Key Deposits Explained

What Is a Key Deposit

A key deposit is a refundable amount that a landlord collects from a tenant to cover the cost of replacing keys, access cards, or remote entry devices if they are not returned at the end of the tenancy. It is one of the few deposits that Ontario landlords are legally permitted to collect under the Residential Tenancies Act (RTA).

How Much Can You Charge

The key deposit cannot exceed the actual replacement cost of the keys or access devices. This is a strict rule. You cannot inflate the key deposit to serve as a de facto security deposit or damage deposit. The amount must be directly tied to what it would cost to replace the items if the tenant does not return them.

For a standard house key, the replacement cost might be a few dollars. For a condo building with electronic fobs or access cards, the cost could range from $50 to $200 or more per device, depending on the building. Keep documentation of the replacement cost, such as a quote from your building's management company, in case the amount is ever questioned.

When to Refund the Key Deposit

You must refund the key deposit when the tenant returns all keys and access devices at the end of the tenancy. If the tenant returns all items, the full deposit must be returned. You cannot withhold the key deposit for any other reason, such as property damage or unpaid rent.

If the tenant does not return the keys or access devices, you may keep the key deposit to cover the cost of replacement. If the actual replacement cost is less than the deposit collected, you must refund the difference.

Recording the Key Deposit in Your Lease

The Ontario Standard Lease includes a dedicated section (Section 8) for recording key deposit details. Fill in the amount collected, the number and type of keys or devices provided, and the conditions for refund. This creates a clear record that both parties agree to at the start of the tenancy.

If you are providing multiple keys or access devices, list each one with its individual replacement cost. For example, you might note two unit keys at $5 each and one electronic fob at $100, for a total key deposit of $110. This level of detail prevents disputes at the end of the tenancy.

Common Mistakes

• Charging a key deposit that exceeds the actual replacement cost
• Treating the key deposit as a damage deposit or security deposit
• Refusing to refund the deposit when all keys are returned
• Failing to document the number and type of keys provided
• Not recording the key deposit in the Standard Lease

Key deposits are simple in principle, but getting them wrong can lead to a complaint at the Landlord and Tenant Board. Follow the rules, document everything, and refund promptly when keys are returned. It is a small detail that reflects how professionally you manage your rental property. For more landlord resources, visit The Rental Market.