Canberra's rental bonds to open to commercial guarantors
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Canberra's rental bonds to open to commercial guarantors

The ACT will become the first Australian jurisdiction in Australia to license the operation of for-profit, commercial rental bond guarantors on Monday.

Renters rights advocates are concerned it creates more hurdles for Canberra's renters and strips funding from the ACT Tenants Union.

But the guarantors argue the move will free up more money for renters, cut government red tape and create more protections.

Instead of paying a rental bond, the commercial guarantee process allows renters to pay ongoing fees to a commercial guarantor to front their bond for them.

Better Renting director Joel Dignam.

Better Renting director Joel Dignam.

Photo: Supplied

Better Renting director Joel Dignam said it would weaken renters protections through the tribunal and the judicial process.

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"These bond alternatives are being pitched to landlords as more convenient and less turnaround and that's potentially because the tribunal is sidestepped," Mr Dignam said.

"The risk is you go from having a transparent, judicial process to a commercial process. We think that there should be more public consultation."

The ACT government said a three-week consultation period on the change was held in October last year.

"The effects on the rental bond market of these products are a serious consideration for government, not only because of programs and services funded through the rental bond scheme but also because of the important consumer protection issues," a spokesperson said.

Renters would have to challenge any claims made by the landlord through their guarantor before being able to access the ACT Civil and Administrative Tribunal.

The chief executive of commercial guarantor Snug, Justin Butterworth, said his company was addressing housing affordability.

"It allows [renters] to more effectively utilise their capital. Those that rent, move frequently, don't get access to their bond cash and are subject to a lengthy claims process," he said.

Currently the ACT Rental Bond Authority earns interest off the bonds it holds with part of that used to fund the ACT Tenants Union. The ACT government earned $1.8 million in interest from rental bonds last financial year.

The union's executive officer, Deb Pippen, said a loss of funding would mean fewer staff, which would harm the amount of assistance they could provide tenants.

"We expressed our concern about the products on the whole to the government," Ms Pippen said.

"It sounds like a sweet deal and that's the problem a lot of people don't realise that instead of a bond that is being held in trust for tenants, this is an ongoing fee."

"These are basically landlords insurance products that they're trying to convince tenants to be paying for."

Like Uber, renters would create a profile through the companies that proves they are good tenants. Ms Pippen said it was essentially property management.

"That's not something a tenant should be paying for," Ms Pippen said.

Ms Pippen said the difference between her union and the guarantors was that the ACT Tenants Union was independent.

Trustbond Australia manager William Soutar said renters advocates needed to focus more on the money it freed up for renters.

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"This is just providing an alternative instead of freezing thousands of dollars," Mr Soutar said.

He said his organisation would use part of their profits to provide free bond to people fleeing domestic violence.

Trustbond allows renters to create a profile based off their social media profiles and transaction history, verifying identities through Facebook and LinkedIn as well as the their history on platforms like Uber or Airbnb.

"We absolutely do not sell the data or anything like that," Mr Soutar said.

Snug and Trustbond confirmed they had been lobbying with the ACT government for clear regulation on commercial bond guarantees.

Trustbond already operates in South Australia where there is no set regulation.

It's been previously revealed Canberra's landlords and real estate agents were pocketing more than half of renters' bonds, a rate disproportionate to South Australia, Queensland, Victoria and New South Wales.

Snug and another Trustbond are backed by insurance companies Insurance Australia Group and Suncorp Group respectively.

Finbar O'Mallon

Finbar O'Mallon is a reporter for The Canberra Times

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