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Last Month's Rent Deposit

Version 1.00 written March 31, 2007

Amount of a Rental Deposit

A landlord can demand a last month's rent deposit on or before the landlord and tenant enter into the tenancy agreement. The rent deposit is to be for one month's rent or the rent for one rental period, whichever is less.

It is illegal for a landlord to demand or to collect a rent deposit of more than one month, or if it is less, then one rental period, (ie. if you pay weekly, then they can only collect one week's deposit.

The rent deposit must be used for the rent for the last month before the tenancy ends. It is a violation of the law to use it for anything else, such as to pay for damages.

If the rent increases after a tenant has paid a rent deposit, the landlord can ask the tenant to pay an additional amount towards the rent deposit to bring it up to the smame amount as the new rent.

It is important to get receipts for all deposits as proof of payment, including key deposits. While the legal onus is on the landlord, when a new landlord purchases a property, it is very common for some to claim they never received any deposits from the previous owner and try to get the tenants to pay the deposits all over again; Don't, you don't have to. It is the problem of the new landlord to collect these deposits paid from the previous landlord, or to somehow provide proof you never paid them when you moved in.

Interest owed to the tenant on the Last Month's Rent Deposit

The landlord must pay tenants interest on the rent deposit every 12 months. The amount a landlord must pay is the same as the rent increase guideline that is in effect when the interest payment is due under section 106, Interest owed on rent deposits. Click here for the annual rent increase guideline amount.

For the transition year, the first year of the new Act, the amount is instead calculated, based upon simple interest for each of the following months:
January 2007 - 0.5% (6% annual amount divided by 12 months);
February through December 2007 - 0.2167% each month (2.6% guideline divided by 12 months).

Landlords are now permitted to deduct from the interest payment any amount needed to legally raise the rent deposit to the amount permitted under the Act.

If the landlord does not pay the interest owed on the last month's rental deposit to the tenant when it is due, the tenant can deduct the interest from a future rent payment or file an application for a rebate with the Landlord and Tenant Board.

What other deposits are permissable?

A landlord can ask for a deposit on keys or pass cards but the amount must be refunded with the return of the keys or pass cards at the end of the tenancy, and can not exceed the expected costs of replacing the keys or pass cards.

If a tenant's cheque is returned for Non-Sufficient Funds, (NSF), a landlord can ask the tenant to pay for the charges the landlord has to pay to the bank, plus an administrative charge of up to $20.00.

Illegal deposits

It is a violation of the law for a landlord to demand or collect a "damage deposit" to cover any possible future damages done to a rental unit.

It is also illegal to have a locker deposit, for a building storage locker, though a refundable key deposit can be asked for though not for more than the replacement cost of the key.

Violations of the Law

Under section 234, Other Offenses, it is a violation of the Act not to pay interest on last month's rent deposit or to charge illegal fees.

And under section 238, Penalties, violations of the Residential Tenancies Act, are punishable by fines of up to $25,000 for each individual, and up to $100,000 for corporations.

If a landlord is breaking the law, you should first verify this by contacting the customer service line of the Landlord and Tenant Board at 416-645-8080 or outside of the 416 calling area, toll free at 1-888-332-3234. If they agree the landlord is breaking the law, then you should inform the landlord of that in writing and keep a copy for your records. And if the landlord will still not comply, then contact the Investigation and Enforcement Unit, (IEU,) of the Ontario Ministry of Municipal Affairs and Housing at 416-585-7214, or outside of the 416 calling area, toll free at 1-888-772-9277, and follow this up with a letter to them with a copy of your letter to the landlord.

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