Rental bonds can resolve distrust between landlord and tenant. Here's how
These bonds answer both parties' concerns at a low cost and eliminate the requirement for a large security deposit
In India, tenants must pay a substantial security deposit to the landlord before entering into a legal arrangement. Also, these security deposits typically last between two and twelve months. This payment acts as a guarantee by the tenant in favour of the landlord, safeguarding him against any future defaults by the tenant. However, this causes difficulties for tenants who lack the funds necessary to cover such substantial security deposits and a lack of trust between landlord and tenants on such issues.
That said, Rental bonds can assist in resolving the issue of landlord-tenant distrust. It may contribute to the promotion of rental homes in India. The bonds answer both parties’ concerns at a low cost and eliminate a hefty security deposit requirement.
What are the rental bonds?
A rental bond is a guarantee to the landlord that the tenant will adhere to the tenancy agreement’s terms. A guarantee firm grants it on behalf of the tenant, benefiting the landlord by shielding him from loss up to the amount of the guarantee in the case of the tenant’s default.
Typically, the tenants pay the bond to the landlord or property manager before moving into the apartment. It is not to be mistaken with weekly rent and should not be regarded as a ‘down payment’ on a rental. The bond must be in the form of money and must be maintained during the lease period.
How it benefits the landlord?
The most significant benefit is that the landlord is assured of a credit-verified tenant. He also can keep the amount in the rental bond as a penalty sum to compensate for unforeseen losses.
How it benefits the tenants?
Tenants, too, have a benefit from renting bonds. The security deposit that a tenant contributes to the landlord is kept safe during the lock-in phase of the tenancy. Rather than making a substantial deposit, the tenant must merely pay a small assurance fee to the landlord while a rental bond is in place. This is a significant comfort, especially given the pandemic’s devastation of many families’ financial resources.
While rental bonds can be tailored to the landlord’s and tenant’s specific needs, they typically cover the unpaid rent, unpaid rent for the remainder of the lock-in period, unpaid energy bills, property damage over normal wear and tear.