Damage Deposits in Ontario: Why They’re Not Allowed and What You Can Collect
Damage, security and pet deposits are not allowed in Ontario. Landlords who collect one can be ordered to pay it back. Here is what you can legally collect, and better ways to protect yourself against damage.
Key points
- Ontario landlords can only collect two deposits: a rent deposit (last month’s rent) and a refundable key deposit.
- Damage, security and pet deposits are not allowed, even if the tenant agrees in writing.
- You must pay interest on the rent deposit every year at the rent increase guideline rate.
- To cover damage, screen carefully, document the unit at move-in and claim repair costs through the LTB.
One of the most common mistakes, especially for landlords new to Ontario, is taking a damage deposit. Damage deposits are not allowed in Ontario. The Residential Tenancies Act is clear, and landlords who collect them can be ordered to pay them back.
What the law allows
| Deposit | Allowed? | Rules |
|---|---|---|
| Rent deposit (last month’s rent) | Yes | No more than one month’s rent, or one period’s rent if paid weekly. Must be applied to the last rental period. |
| Key or fob deposit | Yes | Must be refundable and no more than the cost of replacing the key or fob. |
| Damage or security deposit | No | Not allowed, even if the tenant agrees. |
| Pet deposit | No | Not allowed. |
What you can collect, and how
- A rent deposit of up to one month’s rent, to be used for the last month of the tenancy.
- Interest on that deposit every year, at the provincial rent increase guideline rate. You can apply the interest to top up the deposit when rent goes up.
- A refundable key or fob deposit equal to the replacement cost.
Setting up a new tenancy? We review leases and move-in steps for Ontario landlords.
Book a free 20-minute call →If you already collected a damage deposit
A tenant who paid a deposit that isn’t allowed can apply to the Landlord and Tenant Board to get it back. There is no upside to keeping it. The simplest fix is to refund it, or with the tenant’s written agreement, convert what is allowed into a proper last month’s rent deposit.
Better ways to protect against damage
- Screen carefully: references, employment, credit and past landlord.
- Use the Ontario Standard Lease and spell out the tenant’s responsibilities.
- Do a dated move-in inspection with photos, signed by the tenant.
- Inspect periodically with proper 24-hour written notice.
- If damage happens, serve an N5 or claim repair costs through the LTB.
Frequently asked questions
Are damage deposits legal in Ontario?
No. Ontario landlords can only collect a rent deposit, which is last month’s rent, and a refundable key deposit. Damage and security deposits are not allowed.
Can I charge a pet deposit in Ontario?
No. Pet deposits are not allowed, the same as damage deposits.
How much last month’s rent deposit can I collect?
No more than one month’s rent, or one period’s rent if rent is paid weekly. It must be used for the last rental period.
Do I have to pay interest on last month’s rent?
Yes. You must pay interest every year at the rent increase guideline rate, or you can use it to top up the deposit if the rent goes up.
How do I recover damage costs without a deposit?
Serve an N5 if the damage is ongoing, or apply to the LTB for the cost of repairs. For a former tenant, you can apply for damages within the time limits.
About Bita Di Lisi
Bita is the lead paralegal at Stonegate Legal Services and is licensed by the Law Society of Ontario. She represents Ontario landlords at the Landlord and Tenant Board and teaches landlords and investors about notices, LTB timelines and the mistakes that cost months.
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