Last Month’s Rent Deposit

The Rules

• Amount: no more than one rent period’s rent or one month’s rent, whichever is less.¹
• Timing: the landlord may require it only on or before entering into the tenancy agreement.¹
• Use: it must go to the last rent period. The standard lease guide says it cannot be used as a damage deposit.^1,3
• Interest: the landlord pays interest every year at the rent increase guideline in effect when the payment is due, and may keep part of it to top the deposit up to the current rent.¹ The guideline is 2.1% for 2026 and 1.9% for 2027.²
• No vacant possession: if the prospective tenant never gets possession, the deposit must be repaid.¹

What It Means When Leasing

First month plus last month is the ceiling at signing. A damage deposit, a second month or a pet deposit is a security deposit the Act does not allow. The standard lease records the rent deposit and any key deposit in their own sections, and the guide notes the law limits both.³

If the landlord misses the annual interest payment, the tenant may deduct it from a later rent payment.¹

This page is general information about Ontario law, not legal advice.

Related Terms

• Ontario Standard Lease
• Landlord and Tenant Board (LTB)
• Guarantor

Sources

1. Residential Tenancies Act, 2006, S.O. 2006, c. 17

   Government of Ontario, e-Laws, ss. 105 to 107, consolidated from September 21, 2026. Accessed October 22, 2026.

2. Rent increase guideline

   Government of Ontario, Rent increase guideline; Previous rent increase guidelines (updated June 23, 2026). Accessed October 22, 2026.

3. Guide to Ontario’s standard lease

   Government of Ontario, About the standard lease; What is in the standard lease, sections 8, 9 and 15. Accessed October 22, 2026.