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.