In Ontario, the rules around security deposits are strict and often misunderstood. Landlords can only collect a last month's rent deposit -- they cannot collect damage deposits, pet deposits, or key deposits beyond the actual replacement cost of the key. The last month's rent deposit must be applied to the final month of tenancy, and landlords must pay interest on it annually at the rate set by the provincial guideline. Any attempt to collect additional deposits is illegal under the Residential Tenancies Act.
Why It Matters
Many landlords from other provinces or countries are surprised to learn that damage deposits are illegal in Ontario. You cannot collect extra money upfront to cover potential damage -- your only protection is thorough tenant screening, detailed move-in documentation, and the ability to pursue damages through the LTB after the tenancy ends. Understanding this rule is essential for every Ontario landlord.
Real-World Example
You are renting out your first investment property -- a one-bedroom condo near Bloor and Islington. A prospective tenant offers to pay first and last month's rent plus a $500 damage deposit to secure the unit. Under Ontario law, you can collect the last month's rent deposit ($2,200 in this case) but you cannot collect the $500 damage deposit. It is illegal. If you accept the damage deposit anyway, the tenant can apply to the LTB to have it returned, and you could face penalties. Your only financial protection against damage is thorough screening, a detailed move-in condition report with photos, and the ability to pursue a claim at the LTB after the tenancy ends.
Ontario & GTA Context
Ontario's Residential Tenancies Act, Section 105, explicitly prohibits landlords from collecting any deposit other than a last month's rent deposit. Damage deposits, pet deposits, key deposits beyond the replacement cost of the key, and any other upfront charges are illegal. The landlord must pay annual interest on the last month's rent deposit at the provincial rent increase guideline rate. Landlords who collect illegal deposits can be ordered by the LTB to return them, and tenants can file a T1 application to recover improperly collected amounts.
How It Works in Practice
Do not collect anything beyond last month's rent and the actual cost of key replacement. Instead, protect yourself through thorough tenant screening and a detailed condition inspection at move-in with dated photographs. At move-out, compare the condition to your documentation. If the tenant caused damage beyond normal wear and tear, you can file an L10 application with the LTB to claim the costs after they leave.
Common Questions
Can a landlord collect a damage deposit in Ontario?▾
Can a landlord collect a pet deposit in Ontario?▾
What happens if a tenant causes damage and there is no damage deposit?▾
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