Landlord Allowed to Collect Bond From New Tenant Within 23 Days

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[2025] NZTT 5192454

TENANCY TRIBUNAL AT WELLINGTON | TE TARAIPIUNARA RETIHANGA KI TE WHANGANUI-A-TARA

APPLICANT: [redacted]

Tenant

RESPONDENT: [redacted]

Landlord

TENANCY ADDRESS: Unit/[ADDRESS], [POSTCODE]

ORDER

1. The Tribunal makes the following declarations:

a. That the landlord was permitted to seek payment of [NAME]’s portion of the bond prior to the effective date of the change of tenancy when [NAME] replaced a departing tenant under the tenancy agreement. This is subject to the proviso that the amount received would not have the effect of topping up the bond held at the [COMPANY] to an amount in excess of the maximum that can be demanded under s18(1) Residential Tenancies Act 1986 after the departing tenant’s share of the bond was refunded.

b. That the landlord breached section 19(1) Residential Tenancies Act 1986 by failing to lodge [NAME]’s bond within 23 working days after payment was received.

2. The landlord must pay the tenant $27.00 immediately being the filing fee on the application.

Reasons:

1. Both parties attended the hearing.

2. The tenant, [NAME], claims the landlord, [NAME], did not lodge his bond with the [COMPANY] within the required time and also effectively held two bonds at once pending a change of tenant and bond transfer. [NAME] brought this

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application to the Tribunal for clarification as to whether the landlord’s process for lodging the bond was correct. He does not seek compensation or exemplary damages for any breach. The purpose of the application is to clarify the process and ensure the landlord knows what is required in future.

3. The relevant sections of the Residential Tenancies Act 1986 (RTA) provide: a landlord shall not require payment by way of bond of an amount greater than 4 weeks’ rent lawfully payable under the tenancy agreement (see section 18(1) RTA); and a landlord must send any bond payment to the [COMPANY] within 23 working days after the payment is received (see section 19(1) RTA.

Background facts

4. The tenancy for the premises was a fixed term commencing on 1 February 2024 and ending on 31 January 2025. The bond of $2,400, equivalent to four weeks’ rent, was lodged with the [COMPANY] and there is no complaint about lodgement of that bond.

5. One of the original tenants decided to move overseas and found [NAME] to replace him as a tenant for the remainder of the term with effect from 17th June 2024.

6. The landlord prepared two agreements to document the variation signed by the parties on 11 and 12 May 2024. A variation of tenancy agreement was signed by the landlord, the departing tenant, and the continuing tenants to record the departing tenant’s release from the tenancy on 17 June 2024. A second variation of tenancy agreement was signed contemporaneously by the landlord, [NAME] as the new tenant, and the continuing tenants to record that [NAME] would become a joint tenant responsible for the obligations of the tenants under the existing tenancy agreement from 17 June 2024.

7. After signing the variation, the landlord required [NAME] to pay $720 for his share of the bond. [NAME] held this bond money and did not send it to the [COMPANY] until 18 June 2024, the day after the change of tenancy came into effect. At the same time, he refunded the departing tenant’s bond on 19 June 2024.

8. As [NAME]’s bond was received by the landlord on 13 May 2024. He was obliged to lodge it with the [COMPANY] by 13 June 2024. It was not submitted until 18 June 2024, which is 3 working days late.

9. There are two issues raised by [NAME]:

a. Is the landlord entitled to demand and hold bond money for the same tenancy from an incoming tenant when the maximum bond required under the tenancy agreement is already held at the [COMPANY]?

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b. Is the landlord permitted to hold onto the bond for more than 23 working days for a bond transfer process because it is not a new bond lodgement?

Discussion

10. The landlord explained in written submissions that ideally, from [NAME]’s perspective, the bond transfer should occur directly between the departing and incoming tenants without landlord involvement. In that case, all parties sign the Tenancy Services standard form Change of Tenancy Agreement (the COT form) to document the change. This is then lodged with the [COMPANY] and enables the name of the departing tenant to be removed from the bond, with the bond transferred into the incoming and continuing tenants’ names. The incoming tenant then pays the departing tenant their share of the bond directly.

11. [NAME] explained that in his experience he has encountered difficulties with this process. For example, sometimes departing tenants have taken the bond payment from the incoming tenant but refused to sign the COT form. This means the new tenant has been unable to easily claim their rightful bond refund because it is still in the departing tenant’s name. Another problem is where the departing tenant receives the bond payment from the incoming tenant before a final inspection has been completed, it is difficult to recover compensation from the departing tenant because the bond is no longer under the landlord’s control.

12. [NAME] says that he had an in-depth discussion with Tenancy Services ([NAME]) as to how he could address the problem. He says that [NAME] confirmed that to facilitate the bond transfer process he could collect the new tenant’s payment and refund the outgoing tenant directly. This ensures a smooth transition, prevents disputes, and allows for necessary negotiations if there are damages to the premises for which the incoming tenant should not be responsible.

13. [NAME] says he explored other ways to handle bond transfers with [NAME]. He asked if he could top up the existing bond with the payment collected from the incoming tenant and request the [COMPANY] to refund the departing tenant’s portion. However he was informed that this was not possible, as it could breach the legal maximum bond that can be demanded under s18 RTA (4 weeks rent). He also asked if he could lodge a separate bond and later transfer it to the original bond after refunding the departing tenant. However, he was advised that bond transfers are only permitted between different landlords not within the same tenancy.

14. [NAME] says that [NAME] advised that his role in temporarily holding the new tenant’s payment was a practical approach to ensure a smooth bond transition. The law does not explicitly outline the process for handling bond transfers within the same tenancy, and he followed [NAME] guidance to prevent disputes and ensure fairness for all parties concerned.

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15. [NAME]’s concerns are well-founded with this Tribunal frequently dealing with the types of difficulties he has highlighted. It is not uncommon for disputes to arise at the end of tenancy for rent arrears, cleaning and damages with the bond registered in the names of “long-lost” tenants who departed before the tenancy ended. This creates significant problems for landlords and tenants.

Findings

16. [NAME] is correct when he says that the RTA does not specifically address the process that should be followed for a bond transfer when there is a change of tenant. Technically, it might be argued that requesting an incoming tenant to pay a share of the bond to the landlord, when the maximum bond amount that can be demanded for the tenancy is still lodged at the [COMPANY], is a breach of section 18(1) RTA. However, I consider that there is no breach.

17. Section 18(1) specifically says a landlord shall not require payment by way of bond of an amount greater than 4 weeks’ rent lawfully payable under the tenancy agreement. In this case, I consider that the landlord is not requiring an overall bond payment of more than 4 weeks rent for the tenancy. The intention is that the incoming tenant’s share of the bond will top up the bond held for the tenancy to no more than the maximum amount that can be demanded under s18(1). In that regard, I accept that [NAME] collecting a share of the bond money from the incoming tenant is a practical approach. Provided the sum received will not result in the maximum bond amount held at the [COMPANY] being exceeded once the departing tenant’s bond is refunded, then I consider there is no breach of s18(1).

18. However, when a landlord collects bond money from an incoming tenant in the above circumstances, I consider that the landlord is obliged to ensure that it is lodged with the [COMPANY] in accordance with s19(1) within 23 working days of receiving the funds. Section 19 explicitly provides that the time starts running from the date of the payment. Therefore, where a tenancy is not due to start for several weeks, the landlord needs to take care around the timing of the payment to ensure it can be lodged within the 23 working day period. For that reason, I find that the landlord breached his obligations under s19(1) RTA.

19. In summary, I am satisfied that [NAME] was permitted to seek payment of [NAME]’s portion of the bond prior to the effective date of the change of tenancy. This is subject to the proviso that the amount received would not have the effect of topping up the bond held at the [COMPANY] to an amount in excess of the maximum that can be demanded under s18(1) after the departing tenant’s share of the bond was refunded. However, any such payment must be lodged at the [COMPANY] within 23 working days of the payment in accordance with s19(1). This of course means that any bond dispute with an outgoing

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tenant will need to be settled swiftly, but I can see no leeway provided by s19(1) in that situation.

20. [NAME] has substantially succeeded with the claim, I must reimburse the filing fee. [NAME] indicated that he was happy to arrange payment of the filing fee straight away and indicated that he may voluntarily make an extra payment to [NAME] for the time and trouble of the application.

[NAME]

10 April 2025

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Please read carefully: Visit justice.govt.nz/tribunals/tenancy/rehearings-appeals for more information on rehearings and appeals.

Rehearings You can apply for a rehearing if you believe that a substantial wrong or miscarriage of justice has happened. For example: • you did not get the letter telling you the date of the hearing, or • the adjudicator improperly admitted or rejected evidence, or • new evidence, relating to the original application, has become available.

You must give reasons and evidence to support your application for a rehearing. A rehearing will not be granted just because you disagree with the decision. You must apply within five working days of the decision using the Application for Rehearing form: justice.govt.nz/assets/Documents/Forms/TT-Application-for-rehearing.pdf

Right of Appeal Both the landlord and the tenant can file an appeal. You should file your appeal at the District Court where the original hearing took place. The cost for an appeal is $260. You must apply within 10 working days after the decision is issued using this Appeal to the District Court form: justice.govt.nz/tribunals/tenancy/rehearings-appeals

Grounds for an appeal You can appeal if you think the decision was wrong, but not because you don’t like the decision. For some cases, there’ll be no right to appeal. For example, you can’t appeal: • against an interim order • a final order for the payment of less than $1000 • a final order to undertake work worth less than $1000.

Enforcement Where the Tribunal made an order about money or property this is called a civil debt. The Ministry of Justice Collections Team can assist with enforcing civil debt. You can contact the collections team on [PHONE] or go to justice.govt.nz/fines/civil-debt for forms and information.

Notice to a party ordered to pay money or vacate premises, etc. Failure to comply with any order may result in substantial additional costs for enforcement. It may also involve being ordered to appear in the District Court for an examination of your means or seizure of your property.

If you require further help or information regarding this matter, visit tenancy.govt.nz/disputes/enforcing- decisions or phone Tenancy Services on [PHONE].

Mēna ka hiahia koe ki ētahi atu awhina, kōrero ranei mo tēnei take, haere ki tenei ipurangi tenancy.govt.nz/disputes/enforcing-decisions, waea atu ki Ratonga Takirua ma runga [PHONE] ranei.A manaomia nisi faamatalaga poo se fesoasoani, e uiga i lau mataupu, asiasi ifo le matou aupega tafailagi: tenancy.govt.nz/disputes/enforcing-decisions, pe fesootai mai le Tenancy Services i le numera [PHONE].

https://www.justice.govt.nz/tribunals/tenancy/rehearings-appeals https://www.justice.govt.nz/assets/Documents/Forms/TT-Application-for-rehearing.pdf https://www.justice.govt.nz/tribunals/tenancy/rehearings-appeals/ https://www.justice.govt.nz/fines/about-civil-debt/ https://www.tenancy.govt.nz/disputes/enforcing-decisions https://www.tenancy.govt.nz/disputes/enforcing-decisions http://www.tenancy.govt.nz/disputes/enforcing-decisions/

Reasons: