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Non-refundable bond guarantee?

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  • Non-refundable bond guarantee?

    From TT ruling #4068209

    The tenants position is that $1,200.00 paid at the start of the tenancy should be treated as a bond. The landlords position is that that payment was a non-refundable bond guarantee.
    (my emphasis).

    It's going to be interesting to see how this one pans out.

    I know there is an insurance company which charges tenants 1 week's rent to cover 4 weeks of bond (i.e. the tenant pays 1 week up front, which they can't get back, but don't have to come up with the money for 4 weeks bond, even though they could get that back if there are no successful TT claims against them)

    However, the amount involved here would imply that the 4 tenants were paying roughly $300 a week each in rent, which is unlikely.

    I've done a search of the TT database, and there are no other references to 'bond guarantee' other than this one.

    Has anybody used one? (by the way, I don't mean a bond guarantor)?

  • #2
    This is interesting, Ive not heard of or considered it before. http://www.scoop.co.nz/stories/BU110...-guarantee.htm
    Written by one of the team at http://www.chasepropertymanagement.co.nz/


    • #3
      Accepted something similar once from a tenant as it all seemed legit.

      However when it came time to claim on it the tenant hadn't fulfilled all the fine print details, so was nothing to claim against.

      Couple had separated and wife had moved out. Bond guarantee was only in her name so they wouldn't pay.

      Took it to the TT and won, but it took 2 years to get the money.

      I wouldn't accept a bond guarantee again.


      • #4
        Wow. What a rort.

        It turns out that:

        1. The tenants caused around $700 of damages
        2. The landlord owned the bond guarantee company
        3. When the tenants requested a copy of the bond guarantee contract the landlord emailed them a “tenancy bond guarantee certificate” (reason 23)
        4. This also included conditions on the tenants which included “Full indemnity of Bond Pal NZ Limited for all direct or indirect losses” (Reason 24)
        5. And then there’s this doozy of a statement: (Reason 25)

        In his covering email, Mr Bromley states that: “…the bond guarantee is not issued to the tenant, only the landlord as the landlord has the financial guarantee not the tenant, but the tenant pays the guarantee fee.The tenant doesn’t sign the guarantee as the landlord is issue [sic] the guarantee by Bond Pal.
        To cut a long story short, the TT concluded that the $1200 payment was in fact a bond payment, awarded the damages of ~$700 to the landlord, and awarded the remainder to the tenants.

        Seems like a very fair decision to me.

        Looks like the landlord wanted to be able to charge a non-refundable ‘bond guarantee’, but also wanted the right to go after the tenants via ‘Bond Pal’ on top of that. I'll leave you to form your own opinions on that approach.


        And then a couple of kickers:

        • I can’t find a working website for “Bond Pal” any more. Surprise.
        • The landlord cited in the decision (Reason 40) also appears in a companies office search as a director of “Tenant Rating NZ Limited”. Go figure. I don't seem to be able to find out any useful links to that company though.


        • #5
          But under Osaki rules shouldn't the damage have been covered by the Landlords insurance; or was it proven to not have been accidental?


          • #6
            Originally posted by Nice View Post
            But under Osaki rules shouldn't the damage have been covered by the Landlords insurance; or was it proven to not have been accidental?
            I'm not sure - the ruling doesn't seem to have considered that, but it's a good point. (I don't agree with Osaki, by the way)

            However, in this case I was more interested in the following:

            1. The bond guarantee paid by the tenants was stated as 'un-recoverable'
            2. The bond guarantee, according to the facts of the TT case, didn't seem to protect the tenants from any bond costs awarded against them, despite the fact that the tenants were the ones who paid for the guarantee in the first place.
            3. The final wrinkle is that the director of Bond Pal and the director of the landlord's company are identical

            So, the tenants caused damage. Not great, but they ended up paying for that, which seems fair.

            None withstanding, the whole 'non-recoverable bond guarantee' from a company the landlord directs, and which doesn't actually seem to protect the tenant(s) looks very hinky to me.


            • #7
              There was one company around several years ago that did this but they've now been liquidated....
              Fraser Wilkinson
              Wellington / Lower Hutt / Upper Hutt / Porirua