Landlord & Tenant
Deposits
Before signing a lease agreement, it's important to make sure you understand what deposits you'll need to pay and when they'll be returned to you. Make sure you read the lease agreement carefully and ask questions if you're unsure about something.
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Deposits for Rentals
Are you looking to rent a property in Ontario? Knowing the rules and regulations for rental deposits can help you navigate the process and ensure that you and your landlord are both legally protected.
In Ontario, a landlord may require a tenant to pay a security deposit before occupying a rental unit. The deposit must be no more than one month’s rent, and the landlord must provide a written receipt that states the amount of the deposit and the date it was received. The security deposit acts as a guarantee for the landlord, should the tenant fail to pay rent or otherwise violate the terms of the lease agreement.
The security deposit must be kept in trust in an interest-bearing account at a financial institution in Ontario. The interest earned on the security deposit must be paid to the tenant each year. The landlord must also provide a written statement to the tenant that shows the balance of the account, the rate of interest, and the annual interest earned.
Once the tenant has moved out, the landlord must return the security deposit, minus any deductions for unpaid rent, within 30 days. If the landlord withholds any portion of the security deposit, they must provide the tenant with a written explanation of the deductions.
By understanding the rules and regulations surrounding security deposits for rental properties in Ontario, tenants and landlords can enter into a rental agreement with confidence. Knowing the rules will help ensure that both parties are legally protected and can avoid any misunderstandings.
First Month's Rent & Deposits
In Ontario, post-dated payments are not allowed for residential rental homes. This means that when a tenant signs a lease agreement with a landlord, they cannot make payments in advance of their rental due date. This is because the Ontario Residential Tenancies Act does not allow it and it can be considered an illegal transaction.
Making post-dated payments can sometimes be a temptation, especially if a tenant is able to save money by paying rent in advance. However, this is not allowed under the law and can lead to serious consequences for the landlord.
The Ontario Residential Tenancies Act states that a landlord must not accept post-dated cheques or any other form of payment for rent in advance. If a landlord does accept such payments, they can be fined up to $25,000 for each violation. This is a serious consequence that can be avoided by adhering to the law.
It is important for tenants to understand that post-dated payments are not permitted for residential rental homes in Ontario. This is to protect both tenants and landlords from potential legal issues and to ensure that tenants are not taking on more financial responsibility than they can handle. It is the responsibility of both landlords and tenants to understand and abide by the Ontario Residential Tenancies Act.
By understanding the rules regarding post-dated payments, tenants and landlords can ensure that their rental agreements are in line with the law. This will help to create a safe and secure environment for both parties and ensure that the rental agreement is legally sound.
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Deposits
Here you can find some useful information about deposits in housing law.
An Initial Deposit From a New Tenant
A landlord may only request a last month's (or last week's) rent deposit, plus a key deposit. Tenants are often asked to pay the "first and last month's rent" when they sign a tenancy agreement. The law prevents a landlord from charging the first month's rent before it's due - which is normally the first day of the tenancy.
Landlords Cannot Request:
- Deposits for pets
- Deposits for damage
- Rent for the first month (or first week in a week-to-week rental) before the tenant moves in
- Payments made with post-dated cheques or other forms of preauthorization
Landlords may not even realize that what they are asking for is illegal. It may be possible for the tenant to explain the law to them, thereby preventing further legal problems.
If the landlord refuses to rent to an applicant without receiving the unlawful deposit, the tenant may decide to pay it to them. In that case, the tenant can attempt to get it back once they have moved in. In some cases, this may involve involving the Landlord and Tenant Board (LTB).
A Deposit for the Key(s)
A key deposit cannot be more than what it would cost to replace the keys. It cannot also be used for damage or other expenses. After the tenant moves out, the landlord must refund the deposit if they return the keys.
Extra keys can be made for the cost of making them - nothing more. A keyless entry system, fob, or other device might be used instead of keys in the building. These things follow the same rules as keys.
Paying Interest on the Tenant's Deposit
Landlords are legally required to pay interest on the last month's rent to their tenant. Interest rates are equal to the guideline rent increases for the year the interest payment is due.
Rent deposits made on November 1, 2016, for example, must have been credited to the tenants' accounts on November 1, 2017. In 2017, the rent guideline was 1.5 percent, so the landlord owed the tenant 1.5 percent interest on their deposit.
Landlords must pay the interest either by reducing the rental payment or by adding it to the tenant's last month's rent deposit.
Landlords Must Provide Receipts to Tenants
When a tenant asks for a receipt for payments, the landlord must provide one. Landlords cannot charge a tenant for a receipt or refuse to provide one. Whenever a landlord receives a deposit, rent payment, or any other money from a tenant, they should always give them a receipt immediately.
Receipts Should Include:
- Name of the tenant
- Their address
- Landlord's legal name
- Payment amount
- Payment date
- The purpose of the money
- Landlord's signature
Be Sure to Put it in Writing
Needless to say, we cannot stress enough the importance of any landlord resisting the urge to demand an unlawful deposit. Nonetheless, if the landlord does request it and the tenant pays it, the latter can tell the former afterwards that it's unlawful.
The tenant can request a refund of the deposit. A landlord then has the option to return the deposit(s) if they were unaware that the deposit was unlawful. If they refuse to return the deposit(s), the tenant can apply to the Landlord and Tenant Board (LTB) to have it refunded. The landlord would then have to prove the payment was voluntary and not required to defend themselves.
Make sure you get everything in writing if this is the case. The tenant should provide the landlord with proof that they are voluntarily paying the amount (e.g. letter, email, text) and the reason why. In the rental agreement, note that the additional funds are being provided voluntarily (not as a requirement). Ensure both parties sign all documentation.
Frequently Asked Questions
Here are answers to some common questions.