid rents

Sometimes the tenant may fail to pay the rent, and in those cases, the landlord can make use of the security deposit or the rental bond. It will help them to get rid of losses that are caused by tenants who fail to pay the rent on time. 

To overcome the accumulated debts of unpaid utility bills.

The utility bill is a detailed invoice (or bill) that includes the charges of all utilities that have been used for a month. In general, utilities includes electricity, gas cylinder, water and sewage, and all other related items. Some landlords will not charge for certain utilities like water supply. If the tenant has failed to pay the utility bills and it has got accumulated, then the landlord can utilize the rental bond to cover it.

Reduce risks caused by unpaid rent for the breach of the lock-in period

In some cases, the tenant does not wish to pay the balance amount during the lock-in period by stating certain problems. In such cases, the landlord can take necessary actions and can also take the rental bond paid by the tenant.

Repair damages caused by the tenant to the rental property

The tenant must keep the rental property in good condition by providing necessary maintenance after leasing it. The landlords can use the security deposit to repair any damages caused by the tenants during the tenancy period. Thus, the landlord does not have to ask for any money from the tenants for repairs (or if the tenants are not willing to repair the damages). 

If the tenant breaks any other rules mentioned in the lease agreement

A lease agreement will have many terms and conditions mentioned or added by both the landlord and the tenant. Based on certain laws (which are different for different places), the landlord can use the rental amount whenever necessary if the tenant breaks any terms and conditions of the lease agreement. Read more about tenant eviction and what to keep in mind. 

To provide a guarantee to the tenant (to overcome the lack of trust between the landlord and the tenant)

To overcome all the problems mentioned above, the landlord must have some kind of guarantee provided by the tenant. Thus, the security deposit stands as a guarantee between a landlord and the tenant.



Renting a property will be a challenging task for both the tenant and the landlord if they do not have any agreements. Either the landlord or the tenant can create problems that will lead them to conflict. There comes the need for a rental agreement which will help the landlords and the tenants to create a contract or adjustment between them. A rental bond (a part of this agreement) is the security deposit that has to be paid by the tenant at the beginning. This article provides some information regarding “how a rental bond works?”.



Leave a Reply

Your email address will not be published. Required fields are marked *