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Rent, security deposits and interest

Region: Ontario Answer # 436

Most tenants are covered by the Residential Tenancies Act, which sets out the rights and obligations of residential landlords and tenants. If you are having trouble with your tenant or your landlord and would like help, ask a lawyer now.

Rent deposits and security deposits

In Ontario, it is permissible for landlords to ask new tenants to pay a deposit before they move in. This is technically a rent deposit, as opposed to a security deposit, and must be used to go towards the tenant’s last month’s rent.


Residential Tenancies Act

The Residential Tenancies Act (RTA) says the following regarding security and rent deposits:

A “security deposit” is defined as:  money, property or a right paid or given by, or on behalf of, a tenant of a rental unit to a landlord or to anyone on the landlord’s behalf to be held by or for the account of the landlord as security for the performance of an obligation or the payment of a liability of the tenant or to be returned to the tenant upon the happening of a condition.

105 (1) The only security deposit that a landlord may collect is a rent deposit.

Rent deposit may be required

106 (1) A landlord may require a tenant to pay a rent deposit with respect to a tenancy if the landlord does so on or before entering into the tenancy agreement.

Amount of rent deposit

(2) The amount of a rent deposit shall not be more than the lesser of the amount of rent for one rent period and the amount of rent for one month.

(3) If the lawful rent increases after a tenant has paid a rent deposit, the landlord may require the tenant to pay an additional amount to increase the rent deposit up to the amount permitted by subsection (2)

Landlords required to pay annual interest on last month’s rent

Since the landlord does not use the rent deposit until the end of the tenancy, the landlord is required to pay the tenant interest on the deposit. However, if a tenant rents a unit for only part of a year, the interest owing is proportionate to the length of time that the deposit was held by the landlord.

Although landlords are supposed to pay interest to tenants every 12 months, if they do not, the interest owing to the tenant is compounded each year. Interest is payable on the total rent amount being held by the landlord, including any subsequent increases in rent.

If tenants want to collect the interest owing, they may be able to subtract it from their rent if the landlord consents. If a landlord refuses to pay interest to a tenant, the tenant can apply to the Landlord and Tenant Board for an order requiring the landlord to pay, or for an abatement of rent.

Key deposits

It is legal for a landlord to charge a key deposit. This in included in section 9 of the Ontario Standard Lease. There are two requirements:

  • a key deposit is refundable at the end of the term (when the tenant returns the keys, the landlord must refund the deposit back to them); and
  • the deposit cannot exceed the expected cost of replacing the keys.

For additional information about security deposits, rent deposits and interest, visit the Landlord and Tenant Board.

Help for Tenants

A criminal record will affect your ability to be approved for a residential lease. To erase your criminal record, learn more at Pardon Partners. It’s easier than you think.

If you are having financial problems, it may be difficult to rent an apartment or condominium. You can get help to clear your debt and repair your credit. For easy-to-understand debt solutions on your terms, contact our preferred experts 4Pillars and rebuild your financial future. With 60 locations across Canada, they will help you design a debt repayment plan and guide you with compassionate advice. No judgment. For help, visit 4Pillars or call toll-free 1-844-888-0442 .

If you are a Tenant, you can add your monthly rent payment to your credit report using FrontLobby. This can:

  • Contribute to improving your credit score (Renters have reported 33pts to 84pts jumps)
  • Help establish a positive credit history with a new rent tradeline
  • Improve your access to credit related rewards (better bank loans, credit cards, mortgage rates)

Help for Landlords & Property Managers

For legal advice and assistance with a residential tenancy and applications to the Landlord and Tenant Board, contact our preferred Landlord and Tenant experts Nicola (Nick) Giannantonio Legal Services .

If you are a Landlord or Property Manager, you can report rent payments to Credit Bureaus and screen Tenants using FrontLobby. This can:

  • Attract financially responsible applicants interested in building credit with their rent
  • Decrease rent delinquencies (Landlords have reported 92% reductions) and recover unpaid rent
  • Reduce Tenant turnover and improve monthly cash flow

Get legal help

If you are having trouble with your tenant or your landlord and would like help, ask a lawyer now.

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