Rent deposits in Ontario: last month's rent, key deposits and interest

The only two deposits allowed

When a tenancy starts, Ontario lets a landlord ask for two deposits, and only two:

• a rent deposit, often called last month's rent
• a refundable key deposit

Anything else, such as a damage deposit, a pet deposit or a cleaning deposit, isn't allowed, and a lease term that requires one is void. This is the same in a condo, a house or a basement unit. When we place a tenant through our tenant placement service, these are the only deposits we collect.

How much the rent deposit can be

The rent deposit can't be more than one month's rent if the rent is paid monthly, or one week's rent if it's paid weekly. Most landlords ask for the full month.

So on a $2,400-a-month condo, the tenant pays $4,800 at signing: the first month's rent and a $2,400 rent deposit. The deposit isn't rent for the first month; it sits until the end of the tenancy.

It's for the last month, and nothing else

The rent deposit can only be used as the rent for the last month before the tenant moves out. It can't be used for damage, cleaning or unpaid utilities, even if the tenant agrees in the lease.

When the tenant gives proper notice and moves out, the deposit covers their final month. If the tenancy ends some other way, such as an agreement to end it early, put in writing what happens to the deposit as part of that agreement.

Interest every year

You have to pay the tenant interest on the rent deposit every year, at the rent increase guideline rate in effect when the interest is due: 2.1% for 2026 and 1.9% for 2027.

You can pay it to the tenant, or, when the rent goes up, keep it to top up the deposit. That's the next section.

Topping up the deposit when the rent goes up

When you raise the rent, the deposit can rise with it, so it still covers a full last month. You can keep that year's interest and add it to the deposit; if that isn't enough, you can ask the tenant to add the difference so it matches the new rent.

Because the interest rate and the guideline are the same number, they often match exactly. A $2,400 rent raised by the 1.9% guideline becomes $2,445.60. The increase is $45.60, and so is that year's interest on the $2,400 deposit, so keeping the interest brings the deposit to $2,445.60.

Key deposits

A key deposit is refundable, and it can't be more than what it would actually cost to replace the keys, fobs or remotes. When the tenant returns them at move-out, the deposit goes back to them.

Condo fobs and garage remotes can cost more than a key, so check the building's replacement price before you set the deposit, and write down what was handed over at the move-in inspection.

What about damage?

With no damage deposit allowed, your protection comes from good records and good screening:

• a move-in inspection with dated photos of every room, signed by both of you
• a move-out inspection done the same way
• a tenant whose past landlords confirm they left their last home in good shape

If a tenant causes damage beyond normal wear and tear and won't pay for it, you can apply to the Landlord and Tenant Board. The inspection reports are your strongest evidence.

Receipts and records

Give the tenant a receipt for every deposit, and for rent whenever they ask; you can't charge for receipts. Keep a simple record of the deposit amount, each year's interest and any top-up. It saves a lot of arithmetic when the tenancy ends, sometimes years later. Our tenants stay an average of 1.7 years.

Sources

• CLEO, Deposits (January 2025)
• Government of Ontario, Guide to Ontario's standard lease (updated October 27, 2025)
• Government of Ontario, Residential rent increases (2026 and 2027 guideline, updated June 23, 2026)
• Landlord and Tenant Board, A Guide to the Residential Tenancies Act (December 2020)