Startup Snug to launch surety bond to unlock renters’ bond cash
Rental community platform startup, Snug.com, is set to launch a surety bond which it says will free up renters’ cash while also providing protection to landlords.
The surety bond, BondCover, swaps the traditional cash rental bond with a certificate of guarantee, backed by Snug.
This guarantees that the owner will be paid for a valid claim against the rental bond using the same claims process, rights, and obligations for renters and owners – but without tying up thousands in cash.
Owner claims are paid within two business days by entering the Tribunal order number.
Snug says its product is designed to free up $4 billion worth of rental bonds.
Snug founder said that the current cash bond system is outdated, and the “resulting liquidity and opportunity cost for renters is astronomical”.
“With 2.5 million renters across Australia, it’s time to recognise good renting,” he said.
“BondCover provides the necessary protection to owners, but in a way that doesn’t lock down renters’ precious cash for no good reason – a win-win for all parties. And imagine the returns if renters had invested $4 billion in the Sydney property market, paid off debt, or invested in Amazon shares over the past 5 years instead!”
Renters can purchase BondCover for around 5 per cent of the face value of the rental bond, and are provided with a certificate of guarantee to give the owner or agent to replace a cash bond. So, a current renter with a $2,000 bond could obtain BondCover for around $100 per annum, and receive $1,900 in cash back.
Snug will open BondCover applications to renters on September 1.
BondCover was conceived after Snug research found that 99 per cent of renters do the right thing: around 80 per cent of rental bonds are refunded without claim, and almost all of the remaining 20 per cent is largely negotiated then resolved between parties.
In building its platform, Snug conducted legal and actuarial research, and engaged with state governments.
Its focus group research on hundreds of renters found that renters are most concerned about their rental reputation and ability to rent their next property, driving their good behaviour.
“Snug’s BondCover product has been designed to comply with existing rental tenancy legislation and relevant financial services and insurance regulations. This is digital innovation in housing, that’s good news for affordability, and it’s a stimulus to the economy with strong consumer benefits,” continued Justin Butterworth.
“The world has changed since the cash bond system was designed. It’s 2017, we have the technology to better manage identity, reputation, and recourse to create a more efficient securitised rental bond system. The days of the cash bond are over,” concluded Justin Butterworth.
Snug was one of the first startups to be housed in IAG’s onsite accelerator, Firemark Labs.
