Your first stop for self-help is a review of our FAQs. Take a look at the ever increasing collection of questions asked by Ontario’s small-scale landlords as well as the actual answers provided by Landlord’s Self-Help Centre.
A landlord is allowed to collect a key deposit from their tenant at the beginning of the tenancy. The amount of the deposit cannot exceed the cost of replacing the key and/or fob. At the end of the tenancy, the landlord is required to return the deposit once they receive the keys back.
The last month’s rent deposit is collected on or before the beginning of the tenancy and is kept until the end of the tenancy. It can only be applied for the last month the tenant is in the rental unit. When the tenant gives notice to move out, the deposit is then applied to cover the last month’s rent, so no payment is required for that month. Landlords must pay interest on the deposit collected each year, the interest rate is the same as the rent increase guideline. Visit https://www.ontario.ca/page/residential-rent-increases to learn more about interest rates on the last month’s rent deposit.
Landlords and tenants are able to mutually agree to the timing of these payments, however landlords should not provide keys or access to the rental until they have received the deposit, first month’s rent and have signed the lease agreement.
Last month’s rent deposit can only be used for the final month of a tenancy and cannot legally be applied to any earlier month, even if the tenant is short or is unable to pay. This means, if a tenant failed to pay rent for a particular month, this is to be treated as rent arrears, which allows the landlord to follow the normal non-payment process of issuing an N4 and filing an L1 application with the Board.
Under the Residential tenancies Act, a landlord may require last month’s rent deposit before the tenancy begins. Once the tenant takes possession of the unit, the law provides no way to enforce payment of the deposit during the tenancy, since, technically, the last month’s rent has not yet become due and therefore cannot be collected via an arrear’s application. At this point, the Landlord may only obtain the deposit with the Tenant’s cooperation.
Under the Residential Tenancies Act a landlord is allowed to collect the last month’s rent as a rent deposit. Landlords cannot charge damage deposits, even where they are refundable.
Under the Residential Tenancies Act it is illegal to collect a damage deposit, you can only ask for the last month’s rent deposit. In the case of a seasonal rental, those properties are exempt from the Residential Tenancies Act therefore we cannot provide advice on rules regarding deposits for those type of rentals.
There is nothing wrong with giving the deposit back to the tenant on the 31st when they’re moving out. However, the deposit is only supposed to be used for the rent for the last month, if you find damages, you would have to file a claim with the LTB. As of September 1, 2021, landlords can file an application for damages with the LTB within one year from the date the tenant is no longer in possession of the rental unit. The tenant must have moved out of the rental unit on or after September 1, 2021.
Perhaps it would be helpful if I explained the wording of our rental application in the context of contract law in general, rather than only specifically as it relates to a rental agreement. In Ontario, according to the Residential Tenancies Act, a “tenancy agreement” means a written, oral or implied agreement between a tenant and a landlord for occupancy of a rental unit and includes a licence to occupy a rental unit.” For there to be any kind of contract, there has to exist an offer, acceptance, AND consideration paid in order to “seal the deal,” so to speak. Because the landlord is in a somewhat vulnerable position when offering their rental premises to multiple applicants, it is the usual and accepted practice of asking for a rental deposit (usually part or all of the last month’s rent) from an applicant when the application is made as a way to screen out applicants who are not really serious about moving into the unit if they are accepted. If a landlord is sorting through, for example, three applications for the same unit, they would ask for three deposits along with the three corresponding rental applications. Once a selection has been made, the landlord would return the deposit money to the unsuccessful applicants when they are told they were not successful. The landlord would keep the remaining deposit and apply it to the last month’s rent account for the new tenant. At this point, it is usual (but not required) for the landlord to enter into a lease or written tenancy agreement. Decisions made both at the Landlord and Tenant Board, and Divisional Court generally support a landlord’s position that if the tenant is not taking the unit after being accepted and paying something to the landlord, as long as the landlord is making reasonable efforts to re-rent the unit (Section 16- mitigating losses), then the (usually) last month’s rent amount may be used on a daily rent basis until the unit is re-rented, and the landlord must then return the balance to the tenant, and deduct any reasonable out-of-pocket costs incurred in the re-rental of the unit. However, landlords cannot keep this amount outright as a blanket penalty or fee. In short, this clause appears in some form or other in most residential tenancies as a deterrent against applicants entering into contracts that they have no intention of fulfilling. If it were otherwise, then landlords would likely have to have several months’ worth of rent in reserve to allow for tenants changing their minds on a whim and forcing the landlord into long periods of time where they get no rental income between tenants.