Collecting and using the last month rent deposit – for landlords
Although last month rent deposits are a reality of every tenancy, we often encounter questions and common misconceptions. We address some of these in this post.
Can my tenant refuse to give me a last month rent deposit?
The Residential Tenancies Act is quite clear about allowing the landlord to require a tenant to pay a last month rent deposit. This means that a landlord can refuse to rent out an apartment to a tenant who does not want to put down a last month rent deposit. However, the Residential Tenancies Act does not say that a tenant has to provide such a deposit. Accordingly, a landlord must make sure that the deposit is received before the tenant moves in. Collecting a deposit after the tenancy begins may be legally challenging and, in certain cases, impossible. The rule of thumb here is that the tenant must pay two monthly rents, for the first and last month, before getting the keys.
How much money can the landlord ask for as a last month rent deposit?
The Residential Tenancies Act limits the amount of the last month rent deposit to the amount of one monthly rent. Some landlords ask tenants to deposit two or even three monthly rents, but they are not allowed to do so. A tenant may request the return of any amount of the last month rent deposit which exceeds a one month payment. Moreover, the Residential Tenancies Act sets out that a landlord cannot require a tenant to pay any deposit other than the last month rent deposit. This means that the landlord cannot disguise a bigger last month rent deposit as a security deposit or any other type of deposit.
Can a landlord use the last month rent deposit to cover unpaid rent during the year?
It is quite common that a tenant cannot pay rent for a certain month and asks the landlord to use his/her last month rent deposit in lieu of the payment. A tenant can ask, but the Residential Tenancies Act does not require that a landlord grant such a request. The general rule is that the last month rent deposit must be used to cover the last month payment – nothing more. If the rent is not paid for any other month, an eviction notice for non-payment may be given, even if the landlord still has the last moth rent deposit.
Should a landlord use the last month rent deposit when the one year rent agreement comes to the end?
Some tenants request landlords to use the last month rent deposit to cover the rent payable for the last month of a 12-month written rent agreement. A landlord must do that only if the tenant is leaving at the end of the month and delivers a proper 60-day notice about termination of the tenancy to the landlord. If the tenant wants to continue living in the rental unit after the rent agreement expires, the landlord should keep the last month rent deposit.
What happens with the last month rent deposit if a tenant’s monthly rent increases?
If the monthly rent increases, the landlord has the right to demand the tenant to pay additional money towards the last month rent deposit to make it equal a new monthly rent. However, this works only in cases where an increase of the monthly rent is lawful. A landlord cannot raise the monthly rent arbitrary because of Ontario’s rental rules.
What happens with the last month rent deposit when a tenant is evicted for non-payment of rent?
The Landlord and Tenant Board does not allow a non-paying tenant to stay even if the amount of unpaid rent is less than the last month rent deposit. However, if a tenant is evicted for non-payment of rent, his/her last month rent deposit is applied by the Landlord and Tenant Board towards the rent owing. For example, if a tenant has not paid rent for three months, the Landlord and Tenant Board evicts the tenant and orders him/her to pay the landlord rent for three months, minus the last month rent deposit and interest owing on the last month rent deposit.
We hope the above provides landlords with some clarity about the rules surrounding last month rent deposits throughout all stages of the tenancy. And remember – if your tenant hasn’t paid rent, you don’t have to apply their deposit towards rent currently owing. Contact us for a free case assessment.