Can a Landlord Ask for a Damage Deposit in Ontario?

You have found a place and the landlord asks for a "damage deposit" or "security deposit" on top of the first month's rent. It is a common request, and many tenants pay it without knowing whether it is allowed.

In Ontario, the rules on deposits are narrower than most people expect. This article explains what a landlord can collect, how interest on a deposit works, and what you can do if you have already paid something you should not have.

What deposit can an Ontario landlord collect?

A landlord can collect only a rent deposit. The maximum is one month's rent for a monthly tenancy, or one week's rent for a weekly tenancy.

A rent deposit has one job. It can be applied only to the rent for the last period before you move out. It cannot be used to pay for repairs or damage.

A separate "damage deposit" or "security deposit" is a fee the Act does not allow. Whether a different item, such as a deposit for keys or fobs, is permitted is not something to assume. Ask a lawyer or the Landlord and Tenant Board (LTB) before you pay it.

Rent deposit versus damage deposit

Interest on your rent deposit

Your landlord must pay you interest on the rent deposit every year. The rate is the rent increase guideline rate.

The guideline is 2.1% for 2026 and 1.9% for 2027. It was 2.5% for each of 2023, 2024 and 2025. Check the guideline for the year in question before you work out an amount.

Not paying the annual interest is itself a listed landlord offence.

Rent increases and your deposit

If your landlord gives a rent increase notice, they can ask for the deposit to rise by the same amount. They cannot ask for more than that.

Rent can generally be raised only if at least 12 months have passed since you moved in or since the last increase. The landlord must give at least 90 days' written notice on Form N1, N2 or N3. A guideline increase does not need LTB approval.

• Keep your lease and any rent increase notices together with your deposit receipt.
• Compare the deposit increase to the rent increase, and ask the landlord to explain any difference.
• Note the date each year when interest should be paid.

If you were overcharged, what are your options?

Charging a fee the Act does not allow, using a rent deposit for anything other than last month's rent, and not paying annual interest are all offences. The maximum fine on conviction is $100,000 for an individual and $500,000 for a corporation.

That does not mean every overcharge ends in a prosecution. The practical route to getting money back depends on your facts, such as what you paid, when, and whether you are still a tenant. A lawyer or the LTB can confirm which application fits and any time limit that applies.

• Keep proof of what you paid: receipts, e-transfer records, texts or emails.
• Check whether the payment was labelled as a damage, security, pet or similar deposit.
• Ask the landlord in writing to return or correct the amount, and keep a copy.

What to do next

• Before signing: ask what each upfront payment is for, and get it in writing.
• Pay no more than one month's rent (or one week's for weekly tenancies) as a deposit.
• Get a receipt that calls it a rent deposit.
• Diarize the yearly interest and ask for it if it is not paid.
• If you have already paid a damage deposit, collect your records and get advice on the right application.

If the landlord pressures you to pay an unlawful fee, do not rely on verbal assurances. Get advice before you pay or sign.

Frequently asked questions