Everything you need to know about rent deposits
Rent deposits in Ontario are legal, but timing is essential. A landlord can only ask a tenant for a rent deposit in Ontario on the day they enter into a rental agreement with a tenant, or the day before the agreement is signed. We break down how deposits work, rent deposit rules, and how Rhenti can help you easily collect rent deposits.
Rhenti's tenant screening software, rent deposit collection feature, and rental marketing automation makes it easy for you to find the right-fit renter.
What are rent deposits for?
Rental deposits are not to be used as damage/security deposits and must be applied to last month’s rent at the end of a person’s tenancy.
People often refer to deposits as first and last month’s rent, but first month’s rent must immediately be used to pay for the tenant’s first month of living in the rental, and not held onto as part of the deposit.
Good to know:
If a tenant break’s their lease early, the deposit should be applied to their last month of living at the rental.
If a tenant pays a deposit and then changes their mind about signing the lease, the deposit money must be returned to them.
Can landlords use the rent deposit as a damage deposit/security deposit?
No – damage deposits/security deposits in Ontario are illegal. If a tenant damages something and a landlord wants them to pay to replace or fix it, the landlord must ask them for the money, separately from the deposit.
How much should a landlord charge for a rent deposit?
A rental deposit can’t exceed the cost of one month’s rent or the cost of a rental period. For example, if rent is paid on a weekly basis the deposit cannot be more than a week’s rent.
Do landlords have to pay interest on rent deposits?
Landlords are legally obligated to pay rent deposit interest – the logic being that as they increase rent every year, they need to top up the rent deposit to ensure it covers last month’s rent. The interest must be in line with the rental guideline increases for that year. For 2023, the rent guideline for increases is 2.5%, so this means landlords have to top up the deposit by 2.5%. They can also give that money to the tenant directly. To stay up to date on the current rent increase guidelines check out our blog post here.
Are there other types of deposits?
Landlords are permitted to collect key deposits in Ontario. This is to replace lost or damaged keys. The deposit must be reasonable, just covering the cost of the replacement.
Pet deposits are not legal in Ontario.
Rhenti can help you with rent deposits using our fast deposits feature
What is this fast deposits feature?
Fast Deposits is a new Rhenti-exclusive feature that helps you request and receive an applicant's deposit payment within 5 minutes - with just a few clicks! Our rent deposit collection software makes the process secure and seamless.
Why does this feature exist?
Experienced property owners know that receiving a deposit quickly can help them determine if the applicant is the right renter-fit for their vacant rental unit. With Rhenti's new Fast Deposits feature, property owners can now request a deposit - with just a few clicks - from a promising applicant and receive the funds in their bank account within 5 minutes.
Who is this rent deposit feature for?
- Property owners who want to qualify an applicant by verifying they have the financial means to lease their rental property - even before the lease is signed. (Deposits are refundable to the applicant if it doesn't work out)
- Property owners who already have a signed lease agreement and want to 'seal the deal' by receiving the applicant's deposit as quickly as possible, with no manual effort.
In addition to fast deposits, Rhenti's digital toolbox and marketing includes rental listing marketing, detailed applications, tenant credit checks, references, and customizable digital lease agreements. The entire rental process is made so easy with our digital tools for renting.
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The blog posts on this website are for the purpose of general introductory information. They can’t serve as an opinion or professional advice. Speak to a professional before making decisions related to your circumstances.