Rent Deposits in Ontario: What a Landlord Can Collect

You can collect a rent deposit and a refundable key deposit. Nothing else. Ontario has no damage deposit. The Residential Tenancies Act, 2006 says the only security deposit a landlord may collect is a rent deposit, which people often call last month's rent.

Three rules shape the rent deposit:

• You must ask for it on or before the day you enter the tenancy agreement.
• It cannot be more than the lesser of the rent for one rent period and the rent for one month. With monthly rent, that is one month. With weekly rent, it is one week.
• If the lawful rent goes up later, you can ask the tenant to top the deposit up to the new limit.

The key deposit is a separate, narrow exception. It must be refundable, and it cannot be more than the expected direct replacement cost of the keys, remote entry devices or cards. A tenant who is charged any other deposit can apply to the LTB to get that money back. The tenant-side version of these rules is in our guide to the security deposit in Ontario.

Taking a deposit that the Act does not allow is a provincial offence. Fines go up to $100,000 for an individual and $500,000 for a corporation, and the Rental Housing Enforcement Unit handles enforcement.

You owe the tenant interest on the rent deposit every year. The rate is the same as the rent increase guideline that is in effect when the payment falls due. The Ontario rent increase guideline page sets it at 2.1% for 2026 and 1.9% for 2027. Check that page each year, because the number changes. For example, 2.1% of a $1,500 deposit is $31.50.

Two rules help you:

• After a lawful rent increase, you can keep some or all of the interest to bring the deposit up to the new one-month limit. The amount you keep becomes part of the deposit.
• If you do not pay the interest when it is due, the tenant may deduct it from a later rent payment.

Not paying the annual interest is also an offence. Rent increases themselves are covered in the landlord guide to raising rent in Ontario.

Ontario has no "return within so many days" deadline, because the rent deposit is not held against damage. You must apply it as the rent for the last rent period before the tenancy ends. You may not keep any part of it for damage or cleaning, and there is no statement-of-deductions process.

Other points to remember:

• If the tenant never gets vacant possession of the unit, repay the deposit.
• A refundable key deposit goes back when the tenant returns the keys.
• A new landlord, such as a buyer, cannot ask the tenant for a second rent deposit if the tenant already paid one to the prior landlord, and must apply the earlier deposit to the last rent period.
• You must give a receipt, free of charge, for a rent deposit or any other payment if the tenant asks. A former tenant can ask within 12 months after the tenancy ended. Refusing is an offence.

Using the deposit for anything other than the last rent period is an offence under the Act.

The rent deposit is not your damage fund, so damage goes through the LTB. You can apply for the reasonable cost of repairing or replacing property that the tenant, another occupant or a guest damaged on purpose or by carelessness. You can apply while the tenant is still living in the unit, or up to one year after the tenant moves out. The LTB's guidance describes form L2 for the first case and form L10 for the second. You cannot claim normal wear and tear. The Board can order up to $50,000.

If the LTB order also ends the tenancy, it subtracts any rent deposit and interest still owed to the tenant from what the tenant owes you.

Ontario does not require a move-in or move-out condition report. Dated photos and a written record still help if you apply. For plain-language answers, see the Ask page what to do if a tenant damages property.

Unpaid rent works differently. The deposit effectively covers the last rent period, and rent owed before that is a claim to bring to the LTB. The LTB forms page lists the applications.

The common mistakes are taking a damage or pet deposit, keeping part of the rent deposit after move-out, skipping the yearly interest and not giving receipts. Ontario has no "double the deposit" penalty. The risk is a repayment order and an offence charge.

A tenant or former tenant can apply to the LTB for an order that you repay money you collected or kept against the Act. The application must be filed within one year after the money was collected or kept. If you have made one of these mistakes, the cleaner path is to correct it before an application arrives: refund the extra deposit, pay the interest owed and issue receipts.

1. Check what you collected against the table above.
2. Refund anything not allowed, such as a damage deposit or pet deposit.
3. Work out the interest owed for each year at the guideline rate for that year, and pay it.
4. Apply the rent deposit to the last rent period when the tenant is leaving.
5. Bring any damage claim to the LTB within one year after move-out.

If you are just starting out, see how to become a landlord in Ontario for the rest of the setup rules. This guide explains the rules in general terms; for a specific case, ask the tribunal or a licensed legal professional.