Lease deposits and bonds: What's the difference?

Lease deposits and bonds: What's the difference?


If you are intending to rent property, you are likely to have been asked to pay a bond and, in some circumstances, to put down a holding deposit for the property. This article explains the difference between the two to assist you.

A bond, often referred to as a “rental bond”, is money a tenant pays at the beginning of a tenancy agreement. The reason your landlord (the lessor) asks for a rental bond is to protect them in case the tenant breaches the terms of the agreement. For example, if at the end of the tenancy agreement the tenant owes rent, the lessor may reclaim the arrears from the rental bond. Usually, a bond is only given after both parties have signed the agreement – it is advisable that you do not pay a bond until the agreement has been signed. Tenants usually get the full amount of their bond back at the end of the tenancy, provided that the tenant has not damaged the property and rent is not in arrears.

A holding deposit is usually paid before a tenancy agreement has been signed. It can be used to provide assurance to both the potential tenant and lessor that the agreement will be signed at a later date. After the agreement is reached, the lessor will have to give back, or ‘credit’, the deposit. The lessor will also have to return the deposit if the lessor changes their mind. It should be noted that a lessor will have to give back the deposit if the tenant refuses to enter the agreement because the lessor gave false or misleading information, or failed to disclose material information. However, the lessor may keep the deposit if the potential tenant simply changes their mind.

The tenancy laws are different in each Australian state and territory, and so it is important you are familiar with the laws that apply to you. A solicitor can assist you by providing you with specific information. You should also seek legal advice if the lessor unreasonably refuses to give back your deposit or bond. 

If you're worried about the bond or deposit your landlord has requested, or have questions about your rights as a tenant, contact Pathway Lawyers & Migration Agents for friendly, timely and cost-effective advice.