Security Deposits in Ontario

This is the single most important thing to understand about deposits in Ontario, and it surprises many tenants moving from other provinces: a landlord in Ontario cannot collect a separate security or damage deposit at all. There is no "refundable deposit held against damage" the way there is in provinces like Alberta.

Instead, under the Residential Tenancies Act, 2006 (RTA), the only deposit a landlord can collect is a last month's rent deposit. As the name suggests, this money is not held in trust to cover damage -- it is applied directly as your rent payment for your final month of tenancy. If a landlord asks you for a "security deposit," a "damage deposit," or a "cleaning deposit" in addition to your last month's rent, that request is not permitted under Ontario law.

This distinction matters in practice. Because the last month's rent deposit is not a damage fund, a landlord generally cannot make deductions from it for damage the way a security deposit works elsewhere. If there is damage beyond normal wear and tear, the landlord's recourse is a separate claim at the Landlord and Tenant Board (LTB), not a deduction from this deposit.

The last month's rent deposit is capped at the equivalent of one month's rent (or, for tenancies charged on a different basis, one rental period's rent). A landlord cannot demand more than this amount as a deposit under any label.

The deposit is typically collected at or before the start of the tenancy, alongside your first month's rent. It is common for a lease to require both the first and last month's rent be paid before you move in -- this is legal, since the "first month" is simply your first rent payment and the "last month" is the deposit.

If your rent increases during your tenancy, the landlord is entitled to ask you to top up your last month's rent deposit so that it continues to match one full month's current rent. This request should be made in writing and tied to the rent increase.

Unlike a plain damage deposit, the last month's rent deposit in Ontario earns annual interest, and the landlord is required to pay it. The interest rate is tied to the province's annual rent increase guideline -- for 2026, that guideline is 2.1%, and for 2027 it is 1.9%. Landlords must pay this interest to the tenant each year the deposit is held, either as a direct payment or as a credit against rent.

Some landlords are unaware of this obligation, particularly smaller or first-time landlords. If you have held a last month's rent deposit for more than a year and have not received an interest payment, you can raise this directly with your landlord in writing, and it can also be raised as an issue with the LTB if it goes unresolved.

Because this deposit is legally your last month's rent, it is straightforward at the end of a tenancy: it is simply applied to your final rental period. You and your landlord agree that your last month of occupancy is "paid" using the deposit (plus any accrued interest), rather than you writing a fresh rent cheque for that month.

There is no separate "return the deposit within N days" process the way there is for a refundable damage deposit in other provinces, because the money is not being refunded -- it is being used as rent. This is also why Ontario does not have the kind of post-move-out deposit disputes that are common elsewhere: the money has already been consumed as rent by the time you move out.

Under Ontario's own provincial rules, there are no deductions from the last month's rent deposit for cleaning or minor damage. If a landlord believes you owe money for damage beyond normal wear and tear, they must pursue that separately through the LTB rather than simply withholding part of your last month's rent deposit.

If a landlord asks you to pay a damage deposit, a pet deposit, a key deposit, or any other deposit beyond the single last month's rent deposit, you are within your rights to decline. Put your understanding in writing (a short, polite email referencing the RTA is usually enough) and keep a copy.

If you have already paid an amount beyond what the law allows, you can raise the issue with the Landlord and Tenant Board (LTB). Keep your lease, payment receipts, and any written communication about the deposit, since these form the evidence for any claim.