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
D) 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
Section 18 of the Residential Tenancies Act 1986 caps the general bond at 4 weeks' rent whether or not the home is furnished; here that is $2,000. Requiring more is an unlawful act, so the $400 excess should be refunded and $2,000 lodged within 23 working days of receipt (s 19).
Why the Other Options Are Wrong
Option A: Lodge the full $2,400 now and correct the error at the end of the tenancy
A bond above 4 weeks' rent is unlawful when taken, so the excess should be refunded now, not at the end of the tenancy.
Option B: Keep the $2,400 as it is, because the tenant paid it in good faith
The tenant's good faith does not make an over-limit bond lawful; the landlord must not require more than 4 weeks' rent.
Option C: Ask the tenant for another $600, since furnished homes allow a larger bond
Furnished homes have the same general bond limit of 4 weeks' rent (s 18); asking for more is an unlawful act.
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:
More Property Management Questions
How long does a landlord have to lodge a bond with Tenancy Services after receiving it from a tenant?
Which of the following is a mandatory requirement for all rental properties under the Healthy Homes standards?
A periodic tenancy began 8 months ago and the rent has never been raised. If the landlord gives written notice today, when is the earliest a rent increase can take effect?
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?
Under the Residential Tenancies Act 1986, what is the most a landlord can charge as a general bond (not counting any separate pet bond)?
- → Which of the following is NOT a mandatory requirement for tenancy agreements under the Residential Tenancies Act?
- → How much notice must a landlord give a tenant before conducting a routine property inspection?
- → A tenant has given 21 days' notice to terminate a periodic tenancy but wants to leave 5 days early. What must happen for this to be legally acceptable?
- → A tenant claims bond refund for $1,200 but the landlord disputes $400 for carpet cleaning. The tenant disagrees and applies to the Tenancy Tribunal. What happens to the bond during this dispute?
- → How often may a landlord carry out routine inspections during a tenancy?
- → A landlord wants to increase rent for a periodic tenancy. What is the minimum notice period they must give?
- → During a property inspection, a property manager discovers the tenant has installed a spa pool without permission. What is the most appropriate first step?
- → By what date did all private rental properties in New Zealand have to comply with the healthy homes standards?
- → A property manager conducts an inspection and finds the tenant has installed a heat pump without permission. The tenancy agreement prohibits alterations without consent. What can the landlord legally require?
- → During a property inspection, a landlord notices the tenant has changed the locks. Under what circumstances is this legally permitted?
People Also Study
Property Law & Legislation
56 questions
Agency Practice
89 questions
Sale & Purchase Process
63 questions
Professional Conduct & Ethics
46 questions
Related Study Resources
Previous Question
A property manager inspecting a rental built in 1978 finds peeling paint that may contain lead. What is the most appropriate immediate response?
Next Question
A property manager receives a complaint from neighbors about excessive noise from a rental property during a party at 2 AM on a Wednesday. The tenancy agreement includes a quiet enjoyment clause. What combination of actions should the property manager take?