For an Ontario residential tenancy covered by the RTA, a rent deposit pays the final rent period. It is capped at the lesser of one rental period's rent and one month's rent, and it cannot be used for damage or cleaning.
Start with the purpose of each payment
A first rent payment covers its stated period. A last-period rent deposit is held for the end of the tenancy. A refundable key deposit is a different permitted payment, limited to expected direct replacement cost under Ontario Regulation 516/06.
Keeping those purposes distinct prevents a general security payment from being disguised as something else. A lease label does not make a prohibited damage, cleaning or pet deposit lawful.
Collect and account for the rent deposit
The RTA allows a landlord to require a rent deposit on or before entering into the tenancy agreement. A weekly tenant's cap is one week's rent, while a monthly tenant's cap is one month's rent.
The landlord owes annual interest at the guideline rate in effect when payment becomes due. If lawful rent rises, the permitted deposit can increase; interest owed may be applied toward that shortfall. Receipts and credits should identify what was paid and why.
At move-out, rent and damage remain separate
The deposit must be used for the final rent period. Damage claims are not deductions from that deposit. The LTB distinguishes damage caused wilfully or negligently from normal wear and tear, and provides separate application routes for compensation claims.
An eviction notice, an LTB order and enforcement are different stages. There is no universal rule requiring a new 60-day notice after every successful eviction order. Deposit administration should not be mixed with a generic eviction timeline.
Questions about collection and interest
Can the rent deposit cover cleaning?
No. It pays the final rent period and cannot be used for cleaning or damage.
Can a landlord collect a key deposit?
Yes, a refundable key or access-device deposit is permitted within the expected direct replacement-cost limit.
Which rate determines annual deposit interest?
The rent-increase guideline in effect when the interest payment becomes due, not the Bank of Canada rate.
Does a lease renewal require another full deposit?
A continuing tenancy does not itself create a new full-deposit requirement. A permitted top-up depends on lawful rent and the amount already held.
Questions about the final account
Can an inspection authorise damage deductions?
No. An inspection can record condition, but it does not change the legal purpose of the rent deposit.
What happens when the keys are returned?
The refundable key deposit should be returned. Keep this transaction separate from applying the rent deposit.
Where are unpaid interest disputes addressed?
The LTB's T1 instructions include a reason for unpaid rent-deposit interest and explain the application requirements.
Does this guide cover every rental arrangement?
No. It addresses residential tenancies covered by the RTA. Commercial leases and exempt accommodation need separate consideration.
Key Takeaways
- The rent deposit pays the final rent period; it is not a damage fund.
- A refundable key deposit has a separate expected replacement-cost limit.
- Keep interest, rent application and any separate compensation claim distinct.
Sources & References
- RTA sections 105–109: rent deposits, interest and receipts
- Ontario Regulation 516/06, section 17: key deposits and permitted charges
- LTB guide: deposit use and damage versus normal wear
- LTB T1 instructions: improperly collected money and deposit interest
Checked 7 September 2026. General information for residential tenancies covered by the RTA; individual disputes depend on their facts and applicable rules.
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