Ontario Security Deposits & Last Month's Rent: The Rules

Security Deposits Are Prohibited in Ontario

Unlike most other provinces, Ontario's Residential Tenancies Act (RTA)prohibits landlords from collecting a security deposit, damage deposit, pet deposit, or key deposit. The only deposit permitted is a last month's rent (LMR) deposit.

Last Month's Rent Deposit: The Rules

• Can only be collected before or at the start of the tenancy
• Maximum amount = one month's rent (or one week if rent is paid weekly)
• Must be held and applied to the last rent period of the tenancy only
• Cannot be used for damages, unpaid utilities, or anything else
• If rent increases, the landlord can top up the LMR to match the new rent — but only by agreement

Interest on the Last Month's Rent Deposit

Landlords must pay tenants annual interest on the LMR deposit equal to the provincial rent increase guideline for that year. This interest can be paid out annually, or credited against rent.

When You Move Out: Getting Your Deposit Applied

When you give proper notice and vacate, the LMR deposit is automatically applied to your last rental period — you do not pay rent for that period. You don't need to ask for it back; it was always yours.

If you leave without proper notice and the deposit doesn't cover the last month owed, the landlord can file an L1 application for arrears.

What If the Landlord Refuses to Apply the Deposit?

1. Send a written demand to the landlord confirming the LMR is to be applied to your last month.
2. If they demand rent payment for that final month anyway, file a T1 application at the LTB for the illegally retained deposit.
3. The LTB can order repayment plus up to the same amount as a penalty.

Key Deposit Rules for Other Items

• Key/fob deposits: Landlords may charge a refundable deposit for keys or fobs, but only up to the actual replacement cost — and must refund it in full when keys are returned
• Pet deposits: Illegal — landlords cannot charge any deposit related to having a pet
• Damage deposits: Illegal — damage claims must go through the LTB via an L2 or L10 application