Security Deposit Rules in Ontario (2026)

The rule in one paragraph: only first, last, and keys

Ontario's Residential Tenancies Act limits what a landlord can require a tenant to pay before moving in. Beyond the first month's rent, the only deposit a landlord may collect is a rent deposit — an amount no greater than one month's rent, held to be applied to the last month of the tenancy — plus a refundable deposit for keys, access cards, or remote controls, capped at the direct cost of replacing them. Everything else a landlord might call a deposit is prohibited: damage deposits, cleaning deposits, pet deposits, and 'holding deposits' dressed up as something else are all illegal deposits, whatever name the lease gives them.

The practical consequence is simple and worth repeating: if your lease, or your landlord's move-in checklist, asks for anything beyond first month's rent, last month's rent, and a modest key deposit, you can refuse to pay it. If you already paid because you needed the unit, you have not lost the money — the Landlord and Tenant Board routinely orders illegal deposits repaid, as explained below.

What landlords cannot ask for — the banned list

Landlords get creative with names, so it helps to be explicit about what is banned regardless of the label:

• Damage deposits — money held against future damage to the unit. A landlord's remedy for actual damage is an application to the Landlord and Tenant Board, not a deposit held in advance
• Cleaning deposits — money held against the cost of cleaning when you move out. Same rule: no advance deposit, whatever the label
• Pet deposits — illegal, full stop. A landlord also cannot refuse to rent to you because you have a pet, and a 'no pets' clause in an Ontario lease is void (the one exception is a condominium whose declaration restricts pets, which can apply to the unit)
• Key deposits above replacement cost — a $300 or $500 'key deposit' for a standard key and fob is not a key deposit at all; it is an illegal deposit by another name. The lawful cap is the actual direct cost of replacing the keys
• 'Holding' or 'application' deposits that are kept if you do not take the unit — any pre-tenancy payment beyond what the Act allows should be treated with suspicion, and a landlord who keeps it should be challenged
• Post-dated cheques or automatic payments demanded as a condition of the tenancy — a landlord cannot require post-dated cheques or pre-authorized debits as a condition of entering into a tenancy agreement

Last month's rent: how the lawful deposit actually works

The rent deposit is not a security deposit with a different name — it has a specific legal job. It is held by the landlord and applied to the rent for the last month of the tenancy, so the tenant does not pay rent for that final month. Three rules govern it. First, the amount cannot exceed one month's rent — the rent charged at the time the deposit is collected. Second, the landlord must apply it to the last month's rent and cannot keep it for damages, cleaning, or unpaid amounts from earlier months; if the tenant owes arrears, the landlord's route is an LTB application, not the deposit. Third, the deposit is not the landlord's money to spend freely — it is held for the tenant's last month, and the interest rules below apply to it.

One common confusion: the deposit follows the tenancy, not the calendar. If your tenancy runs longer than expected, the deposit still applies to whatever turns out to be the final month — it is not consumed by the twelfth month of a tenancy that continues. And if you move out without notice or break the lease early, the deposit's application gets fact-specific — get advice before assuming it covers (or does not cover) your situation.

Interest on your deposit in 2026: 2.1%, and the top-up rule

The landlord must pay the tenant interest on the rent deposit every year, on or before the anniversary of the tenancy, at the provincial rent increase guideline rate for that year. For 2026, the Ontario rent increase guideline is 2.1% — so on a $2,000 monthly rent deposit, the annual interest is $42. The landlord may deduct the interest from the rent, or pay it directly; either way, it is owed, and a landlord who never mentions it is not thereby excused from paying it.

The mirror rule is the top-up. When the rent lawfully increases, the landlord may require the tenant to top up the rent deposit by the amount of the increase, so the deposit keeps pace with the current rent. In practice, in a year when rent rises by the guideline, the interest owed and the top-up requested roughly cancel each other out — the landlord pays 2.1% interest and asks for a 2.1% top-up. Neither side should treat that coincidence as an excuse to skip the accounting: the interest is a legal entitlement, and the top-up is a legal entitlement too, and both should appear on the record. If your rent is in a unit exempt from the guideline (first occupied for residential purposes after November 15, 2018), the interest rate still follows the guideline rate for the year, even though the rent increase itself is not capped by it.

You already paid an illegal deposit — how to get it back

Paying an illegal deposit does not make it legal, and the landlord has no right to keep it for damages, cleaning, or anything else. The route to recovery is a tenant application to the Landlord and Tenant Board on Form T1 (Tenant Application for a Rebate). The T1 is the general rebate application, and illegal deposits are one of its most straightforward uses — the LTB routinely orders them repaid, with the tenant's lease, receipts, e-transfer records, and any messages in which the deposit was demanded as the evidence.

Build the file before you apply: the lease or move-in paperwork showing the deposit, proof of payment (bank record, e-transfer confirmation, or receipt), and any texts or emails in which the landlord asked for it or described it as a damage, cleaning, or pet deposit. If the landlord later claims the money was for something else — first month's rent, for example — the paper trail is what settles it. Keep copies of everything, and do not let a landlord re-label the deposit in a later conversation: what matters is what was demanded and paid at the time.

Two cautions. First, do not withhold rent to 'recover' the deposit yourself — self-help deductions create a new dispute and can put you in arrears, which is a far worse position than being a creditor on a T1. Second, if the landlord is also withholding the deposit at move-out while claiming damages, remember the landlord cannot apply the rent deposit to damages at all: damages claims go to the LTB on their own application, and the tenant can dispute them there. The deposit and the damages claim are separate questions, and the landlord does not get to merge them.

At move-out: what the landlord can and cannot deduct

Move-out is where most deposit disputes actually happen, so the rule is worth stating plainly. The rent deposit is applied to the last month's rent — that is its entire job. The key deposit is returned when the keys, fobs, and remotes come back, up to the replacement cost if any are missing. Nothing else is deducted from either deposit, because neither deposit is a fund for damages or cleaning.

If the landlord believes you caused damage beyond normal wear and tear, or left the unit in a state requiring unusual cleaning, the landlord must apply to the LTB and prove it — with move-in and move-out inspection evidence, photos, and receipts. Tenants should protect themselves at both ends: photograph the unit on move-in day and again on move-out day, keep the move-in inspection report if one exists, and return the keys with a written record of the handover. Normal wear and tear — faded paint, minor scuffs, worn carpet in traffic areas — is the landlord's cost of doing business, not a tenant's debt.

What this page doesn't cover

This page explains Ontario's deposit rules under the Residential Tenancies Act only. It does not cover tenancies exempt from the Act (such as most care homes, many student residences, and units shared with the owner, where the Act's deposit rules may not apply), rent-geared-to-income or social housing rules, or commercial tenancies. It is a self-help explainer, not legal advice: if a deposit dispute is already before the LTB, or if the amount is large, get advice on your specific file before acting.

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