Security Deposits and Last Month's Rent in Ontario: What Landlords Can Collect

Ontario's rules on deposits are specific and often misunderstood. Here's a clear explanation.

Property Management in Ontario

Ontario's Residential Tenancies Act has specific rules about what landlords can and cannot collect as security. Understanding these rules prevents illegal practices that create liability and LTB applications.

Last month's rent (LMR) deposit is the only deposit permitted under Ontario law. Landlords cannot collect a damage deposit, key deposit, pet deposit, or any other deposit beyond LMR. This is a commonly violated provision — landlords who collect damage deposits are in violation.

Key Responsibilities and Best Practices

LMR deposit must be applied to the last month of tenancy. It is not a damage deposit, though landlords sometimes attempt to treat it as one. Misapplying LMR deposit to cover damages is an RTA violation.

Interest on LMR deposits must be credited annually to the tenant (or applied against rent). The interest rate equals the rent increase guideline for that year. Landlords who fail to credit interest are in violation.

How D&D Property Management Helps

Key deposit for keys, access fobs, or garage door openers can be collected but must be refunded when keys are returned. The amount collected must be refundable — it cannot be treated as additional rent or a non-refundable fee.

Move-in charges for parking spaces, lockers, or other amenities are governed by the same deposit rules. Deposits for these items must be refundable; non-refundable fees for these items are not permitted.

Compliance with deposit rules is straightforward when understood. The core rule is simple: last month's rent only, credited with interest annually, applied to the last month of tenancy.

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.