Security Deposits in Ontario: What Landlords Need to Know

Ontario's RTA does not allow a landlord to hold a damage deposit for an ordinary covered residential tenancy. A permitted rent deposit pays the final rent period; a refundable key deposit is a separate, limited exception.

Identify what the payment is for

A last-period rent deposit may be required on or before entering into the tenancy agreement. Its cap is the lesser of one rental period's rent and one month's rent. The payment cannot be reassigned to damage or cleaning when the tenant leaves.

Key, remote-entry-device and card deposits are separately permitted by Ontario Regulation 516/06. They must be refundable and no greater than expected direct replacement cost. Calling a larger general security payment a key deposit does not change its purpose.

These rules concern residential tenancies covered by the RTA. Commercial leases and exempt accommodation should not be treated as if they have the same deposit rules.

Correct the interest calculation

Interest on a rent deposit is payable annually at the rent-increase guideline rate in effect when the payment becomes due. The Bank of Canada policy rate is not the statutory benchmark.

Section 106 sets the rent-deposit and interest rules. Any separate trust-account duties need their own legal or professional basis.

When lawful rent rises, a permitted deposit top-up may be required. Interest owed can be credited toward the shortfall under section 106(7); the remaining figures should be shown rather than assuming interest and top-up always cancel each other.

Refunds and disputes need the correct route

A returned key deposit and application of a rent deposit are different transactions. The rent deposit goes toward the final rent period, while the refundable key deposit is returned when the keys or devices are returned.

The LTB's T1 application covers specified claims about money collected or retained improperly and unpaid deposit interest. The current instructions explain the available reasons and time limits. Keeping receipts and the deposit account helps explain the amount in dispute.

Administrative support can help organise those records, but a management service description is not a guarantee of legal compliance or a tribunal outcome.

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.