Page 4253 - Week 12 - Tuesday, 24 October 2017

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Like many Canberrans I have had experience in the property market as a renter and I know from personal experience that it can be difficult to cobble together a bond for a rental property, which can be up to or in excess of $1,000 for an individual, particularly for people who are on lower incomes and in insecure work.

Recently released figures from the census show that almost 32 per cent of all Canberra dwellings were rented, as were 60 per cent of all apartment dwellings in the ACT, the latter of which are disproportionately housing younger Canberrans. For a university student working part time who wants to live close to the ANU and their place of employment in the retail sector, the bond can be a whole fortnight’s salary or more, which is a significant sum and can be difficult to budget for.

While the bond is redeemable at the end of a tenancy, a renter will not see the bond returned until they exit the rental market. Should bond guarantee products deliver on their full promise, they may provide lower income Canberrans relief from having to make that large up-front payment. My understanding of the way that these schemes work is that a renter will pay an initial non-refundable fee at the beginning of their tenancy to the guarantee provider, which will be a fraction of what the bond amount would have been.

If there are no property damages at the end of a lease, the renter has avoided paying the cost of a full bond. If there are damages, the guarantee provider will immediately pay out to the landlord and then may engage in a repayment plan with the lessee to cover the gap between their initial fee and the amount recovered by the landlord from the guarantee provider. This would mean that the lessee would not be worse off than they would have been had they paid a traditional bond, and the lessee gains the flexibility to pay the damages off over a longer period through a payment plan.

I understand that the company Snug has indicated its intention to offer a rental guarantee product in the market, which will charge an initial annual fee of $110 for the first year of a tenancy for a one-and-a-half thousand dollar bond. In subsequent years, the fee would be reduced to $60 for the second year, $53 for the third year and $45 for any subsequent years.

This option could be an alternative for cash-poor members of the community to avoid up-front bond payments, but it is important that it is regulated properly. The government has an important role to play in regulating any proposed market and bond conditions. The ACT government already has strict regulations on bond conditions to prevent exploitation from lessors. For example, it is illegal for lessors themselves to hold a bond. All bonds must instead go to the independent government-run Office of Rental Bonds, which prevents lessors from claiming the bond as damages without due process. This is critically important for renters, who are already subject to a power imbalance.

If there are not stringent regulations surrounding a proposed bond guarantees marketplace at its commencement, financially vulnerable people could be at risk of exploitation. That is why all commercial guarantee products will now require approval from the ACT Commissioner for Fair Trading, part of the Chief Minister,

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