Which Deposits Are Allowed?
Two. The Residential Tenancies Act says the only security deposit a landlord may collect is a rent deposit collected under section 106.1 A refundable deposit for keys, remote entry devices or cards is the other one, and it comes from a regulation that exempts it from the Act’s ban on extra charges.5
| Deposit | Maximum | When it can be required | What happens to it |
|---|---|---|---|
| Rent deposit (last month’s rent) | The lesser of one rent period and one month’s rent1 | On or before entering into the tenancy agreement1 | Applied to the rent for the last rental period; interest paid every year1 |
| Key, fob or card deposit | The expected direct replacement cost5 | Not set by statute | Refunded when the keys come back at the end of the tenancy7 |
The timing rule on the rent deposit is easy to miss. A landlord may require it only if they do so on or before entering into the tenancy agreement.1 A landlord who forgets to ask at signing cannot add one six months later, though they can top up an existing deposit after a lawful rent increase.1
For a weekly tenancy, the cap is one week’s rent, because the limit is the lesser of one rent period and one month.1
Why Damage and Pet Deposits Are Not Allowed
The Act defines a security deposit broadly: money, property or a right given to the landlord as security for the tenant’s obligations, or to be returned when a condition happens.1 Because the only permitted security deposit is the rent deposit, a damage deposit, pet deposit or cleaning deposit is a security deposit the Act does not allow.1
Section 134 closes the other doors. A landlord may not collect or require, or try to collect or require, a fee, premium, commission, bonus, penalty, key deposit or other like amount from a tenant or prospective tenant, whether or not it is refundable, unless a regulation allows it.2 The same ban applies to a superintendent, property manager or anyone else acting for the landlord, with or without the landlord’s authority.2
The regulation lists the exceptions. Besides the refundable key deposit, the ones that come up at move-in are:
- Extra keys, fobs or cards the tenant asks for, at no more than direct cost.5
- Replacement keys at no more than direct replacement cost, unless the landlord chose to change the locks.5
- Bank NSF charges, plus an administration charge of up to $20 for an NSF cheque.5
The government’s Standard Form of Lease spells out the result: a term requiring a damage or pet deposit is void and cannot be enforced, and a tenant who pays anything more than the permitted deposits can apply to the Landlord and Tenant Board to get it back.7
Interest on the Rent Deposit
The landlord must pay the tenant interest on the rent deposit every year, at the rent increase guideline rate in effect when the payment becomes due.1 The LTB’s Form T1 instructions give the same rule and use the guideline for the year the payment falls due.8
The guideline is 2.1% for 2026 and 1.9% for 2027.9 So an interest payment that falls due in 2026 on a $2,500 deposit is $52.50; one that falls due in 2027 on the same deposit is $47.50.
Most landlords settle the interest against the deposit instead of writing a cheque. The Act allows that: when rent rises, the landlord may require a top-up to bring the deposit back to the new one-month cap, and may deduct the shortfall from the interest owed, with the deducted amount counting as part of the deposit.1 If the landlord pays nothing when interest falls due, the tenant may deduct it from a later rent payment.1
Using and Returning the Deposit
- Last month only. The landlord must apply the rent deposit to the rent for the last rental period before the tenancy ends. It can’t be kept for damage.1,7
- If the tenant never moves in. If vacant possession isn’t given, the landlord must repay the deposit, unless the prospective tenant agrees to rent a different unit from the same landlord instead.1
- Receipts. On request, the landlord must give a free receipt for any rent or deposit, including to a former tenant who asks within 12 months.1
- New owner. A new landlord cannot ask for a second rent deposit if the tenant already paid one to the previous landlord.1
Getting this wrong has a cost. Collecting a prohibited deposit, failing to pay interest, failing to apply the deposit to the last month and failing to repay it are each offences under the Act.4 Fines run up to $100,000 for an individual and $500,000 for a corporation.4 Separately, a tenant or a prospective tenant can apply to the Board within one year for the return of money collected or retained illegally.3
Post-Dated Cheques and Automatic Payments
Neither the landlord nor the lease can require post-dated cheques, automatic bank debits, automatic credit card charges or any other automatic payment for rent.1 The Standard Form of Lease notes the tenant can choose to pay that way.7 So an offer can say how rent will be paid, but it can’t make a stack of cheques or a pre-authorized debit a condition of the tenancy.
Apply the Same Deposit to Every Applicant
O. Reg. 290/98 lets a landlord require a deposit that follows sections 105 and 106 of the Act.6 The Ontario Human Rights Commission says it is not permissible to require one only because an applicant belongs to a Code-protected group, such as someone receiving social assistance or a lone parent.10 If you ask one applicant for last month’s rent, ask all of them.
Prepaid rent beyond last month’s rent raises the same concern. The OHRC flags demands for cash sums larger than the Act allows, sometimes aimed at newcomers, as a possible Code violation as well as an RTA one.10 Whether an applicant can volunteer extra prepaid rent is a separate legal question; get advice before relying on it.
What to Put in the Offer to Lease
Write the deposit terms so they match what the Standard Form of Lease will say in sections 8 and 9.7
- State the rent deposit as a last month’s rent deposit, in an amount no higher than one month’s rent, to be applied to the last rental period.1
- If keys, fobs or cards are being handed over against a deposit, list them and set the deposit at no more than their expected replacement cost.5,7
- Leave out damage, pet, cleaning and furniture deposits, and any non-refundable fee.2
- Set out the payment method without requiring post-dated cheques or automatic debits.1
- Ask for the same deposit from every applicant.10
- Note how the deposit will be held between acceptance and the start of the tenancy, following your brokerage’s trust procedures.
Deposits are one part of the lease. For the rest, see the Ontario standard lease, and for what the application itself can ask, what a landlord can ask on a rental application.
This page is general information about Ontario law, not legal advice. Where a situation turns on its facts, contact the Landlord and Tenant Board or get advice from a lawyer or a paralegal.
Questions
Can a Landlord Ask for First and Last Month’s Rent in Ontario?
A landlord may require a rent deposit of up to one month’s rent, on or before signing, and must apply it to the rent for the last month. It is the only security deposit the Act allows.1
Is a Damage Deposit Legal in Ontario?
No. The only security deposit a landlord may collect is the rent deposit, and the Standard Form of Lease lists damage and pet deposits as examples of void terms.1,7
How Much Interest Is Owed on Last Month’s Rent?
Interest is owed every year at the rent increase guideline in effect when the payment falls due: 2.1% for 2026 and 1.9% for 2027. The landlord can use it to top up the deposit after a rent increase.1,9
Can a Landlord Keep the Deposit if the Tenant Doesn’t Move In?
If the landlord doesn’t give vacant possession, they must repay the rent deposit, unless the prospective tenant agrees to rent another unit from them instead.1
Sources
- Residential Tenancies Act, 2006, S.O. 2006, c. 17
Government of Ontario, e-Laws, ss. 105 to 109, consolidated to September 21, 2026. Accessed October 22, 2026.
- Residential Tenancies Act, 2006, S.O. 2006, c. 17
Government of Ontario, e-Laws, s. 134(1) and (2), additional charges prohibited. Accessed October 22, 2026.
- Residential Tenancies Act, 2006, S.O. 2006, c. 17
Government of Ontario, e-Laws, s. 135(1), (2) and (4), money collected illegally. Accessed October 22, 2026.
- Residential Tenancies Act, 2006, S.O. 2006, c. 17
Government of Ontario, e-Laws, s. 234(d) to (g) and (l), offences; s. 238, penalties. Accessed October 22, 2026.
- O. Reg. 516/06: General
Government of Ontario, e-Laws, s. 17, paras. 1 to 5, exemptions from s. 134(1) and (3) of the Act, consolidated to September 21, 2026. Accessed October 22, 2026.
- O. Reg. 290/98: Business Practices Permissible to Landlords in Selecting Prospective Tenants for Residential Accommodation
Government of Ontario, e-Laws, s. 2(2). Accessed October 22, 2026.
- Residential Tenancy Agreement (Standard Form of Lease), Form 2229E (2020/12)
Government of Ontario, Central Forms Repository, Sections 5(d), 8, 9 and 15; Appendix Part H, Deposits. Accessed October 22, 2026.
- Instructions for Form T1: Tenant Application for a Rebate of Money the Landlord Owes
Landlord and Tenant Board, Tribunals Ontario, Reason 5: The landlord owes me interest on the last month’s rent deposit. Accessed October 22, 2026.
- Rent increase guideline
Government of Ontario, Rent increase guideline; Previous rent increase guidelines table. Accessed October 22, 2026.
- Policy on human rights and rental housing, V. Identifying discrimination in rental housing
Ontario Human Rights Commission, s. 4.2.7 Security deposits and extra rent requirements. Accessed October 22, 2026.
