A Landlord's Guide to Rental Deposits in Ontario

Collecting rent deposits in Ontario is different than in other parts of the country. If you haven’t already, familiarizing yourself with the rules of the province will make your life as a landlord (and the lives of your tenants) much easier.

With that said, keep reading to learn what rental deposits are, how they differ from other types of deposits, how much to ask for in a deposit, and the tools all landlords can use to collect and manage rental deposits as smoothly as possible.  

Rhenti's tenant screening software, rent deposit collection feature, and rental marketing automation makes it easy for you to find the right-fit renter.

Types of deposits in Ontario

The word “deposit” gets thrown around a lot when renting. Let’s first clear up the different kinds of deposits, what they refer to, and their legality:

1. Rent deposits: Also known as first and last, rent deposits refer to a tenant paying the equivalent of first and last month’s rent on or before moving into a place. These funds are to be used by the landlord to cover rent, nothing else. 

2. Key deposits: Key deposits are funds sent to a landlord to cover the cost of lost or damaged keys. These funds are used only in the event that keys need to be replaced; they must be returned at the end of the tenancy if replacement wasn’t needed. Tenants are also entitled to receipts to make sure that the key deposit amount makes sense for how much it costs to replace them. 

3. Damage deposits: Damage deposits aren’t legally enforceable at the time of signing a lease. In the case that damage does occur to your unit during the tenancy, you’re required to go through the Landlord and Tenant Board to seek payment.

4. Pet deposits: Deposits related to the potential cost of owning a pet in a rental unit are not legal in Ontario. 

Is requiring first and last month’s rent legal in Ontario?

Collecting first and last month’s rent in Ontario is perfectly legal, as long as you use these funds towards paying first and last month’s rent. This means the first month of their tenancy is covered, as well as their last month (they’ll only be required to pay rent for the second last month).

Security deposits, legal or not in Ontario?

No, security deposits (damage deposits as they’re also known) are illegal in Ontario. If a tenant damages something and you want them to pay to replace or fix it, you must ask them for money that is separate from their rental deposit.

Key deposits, legal or not in Ontario?

Key deposits are legal in Ontario, as long as they are:

• Priced realistically (no more than what’s required to cover the cost of replacing the keys)
• Refundable

If a tenant needs to get their keys replaced, you’re not required to refund their key deposit. But if they return their keys in working order, you’re required to return their deposit. 

Damage deposits, legal or not in Ontario?

Ontario landlords cannot legally collect damage deposits at the beginning of the tenancy. Rent deposits and key deposits are the only permitted form of deposit in the province.

Rhenti's tenant screening software, rent deposit collection feature, and rental marketing automation make it easy for you to find the right-fit renter.

If damages to the unit or building occur during your tenancy, the landlord is required to go through the Landlord and Tenant Board to seek payment. In this instance, an adjudicator will determine how much is owed.

How much should a landlord charge for a rent deposit?

Although the term “first and last” often gets associated with rental deposits, the main purpose of a rental deposit is to cover just one month of rent, last month’s (first is assumed). 

With this in mind, a rental deposit in Ontario 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?

In Ontario, landlords are legally obligated to pay rent deposit interest in line with the rental guideline increases for that year. 

For example, 2.5% is the maximum you can increase rent in 2023. This means you have to top up the deposit by 2.5% (you can also give this money to the tenant directly).

Are rent deposits refundable in Ontario?

In Ontario, rent deposits are refundable. No matter what, they must always either be returned to the tenant in full, or used to pay for the final month’s rent; you can’t withhold a rent deposit to cover damage, cleaning, or anything else. 

Even in cases where a tenant breaks their lease early, the deposit should be applied to their last month of living at the rental. The same goes for if a tenant pays a deposit and then changes their mind about signing the lease: the deposit money must still be returned to them.

Learn more about landlord responsibilities in Ontario. 

The easier way to manage rental deposits

As you can see, rental deposits aren’t so cut and dry—at least without the right help. 

Fast Deposits by Rhenti is an exclusive feature that helps you request and receive an applicant's deposit payment in under five 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.

Sound like you? 

Speed up the application process, reduce vacancy time, and more quickly sign paying, trustworthy tenants by signing up for Rhenti today.

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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.