Owner took out the bond prior to settlement without letting us know

[sumterrence]

Hi guys,

I wish I can get some advise from the experts or people that have dealt with similar situations and what are the options for me.

Basically what happened was I recently bought an investment property in QLD and there were existing tenants in place, everything was good and normal until on the settlement day I was told the tenant have arrears with the previous owner and the owner demand me to take over the debt as well.

I replied NO and the sale just flows through without much hassle.

NOW, the tenants has been short paying by over a month worth of rent and I've issued all the required notice and basically they must leave the premises now, HOWEVER, when my agent went to RTA and check on the bond status, RTA advise the agent that the bond has been finalized and it was BEFORE our contract settlement.

So my question now is, did the previous owner in breach of any of the contract laws or misleading conduct etc, as when I sign the contract I was believe that the bonds were there, when the owner finalized the bond with the tenant does that also means the tenancy contract has ended? if not should there be any correspondence confirming that the bond has been finalized but the original tenancy agreement still in place?

Further more, the owner did all this while we are in the period of exchanging contract and he have not advise either the solicitors or agent or myself. Can I take this matter further base on this act?

Any advise or ideas would be greatly appreciated.

Cheers,

Terrence

 

[wylie]

Sounds pretty dodgy to me. Give the Residential Tenancy Association a call. They are very helpful. Did you use a solicitor when you purchased?

 

[sumterrence]

Yea I've got a solicitor and now he is dealing it with the owner's solicitor and demanding for the bond money to be returned otherwise we will be reporting this to the police as a matter of theft. will see how it goes.

 

[RPI]

Hope you sort it out. It is rare and takes the right circumstances but does happen. It is very hard for solicitors to ensure it doesn't either, like a lot of things it is a trust issue and you can really only sort it when it is done.

 

[Scott No Mates]

Didn't the previous managing agent provide the transfer of bond form to the new managing agent?

Not a good position to be in.

 

[wylie]

I don't know if this is something a solicitor (or conveyancer) would even look for. I guess it would be pretty unusual for bond monies to be released during a tenancy. I was asking more from point of view that seeing you've paid them money to do your settlement, they may look favourably upon shooting off a quick letter to the vendor without charging you much, or at all. Seeing a solicitor letterhead may convince the vendor to fix this rather than get into trouble if it is taken further (assuming they did the wrong thing).

I think first call would be to the RTA to see if the vendor had any right to release bond monies prior to settlement. Could they face repurcussions?

 

[Ed Barton]

Seeing a solicitor letterhead may convince the vendor to fix this rather than get into trouble if it is taken further (assuming they did the wrong thing).

I'm amazed at how a lot of people will give in with a solicitors letter, like it's a judgement from the full bench of the high court!

 

[RPI]

I'm amazed at how a lot of people will give in with a solicitors letter, like it's a judgement from the full bench of the high court!

I see this first hand. It is amazing the different treatment different letterheads receive from some people. Even calling councils about planning matters, when I call wearing my town planning hat it is a lot less formal on the other end than when I wear my solicitors hat.

 

[cu@thetop]

I'm amazed at how a lot of people will give in with a solicitors letter, like it's a judgement from the full bench of the high court!

As a lawyer who does debt collection I'm amazed when someone does pay due to letterhead. A lot of the debtors know the ropes so now when I do a letter of demand I knock up draft pleadings to attach which shows the extra costs to be incurred. When they don't pay I go ahead and file and serve 'em.

 

[sumterrence]

I've called RTA regarding this issue, apparently it is not compulsory to hold bonds within a tenancy agreement as long as both party (landlord & tenant) agree to have the bond released.

However, from what I can understand, the Bond should belongs to the new landlord that is taking over the existing tenant, regardless of any dispute they had before, the previous owner should NOT release the bonds during an exchange of contract without notifying the buyer (myself) as it was part of the sale agreement.

Upon reading more from RTA website, the owner DO have the right to end the contract provided he have given the tenant enough notice and the tenant still remain in arrears, than the owner may ceased the contract as the tenants has breach the contract term and may claim the bond as a form of loss.

BUT, these were all done without any formal letters or communications and the owner just went and took the bond without anyone's knowledge so in my point of view this is purely theft and dis-honest during the sale of his property.

 

[DaveM]

Umm since the bond is the tenants money not the owner, how did the previous owner even get it? It would mean its gone back to the tenant.

 

[Morbius]

Umm since the bond is the tenants money not the owner, how did the previous owner even get it? It would mean its gone back to the tenant.

Sounds like the tenants must have colluded with the previous owner.

I'm glad I read this thread. Another risk to cover off if I ever buy with an existing tenant in place.

 

[Morbius]

However, from what I can understand, the Bond should belongs to the new landlord that is taking over the existing tenant, regardless of any dispute they had before, the previous owner should NOT release the bonds during an exchange of contract without notifying the buyer (myself) as it was part of the sale agreement.

I'd say this is your only hope. If the bond were released after contract and before settlement, I suspect you could argue it was a material change to the status of the property after signing of the contract. But the bond belongs to the tenant, not the landlord. It was never your property, so you may be in a bind. Unfortunately "should" may not be enough here. I would prefer "must".

 

[Salvatore1]

I am surprised that the tenant allowed his bond to be paid to the old owner. Sounds like the old owner, old managing agent that would of filled out the form and signed it and the tenant who agreed by signing the bond release or when he rec the letter from Fair trading allowed it to happen. The three had to be involved in the release (maybe due to your hard line)!!!! If this is the case then you would have the right to ask for a new bond from the tenant as required by his lease!!

 

[sumterrence]

Thanks for all the feedback guys, at the moment the previous owner's solicitor has been denying they have done anything wrong because the tenant were short paying the previous owner and the owner has the right to take the bond.

However, 6 days before settlement we have ask their solicitor if the RTA currently held a bond from the tenants and they confirmed it.

I suppose myself as a buyer would not expect the bond to be released few days before settlement, and I believe this is simply misleading from the solicitor.

I'm going to see if they reply to my solicitor's email today, if not I'm calling the police to get involve and going to lodge a formal complaint to the law society about the misleading information and what they did.

 

[sumterrence]

Umm since the bond is the tenants money not the owner, how did the previous owner even get it? It would mean its gone back to the tenant.

yea what happened was the previous owner took whatever the tenants owe him and he give the rest back to the tenant.......

 

[S.T]

How long until the tenant moves out? Why don't you work on what you can do first and get them out of the property and get a better tenant in, with a new lease and new bond.

How much short paying have they done? If it's only say $500, might be cheaper to write it off than pursue legal means of recovery.

Really, the bond is only of use to you if they've done some damage or have paid no rent at all for a month.

 

[sumterrence]

apparently the tenants owe me about $1.5k worth of rent, I was going to take the bond to recover the lose but than it open up all these can of worms.....

Further to that my agent is having difficulties to evict the tenants as the mother is always not at home and does not answer the phone or reply to texts....

I might need to go to QCAT for this matter.

 

[Lil Skater]

apparently the tenants owe me about $1.5k worth of rent, I was going to take the bond to recover the lose but than it open up all these can of worms.....

Further to that my agent is having difficulties to evict the tenants as the mother is always not at home and does not answer the phone or reply to texts....

I might need to go to QCAT for this matter.

Good luck!

I don't get why the PM is having trouble evicting them, wouldn't they just issue a notice to vacate, go to QCAT and be done with it? I don't get why it matter if they can get in touch or not.

I will admit I've never come across this issue in the past, I hope you have insurance and I hope your solicitor can get it sorted out quickly!

 

[zimby]

Have you notified your landlord Insurance company?, this may come into play if you need to make a claim.