Deposits in Ontario: what you can collect and what you owe back

01The only deposit you may collect

Section 105 of the Residential Tenancies Act is unusually blunt. The only security deposit a landlord may collect is a rent deposit collected under section 106.

That rent deposit has three hard edges. You must require it on or before entering into the tenancy agreement. It cannot be more than the lesser of one month's rent and one rent period's rent. And it is applied to the rent for the last rent period before the tenancy ends.

So if the rent is $2,100 a month, the deposit is at most $2,100, and it pays the final month. That is all it can ever do.

It is not a damage deposit. It is not a cleaning deposit. It is not a pet deposit. None of those exist in Ontario, whatever they are called on the form someone downloaded.

You also cannot require post-dated cheques or automatic debits as a condition of the tenancy. Section 108 prohibits it. A tenant can offer, and many do, but you cannot make it a requirement.

02The charges that are allowed and the ones that are not

Section 134 bans, in one sentence, any fee, premium, commission, bonus, penalty, key deposit or other like amount of money, refundable or not. Then a regulation carves out a short list of exceptions. That list is the whole universe of extra charges.

03The interest you owe every year

This is the part almost nobody does. Section 106 says the landlord shall pay interest to the tenant annually on the rent deposit, at a rate equal to the rent increase guideline in effect when the payment falls due.

For a payment falling due in 2026 that is 2.1%. For 2027 it is 1.9%.

There is a second rule that makes it painless. If the lawful rent has gone up since the deposit was paid, you may require the tenant to top the deposit up to one month's current rent. And you may deduct that top-up from the interest you owe. The amount you deduct is treated as part of the deposit.

In practice that means very little money moves. You settle the interest against the top-up on the same day each year and record both.

If you skip it, the tenant is entitled to take it. Section 106 says that where the landlord has failed to make the payment when it comes due, the tenant may deduct it from a later rent payment. Six years of unpaid interest arriving as a rent shortfall is a bad surprise.

04Settling one anniversary

Say your tenant paid a $2,000 deposit when the rent was $2,000. Two years later the lawful rent is $2,100 and the anniversary falls in 2026.

TenantBay calculator

Deposit interest you owe this year

If you hold a last month's rent deposit, you owe the tenant interest on it every single year, at the same percentage as the rent increase guideline. You are also allowed to top the deposit up to the current rent. Most landlords do neither, then find out about both at a hearing.

What you are holding

Deposit you are holding now$The last month's rent deposit, not first-and-last combined.Current monthly rent$Anniversary of the tenancyInterest falls due once a year on this date.

The settlement

Enter the deposit you hold and the current rent. You will see the interest owed, the top-up you are entitled to ask for, and what actually changes hands.

Based on sections 106(3) and 106(6) of the Residential Tenancies Act, 2006. General information, not legal advice.

05What to do if you already got this wrong

Plenty of small landlords are holding a deposit they called something else, or have never paid a cent of interest. Neither is unusual and neither is unfixable.

• If you are holding more than one month's rent, or a separate damage deposit, give the excess back now rather than at the end of the tenancy.
• Work out the interest you owe for each year the deposit has been held, at the guideline for that year, and settle it against any top-up you are entitled to.
• Pick one date, the anniversary of the tenancy, and do it on that date every year.
• Give a receipt. Section 109 requires you to provide one free of charge on request, including to a former tenant for up to 12 months after the tenancy ends.
• Never take repair costs out of the deposit. Apply it to the last rent period and deal with damage separately.

06Keeping it straight

The reason deposits go wrong is not that the rules are hard. It is that the deposit is set up once, at the busiest moment of the tenancy, and then never looked at again for four years.

How TenantBay helps: the deposit sits on the tenancy record with the Ontario rules applied, so the last month's rent is applied to the right period at move-out and the anniversary does not depend on anyone remembering it.