Supreme Court Finds ZeroBonds Product Would Offend Residential Tenancy Laws

Renters in New South Wales have been handed yet another major win after the Supreme Court ruled a product designed to replace traditional rental bonds does not comply with the State’s tenancy laws.

Last month the Court dismissed an application by ZeroBonds, a company offering an alternative to upfront rental bonds, and confirmed its Bond Replacement Product and Bond Reversal Product were not in line with the Residential Tenancies Act 2010.

It found the company’s model, which requires tenants to make a non-refundable payment instead of a bond, violates legislated protection for renters from unauthorised fees under the Act.

Additionally, ZeroBonds’ Bond Reversal Product which allows tenants to retrieve their bond before the end of a lease while the company provides a guarantee to landlords, was also found to possibly be in breach of rental laws by charging tenants in a way not permitted under the Act.

Residential bonds are not mandatory, but if one is collected, it must be lodged with the NSW Rental Bond Board, which is fee-free and provides protections under the Residential Tenancies Act.

NSW Fair Trading raised concerns about ZeroBonds’ model in 2024 and warned the company its approach to rental bonds did not comply with the law.

A dedicated $8.4 million Rental Taskforce has since been established within NSW Fair Trading to investigate and act on breaches of tenancy laws, including failures to lodge bonds and the misappropriation of funds.

Renters and landlords should be cautious when considering products related to rental bonds. While bond loan products – which allow tenants to borrow funds to pay a bond – are legal, they come with fees and interest charges which can increase costs over time.

In contrast, bond replacement schemes such as Zerobonds’ which require payments beyond what is permitted under the Residential Tenancies Act, are not permitted.

The NSW Government is implementing a Portable Rental Bond Scheme which will allow tenants to transfer their bond between properties without having to pay a new bond upfront, providing further cost-of-living relief for renters.

Those facing significant financial difficulties paying for their bond up front may be eligible for the Rentstart Bond Loan scheme, which offers interest fee loans to support tenants who need it.

Visit the rental bonds online page for more information: https://www.nsw.gov.au/housing-and-construction/renting-a-place-to-live/residential-rental-bonds/rental-bonds-online-for-tenants.

Quotes to be attributed to NSW Rental Commissioner, Trina Jones

“Rental bond processes should be fair, transparent and lawful so we welcome this decision which is a win for tenants who won’t be burdened with unnecessary and unlawful fees.”

“This ruling makes it clear companies cannot sidestep tenancy laws with financial products which ultimately do not comply with the law.”

“The Rental Taskforce within NSW Fair Trading is focused on protecting tenants and ensuring compliance with rental laws, including taking action against unlawful fees and misappropriation of funds.”

“In 2024, NSW Fair Trading wrote to ZeroBonds raising concerns its product did not comply with the Residential Tenancies Act 2010.”

“NSW Fair Trading considers payments of both a non-refundable application fee and a percentage of the bond, as offered by ZeroBonds, are not compliant with the law.”

“The Supreme Court’s judgment has reinforced that these types of products must comply with NSW tenancy laws to ensure renters are not subjected to unlawful fees.”