Understanding Ontario’s Laws on Last Month’s Rent and Deposits

Ontario landlord-tenant laws prohibit landlords from charging tenants a security deposit. However, landlords can request a last month’s deposit, which is a sum of money that renters put down to be used towards their final month’s rent. It’s important to note that a rent deposit is different from a security deposit. A security deposit acts as a safety net for landlords against financial liabilities that may be caused by tenant negligence and is kept for the entirety of the lease. At the end of the lease, the landlord can either partially or fully return it.

Ontario tenancy laws outline how landlords should collect and handle a tenant’s rent deposit. Here is a basic overview of Ontario’s rent deposit laws.

Limit of Last Month’s Rent Deposit Ontario landlords is limited in the amount of rent deposit they can charge their tenants. The specific limit depends on the type of rental agreement being operated. For weekly rental agreements, the rent deposit should not exceed the rent for one week. For monthly agreements, the deposit should not exceed the rent for one month.

Purpose of Last Month’s Rent Deposit A rent deposit serves the essential purpose of holding the unit down for the tenant for a specific period of time. During this time, landlords cannot rent the unit to another tenant. If the tenant fails to move in within the specified period, the landlord can retain the entire deposit. However, if the tenant moves in, the deposit must be returned to the tenant.

Increase of Last Month’s Rent Deposit Ontario landlords can increase the last month’s rent deposit if they choose to raise the rent. However, the last month’s rent should be the same amount as the rent charged to the tenant. Once the one-year period is up, the landlord can decide to increase the rent according to the Ontario Landlord-Tenant Board rate for that year.

Interest on Rent Deposit Rent deposits can accrue interest, and landlords must pay their tenants any interest earned annually. Failure to do so will result in compounded interest payable to the tenant. The amount of interest payable to a tenant is based on the amount of rent held by the landlord, as per the Residential Tenancies Act. If the tenant wishes to collect it, the landlord can subtract it from their rent, but their consent is necessary.

Pet Deposits Ontario landlords are not allowed to charge a pet deposit.

Key Deposits Ontario landlords can charge a refundable key deposit, provided that the deposit is refundable at the end of the lease term. Once the tenant returns the keys, the landlord must refund the deposit back to the tenant.

Damage Deposits Ontario landlords cannot collect a damage deposit as they cannot mitigate their risks by requiring tenants to pay a damage deposit. Therefore, thorough tenant screening is essential to avoid potentially problematic tenants. The screening process should comply with Ontario’s anti-discrimination and anti-harassment policies.

The Bottom Line Ontario landlords cannot charge a security deposit. They can only collect a last month’s rent deposit and a refundable key deposit (if they choose). This overview of Ontario’s rent deposit laws should help landlords understand their rights and obligations. For more information, landlords should contact a professional legal advisor.

Disclaimer: Please note that this blog does not serve as a replacement for professional legal advice. Additionally, it’s important to remember that laws may change over time, and the information in this post may not be up-to-date at the time of your reading.