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  • In a lettings context, bonds are used as an alternative to a money deposit.
  • The word bond indicates "binding" - in this instance a binding agreement between a local authority (LA / City Council) and a landlord.
  • Whilst a money deposit would be preferred by a landlord the bond offers a compromise.
  • A government protected bond obviates the requirement for mainly social housing tenants and those on low incomes to fund a deposit.
  • In the event of non payment of rent a landlord can invoke the terms of a bond to recover non payment of rent.
  • A bond is primarily aimed at protecting rent and is less likely to provide protection of damage to property.  In any event a ceiling is set to limit government exposure to excessive loss.
  • Vulnerable prospective tenants include: benefit recipients, the young or elderly all with insufficient funds to pay a money deposit.  They can instead approach LAs and request bond assistance.
  • The LA or Local Council will not pay any money unless retrospectively the tenant fails to pay.  The tenant will be required to repay the loss suffered by the Council.  The landlord will be reimbursed for any loss covered by the terms of the bond.  The bond invariably includes numerous exceptions to avoid expose to both abuse and excessive claims.
  • Without a bond many prospective tenants would be homeless.
  • When drafting a contract for a tenant entitled to rely on a bond the normal requirement for a deposit can be either waived or  simply entered as a value of £0 or £zero.
Published: 21 October 2013 Last Updated: 17 November 2021