A use for unclaimed tenants’ bonds

Note: This is a repost of an article I wrote with Philippa Howden-Chapman and Sarah Bierre in response to an article in the Dominion Post’s print edition about unclaimed bonds. It was published on 29 October 2013. 

In Wellington alone, there is $1.18 million of unclaimed tenants’ bonds. Under the provisions of the Tenants Protection Act 1986, tenants pass a bond to the Ministry for Business, Innovation and Employment for safe- keeping until the tenancy is over. If there is no damage to the house, the bond money is returned to the tenants – unless of course, as has been pointed out ($1 million of bonds lies uncollected as tenants ‘forget’ Oct 22), the tenants do not claim their money. Then the money goes into the Government’s consolidated fund. The tenants who do not collect their bond, for whatever reason, are essentially paying additional tax.

The interest, along with the interest from all the bonds the Government holds for the 32 per cent of the population who are tenants, helps provide for tenancy mediation and dispute resolution services, such as the Tenancy Tribunal, which hears about 20,000 cases a year. The tenants’ money funds the tribunal, but the tribunal receives only 10 per cent of its applications for a hearing from tenants – 90 per cent are from landlords. The Tenancy Tribunal is the only court expected to be funded by some of the users rather than Vote Justice.

Of course it is important for the Government to do whatever it can to return uncollected bonds to rightful owners. However, if these efforts are unsuccessful within a certain time period, then Helen Gatonyi, manager of Christchurch’s Tenants Protection Association, has suggested that it should go towards the funding of tenant advocacy and support. The interest alone from uncollected bonds would be extremely helpful.

Indeed, such funding was promised to tenant organisations leading up to the establishment of the bond scheme in the 1986 Residential Tenancies Act. The interest from all tenants’ bonds – not just unclaimed bonds – was to be used to fund advocacy services for tenants. Tenants’ money was explicitly intended to be used to support tenants.* Despite the promises to tenant organisations, in private and in Parliament, the money never materialised.

Tenant advocacy is of crucial importance in New Zealand, where we have a low proportion of social housing and serious quality problems in private rental homes. Declining rates of home ownership since 1990, means that more households are now renting homes. Rental homes are more likely to be cold and damp, which has serious respiratory and other consequences for vulnerable younger and older people. This is particularly concerning when we consider the Children’s Commissions Expert Working Group’s Report on Child Poverty has shown that half of all children in poverty live in rental housing, and mostly in the private sector.

Because of the lack of a warrant of fitness for private rental housing, it is up to renters to encourage improvements in the quality of rental homes through their own petitions to landlords or through the tribunal. However, research from New Zealand and overseas indicates that this is problematic. There are significant costs, risks and disincentives for tenants to make this move, as reflected in the very low number of cases brought by tenants.

Tenants are more likely than landlords to be young, on low incomes, and to have less experience of tenancy law. Tenancy advocates, in the few places they exist in New Zealand, provide tenants with information on their rights and responsibilities under the law and support tenants to assert their rights. Yet, like many community organisations, they struggle for funding.

For tenants, Australia is a luckier country. The interest from bonds stays where it belongs – with tenants. It is used to fund organisations that advocate for the rights of tenants – in much the same way that landlords’ associations advocate for their interests here in New Zealand. The organisations also provide support to individual tenants.**

That can make all the difference when it comes to preventing homelessness and ensuring that children and their families have access to warm, safe and stable homes.

EDIT: From a question on the facebook page – is there actually money left over from the interest on tenants’ bonds after funding Tenancy Services?

Not really –  interest from the Residential Tenancies Trust Account earned MBIE $19,913,000 year ending July 2013 and the Budget allotted “the provision of residential tenancy and unit title dispute resolution services, information, education, and advice; administration and investment of residential tenancy bond monies; provision of administrative support to the State Housing Appeals Authority” $22,232,000. So, we’re about breaking even. However, the services, funded by tenants, are used mainly by landlords. I think there is good case that more of this money be prioritised for tenant advocacy.

As a person supported by Tenants Protection Association reflects:

I couldn’t have done it by myself; I got help through Tenants Protection Association, their manager a fantastic woman called Helen Gatonyi.  She stood beside me through thick and thin, backwards and forwards, in and out of meetings with Mr Godfrey and the Tenancy Tribunal Hearings from 2010 to 2013.  She got hold of a registered master builder, and the head of the Environment Department of the Christchurch City Council, an environmental officer… My life is so much better now.  With Helen and TPA’s help, none of this would be worth all the effort that I have put into it.   Fighting this war by myself,  was bloody hard, as I had no support at all until Helen came along, and this is just one small battle, the war is not over yet. Having someone finally take me seriously helped me heaps.

* I’m basing this on research I did in the Archives. Letters between tenant associations assert that the then-Minister for Housing, Phil Goff agreed that interest from tenant bonds should be used to fund tenant advocacy services. In introducing the Residential Tenancies Act 1986, Goff said that:

 Interest earned on that money will be used to pay for the various services established by the Bill… It is estimated that the bond fund will generate surplus funds after about 18 months of full operations. Further consideration will be given to the return of any profit to tenants or, in appropriate cases, as a compensation to landlords when damage or arrears exceed the value of the allowable bond.

 ** Actually, while it’s true that the interest from tenant bonds did (until recently) pay for tenant advocacy in New South Wales, in other states, tenant advocacy is funded by government, but from other sources. See Bad Landlord for details.
High Change in Bond Street, James Gillray, 1796, Creative Commons
High Change in Bond Street, James Gillray, 1796, Creative Commons

3 thoughts on “A use for unclaimed tenants’ bonds

  1. Interesting reading I thought the unclaimed bond was much higher ,and as it is tenants money a part of that should be allocated to registered tenants groups to fun support services for tenants in their disputes with their landlord. This issue has been brought up in the past and fell on tin ears when tenants groups were invited to housing meetings with Tenancy Services,again they were disestablished under the present government,which was a shame as much vital information was shared to the benefit of every one. Kevin Reilly MTU

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