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.
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:
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.
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.
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).
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 are legal in Ontario, as long as they are:
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.
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.
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.
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).
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.
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.
Sound like you?
Speed up the application process, reduce vacancy time, and more quickly sign paying, trustworthy tenants by signing up for Rhenti today.
Discover more property owner insight at Rhenti blog
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.