Illegal bond replacements

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Bond replacement products are illegal in Victoria. 

These products include loans and guarantees offered by private businesses or companies where renters have to pay a fee. 

You should not buy these products if you are renting a property and need to pay a bond. 

If you are a rental provider (landlord) and accept a bond replacement product, you may be breaking the law.

If you are having difficulty paying your bond, you may be able to get a government loan. This kind of loan is called a RentAssist or Homes Victorian bond loan. There are also some cases in which a guarantee is legal. 

What to look out for 

Bond replacement products often claim to be cheaper than bonds. They may try to attract renters by saying that the products free up renters’ money, which would otherwise be ‘locked away’. They also claim rental providers will get the same protection as they would with a bond that is lodged with the Residential Tenancies Bond Authority (RTBA).

These claims are not true.

Different types of bond replacement products work in different ways. Usually:

  • the renter pays a fee 

  • the rental provider agrees to the renter using the product

  • the product is a guarantee to pay the rental provider if the renter owes them money when they move out

  • there is a limit on the amount of money paid to the rental provider

  • the fee is not refundable

  • the fee cannot be used to pay the rental provider

  • if the renter stays in the property for longer than the original agreement (lease), they will have to pay a renewal fee. 

This means that as well as being illegal, bond replacement products can cost the renter more than a standard bond. Bonds lodged with the RTBA do not have fees.

Fees for bond replacement products might be based on some or all of these things: 

  • rental and credit histories
  • amount of rent
  • personal information to assess your ability to repay the loan.

If the rental provider makes a claim because the property is damaged or the renter owes them money, the business providing the replacement product will only pay up to the amount specified in the terms and conditions. The business providing the product may then try to get that money back from the renter. They could take legal action to do this. 

If the amount of money owed to the rental provider is more than the amount in the terms and conditions of the product, the rental provider might try to get extra money from the renter.

Note: This can also happen when the money owed to the rental provider is more than the amount of bond lodged with the RTBA.