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

The name on a payment is less important than its purpose. Ontario residential rent deposits pay the final rent period, while refundable key deposits are limited to expected direct replacement cost. Neither is a general fund for damage or cleaning.

Separate the permitted payments

Under RTA section 106, a landlord may require a rent deposit on or before entering into the tenancy agreement. It cannot exceed the lesser of one rental period's rent and one month's rent.

Ontario Regulation 516/06 separately permits refundable deposits for keys, remote entry devices and cards, capped at their expected direct replacement cost. A blanket statement that key deposits are prohibited is therefore incorrect.

A charge for parking or another service is not automatically a refundable deposit. Its treatment depends on what the payment is for and the applicable tenancy terms and law; the deposit rules do not create a general permission to collect amenity deposits.

Follow the rent deposit through the tenancy

The deposit is held for the final rent period. Annual interest is owed at the guideline rate in effect when payment becomes due, even though the deposit is not being used for the current month's rent.

If lawful rent rises, the permitted deposit amount can rise with it. The RTA allows interest owed to be applied toward that shortfall. The statement should distinguish the interest credit from any additional money received.

At termination, applying the deposit to rent is different from withholding it for repairs. A condition report or cleaning invoice does not change that legal purpose.

Resolve key returns and other claims separately

When keys or devices are returned, the refundable key deposit should be returned. Missing items raise a direct-replacement-cost question, not a right to impose an unrelated penalty.

Pet, cleaning and damage deposits are not justified by concerns about how a tenant may use the unit. Any claim for actual tenant-caused damage requires its own basis and process; normal wear and tear is treated differently.

For money collected or retained improperly, the LTB provides T1 instructions explaining the relevant application reasons and limits. Clear receipts and separate rent/key records help identify what actually happened.

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.