A property manager receives a bond of $2,400 for a furnished rental property with weekly rent of $500. Three weeks later, they realize the bond amount is incorrect. What should they do?
Correct Answer
B) Refund $400 to the tenant and lodge $2,000 with Tenancy Services
The maximum bond for a furnished property is 4 weeks' rent ($2,000). Since $2,400 exceeds this limit, the excess must be refunded to the tenant and only the legal maximum should be lodged with Tenancy Services, regardless of when the error is discovered.
Why This Is the Correct Answer
Option B is correct because the Residential Tenancies Act 1986 sets the maximum bond for furnished properties at 4 weeks' rent. With weekly rent of $500, the maximum allowable bond is $2,000 (4 × $500). Since $2,400 was collected, the excess $400 must be refunded to the tenant immediately upon discovery of the error. Only the legal maximum of $2,000 should be lodged with Tenancy Services. This ensures compliance with tenancy law and protects the tenant's rights.
Why the Other Options Are Wrong
Option A: Lodge the bond as received and address the error later
Lodging an incorrect bond amount violates the Residential Tenancies Act. Property managers cannot lodge bonds exceeding legal limits, even temporarily. The excess must be refunded before lodging, not addressed later.
Option C: Request an additional $600 from the tenant to reach the maximum allowed
This would increase the bond to $3,000, which far exceeds the 4-week maximum of $2,000. Requesting additional funds when already over the legal limit compounds the violation and is illegal.
Option D: Lodge the bond as received since it was accepted in good faith
Good faith acceptance doesn't override legal requirements. The Residential Tenancies Act mandates maximum bond limits regardless of intent or when the error is discovered. Legal compliance is mandatory.
Deep Analysis of This Property Management Question
This question tests understanding of bond limits under the Residential Tenancies Act 1986. Property managers must know the maximum bond amounts and take corrective action when errors occur. For furnished properties, the maximum bond is 4 weeks' rent, while unfurnished properties allow up to 4 weeks' rent as well. The key principle is that excessive bonds must be corrected immediately upon discovery, regardless of when the error occurred or whether it was made in good faith. This protects tenants from illegal bond collection and ensures compliance with tenancy law. The property manager has a legal obligation to refund excess amounts and lodge only the permitted maximum with Tenancy Services. This scenario commonly occurs in practice when property managers miscalculate bond amounts or apply incorrect formulas.
Background Knowledge for Property Management
Under the Residential Tenancies Act 1986, bond amounts are strictly regulated to protect tenants. For both furnished and unfurnished properties, the maximum bond is 4 weeks' rent. Property managers must calculate bonds correctly and lodge them with Tenancy Services within 23 working days of receipt. If errors occur, immediate correction is required - excess amounts must be refunded to tenants and only the legal maximum lodged. The bond serves as security for potential damages or unpaid rent, but cannot be used as additional income or security beyond statutory limits.
Memory Technique
Remember 'FOUR weeks maximum' for both furnished and unfurnished properties. Think 'FOUR-get about more' - you must forget about collecting more than 4 weeks' rent as bond, regardless of property type or circumstances.
When you see bond calculation questions, immediately think 'FOUR weeks max' and multiply weekly rent by 4. If the amount in the question exceeds this, the excess must be refunded.
Exam Tip for Property Management
Always calculate maximum bond as weekly rent × 4. If the collected amount exceeds this, the answer involves refunding the excess and lodging only the legal maximum.
Real World Application in Property Management
A property manager takes over a portfolio and discovers several properties have bonds exceeding legal limits due to previous manager errors. They must immediately contact affected tenants, refund excess amounts, and update Tenancy Services records. For example, a $600/week property with a $3,000 bond requires a $600 refund (keeping only $2,400). Failure to correct these violations could result in tribunal orders, penalties, and damage to the agency's reputation.
Common Mistakes to Avoid on Property Management Questions
- •Thinking furnished properties allow higher bonds than unfurnished
- •Believing good faith acceptance excuses legal violations
- •Assuming errors can be corrected 'later' rather than immediately
Related Topics & Key Terms
Key Terms:
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- → A property manager discovers during an inspection that a tenant has installed a spa pool without permission. The tenancy agreement prohibits alterations without consent. What is the most appropriate initial action?
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- → A property manager discovers a tenant has been subletting rooms without permission for 6 months, generating significant income. The head tenant is otherwise compliant and rent is current. What factors would most influence the Tenancy Tribunal's decision on termination?
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