Last Month's Rent Deposit in Ontario: Rules, Limits, and Top-Up Requirements

A last-month rent deposit does not become a new charge each time a lease term ends. For Ontario tenancies covered by the RTA, its permitted amount follows lawful rent, while annual interest and any top-up must be accounted for together.

A continuing tenancy does not reset the deposit

The end of a fixed lease term does not by itself mean the tenant must move out or pay a second rent deposit. The LTB explains that a tenancy can continue monthly or weekly when a new fixed term is not agreed.

The existing deposit remains part of the tenancy record. A change of manager should begin with the balance and supporting records, not an assumption that a fresh full deposit is needed.

A top-up follows a lawful rent increase

Section 106(3) permits an additional payment to bring the rent deposit up to the statutory maximum when lawful rent increases. The maximum remains the lesser of one rental period and one month.

A renewal date alone does not determine the amount. The relevant figures are the lawful rent and the deposit already held. Any proposed rent increase must satisfy its own applicable rules.

Annual interest is a separate obligation

The landlord must pay interest annually on the rent deposit using the guideline rate in effect when payment becomes due. This is not determined by the bank account's return.

The RTA permits interest owed to be applied toward a lawful deposit shortfall. That accounting should be explicit: a landlord should not describe a full top-up as still owing while silently retaining the interest that could cover it.

Compare the two amounts

Consider a hypothetical $1,500 deposit with $30 of interest owing. If the permitted deposit has risen to $1,550, applying the $30 leaves a $20 shortfall. If the permitted deposit has not increased, there is no shortfall to absorb that interest under the top-up provision.

These figures illustrate the calculation only. The actual interest rate, dates, rent and balance need to come from the tenancy record.

The deposit still pays the final rent period

At termination, the deposit is applied to the last rent period. It cannot be repurposed for cleaning or damage, even if the tenant leaves the property in disputed condition.

A mid-period departure does not justify assuming a universal proration rule. The lawful termination date and rent liability need to be established before the final account can be calculated.

Explain the balance clearly

A useful statement separates rent payments, the deposit balance, interest owed, interest credited toward a top-up and any additional amount paid. Keeping these entries distinct helps both parties identify a disagreement.

The LTB's T1 instructions address unpaid rent-deposit interest and specified improperly collected amounts. For a dispute, use the current official instructions rather than treating a deposit statement as a final legal determination.

Devon Moore, Operations Lead Co-Founder & Operations Lead — D&D Property Management

Devon Moore is the co-founder and Operations Lead at D&D Property Management, managing rental properties across Kitchener-Waterloo, Cambridge, Guelph and Waterloo Region.