Security Deposits in Ontario: What Landlords and Tenants Must Know

Ontario's Strict Rules on Deposits

Ontario has some of the strictest rules in Canada governing what landlords can collect from tenants. Many landlords and tenants are unaware of these rules, leading to disputes that could easily be avoided.

What Landlords Can Collect

Under the Residential Tenancies Act, 2006, Ontario landlords are permitted to collect only one type of deposit: a last month's rent deposit. This deposit must be applied to the last rental period of the tenancy — it cannot be kept as a security deposit against damage. The maximum amount is exactly one month's rent.

What Landlords Cannot Collect

• Security deposits: Money held in case of damage is illegal in Ontario.
• Pet deposits: Landlords cannot require a pet deposit, even if they allow pets.
• Key deposits: Landlords cannot charge for keys or fobs beyond the actual replacement cost.

Interest on Last Month's Rent Deposits

Landlords must pay interest on a last month's rent deposit annually, at the rate equal to the annual rent increase guideline for that year. The landlord typically applies this interest to top up the deposit to reflect allowable rent increases.

What If You Paid an Illegal Deposit?

File a T1 application with the LTB requesting its return. The LTB can order the landlord to repay the illegal deposit.

Landlords Cannot Deduct Damage from the Last Month's Deposit

The last month's rent deposit must be applied to the last month's rent — period. The landlord cannot deduct damage costs from it. To recover damage costs, the landlord must file an L10 application with the LTB or sue in small claims court.