Security Deposits vs. Last Month's Rent: What a Landlord Can Legally Collect in Ontario

Few moments are more stressful for a new tenant than signing a lease and being asked for a pile of money up front — first month, last month, a "damage deposit," a "pet deposit," maybe a "cleaning fee." Many renters pay it all without realizing that, in Ontario, most of those charges are simply not legal. Knowing the difference can save you hundreds or thousands of dollars and spare you a fight at move-out.

The big surprise: security and damage deposits are illegal

Ontario's Residential Tenancies Act, 2006 (RTA) is strict about what a landlord can collect. Unlike some other provinces and many U.S. states, Ontario does not allow a "security deposit" or "damage deposit." A landlord cannot legally demand money to cover possible future damage, cleaning, or wear and tear.

There are really only two deposits a landlord can ask for:

• A rent deposit — almost always used as last month's rent (LMR).
• A refundable key deposit — limited to the actual cost of replacing the

keys, fobs, or cards.

That's it. Pet deposits, "first and last and a damage deposit," automatic post-dated cheques as a condition of renting, and non-refundable "administration" or "cleaning" fees are not permitted. If a landlord keeps part of your money at move-out for cleaning or scuff marks, that is not a deposit they were ever entitled to hold.

How last month's rent actually works

The rent deposit can be no more than one month's rent (or one rental period — for example, one week if you pay weekly). A landlord can collect it on or before the day the tenancy starts, but cannot keep increasing it later beyond the rules below.

Two things people often get wrong:

1. LMR can only be applied to the last month of your tenancy. It is not a

slush fund for damages, unpaid utilities, or cleaning. If you owe for those, the landlord has to pursue them separately (usually at the Landlord and Tenant Board), not by quietly pocketing your deposit.

1. Your landlord must pay you interest on the deposit every year. The rate is

set by the province and equals the annual rent increase guideline. For 2026 that rate is 2.1%. If the landlord doesn't pay it, you are generally entitled to deduct the owed interest from your rent — or the landlord can apply it toward a lawful rent increase.

When your rent goes up, the landlord can ask you to "top up" the deposit so it still equals one month's rent — but only by a lawful amount, and the interest owed to you can be used to cover part of that top-up.

What a landlord can — and can't — ask for

"But I already paid it" — how to get an illegal deposit back

If you've already handed over a damage deposit, pet deposit, or other unlawful charge, you have a clear path. You can file a T1 application (Tenant Application for a Rebate) with the Landlord and Tenant Board (LTB) to recover money the landlord collected illegally, including unpaid interest on your last month's rent. There is normally a time limit — generally one year from when the money was collected or the contravention happened — so don't sit on it.

A few practical tips:

• Keep records. Save the lease, receipts, e-transfer confirmations, and any

texts or emails where the landlord describes the charge. These prove both the amount and what it was supposedly for.

• Don't agree to deductions you don't owe. A landlord can't unilaterally keep

your last month's rent for cleaning or damage. If they want compensation, the burden is on them to apply to the LTB and prove it.

• Mind the key deposit. A key deposit is legal only if it's refundable and

matches the genuine replacement cost — charging $200 for a $10 key is not.

Where to confirm the current rules

• Ontario's official overview of deposits and rent rules:

ontario.ca/page/renting-ontario-your-rights.

• The Landlord and Tenant Board, including the T1 application:

tribunalsontario.ca/ltb.

• Plain-language guides from Community Legal Education Ontario:

cleo.on.ca.

Get in touch

Deposit disputes are one of the most common — and most winnable — landlord and tenant issues, because the rules are clearer than people assume. If a landlord is holding money you believe you're owed, or you've been asked to pay something that doesn't sound right, JSR Legals can help you understand your rights and, if needed, bring an application to the LTB. Reach us at info@jsrlegals.ca.

This article is general information about Ontario law, current as of June 2026, and is not legal advice for any specific situation. Rules, rates and deadlines can change — confirm the current requirements before you act.