An Ontario renter paid $375 toward a room rental, half of one month's rent, then never signed anything and never moved in. When they asked for the money back, the landlord said no. The question landed on r/legaladvicecanada this week and pulled two dozen replies in a day, because thousands of renters have stood in the same spot: money handed over, keys never picked up. r/legaladvicecanada

Short answer: the landlord almost certainly cannot keep it. But the reason why has a fork in it that matters, especially for room rentals.

The only deposits an Ontario landlord can take

Ontario bans security deposits outright. Section 105(1) of the Residential Tenancies Act says the only security deposit a landlord may collect is a rent deposit collected in accordance with section 106. Legal Line

That leaves exactly two lawful charges at move-in:

  • A last month's rent deposit. Section 106(1) allows it only if the landlord asks for it on or before the tenancy agreement is entered into, and section 106(2) caps it at one month's rent or one rent period, whichever is less.
  • A refundable key deposit, capped at the direct replacement cost of the key or fob under Ontario Regulation 516/06. LTB order

No damage deposit, no pet deposit, no cleaning fee, no "application fee" that sticks. If a landlord collects any of those, the tenant can file a T1 application at the Landlord and Tenant Board to get it back. OntarioLandlord

The never-moved-in rule

Here is the part landlords and tenants both miss: a rent deposit belongs to a tenancy. Section 107(1) of the RTA requires the landlord to return the deposit if possession of the unit is not given to the prospective tenant. Paid half a month's rent as a deposit, never got the keys, never slept a night there? The deposit comes back. Buttonwood

There is a second, even simpler fork. If no tenancy agreement was ever formed, not in writing and not orally, then what was paid was never a rent deposit at all. Ontario's Divisional Court made this point in Musilla v. Avcan: a payment made at the rental-application stage, where the paperwork was an application rather than a lease, was not a deposit under the Act because no tenancy had been established, and the landlord had no authority to keep it.

One honest caution. The RTA treats a tenancy agreement as a written, oral, or implied agreement for occupancy, so "I never signed anything" is strong evidence but not the whole test. An oral yes over the phone plus a deposit can still be an agreement. In this story it barely matters: either way the money comes back, because section 107(1) covers the prospective tenant who never got possession. Landlord's Self Help Centre

The room-rental twist: the exemption changes the courtroom, not the answer

This is where rooms get tricky. Section 5(i) of the RTA says the Act does not apply to living accommodation where the occupant shares a kitchen or bathroom with the owner, the owner's spouse, parent, or child, and that person lives in the building. A room in the landlord's own home, sharing the kitchen, is the textbook case. OpenRoom

What the exemption does: it takes the Landlord and Tenant Board out of the picture. No T1 application, no LTB hearing. What it does not do: hand the landlord your money. The dispute simply becomes a plain contract claim, heard in Small Claims Court. Courts look past the wording of an agreement to the true nature of the living arrangement, and the exemption decides where you fight, not who wins. IsThatLegal

So the test for the $375 renter is two questions, in order. First: was I ever in a tenancy agreement, even an oral one? Either answer leads to a refund. Second: was the room in the landlord's own home with shared facilities? That answer only tells you which door to knock on: the LTB, or Small Claims Court.

How to get it back

Keep the e-transfer receipt and every text where the landlord refused the refund. Send a written demand with a clear deadline; a week is the usual ask. If the RTA applied, a T1 application at the LTB is the route for an illegally collected or retained deposit. If the room-share exemption applied, Small Claims Court is built for exactly this size of dispute.

One last thing for landlords. Collecting a security deposit contrary to section 105 is not just a bad look; section 234 of the RTA makes it an offence. Keeping $375 from someone who never moved in is the most expensive $375 a landlord will ever "save." RTA, Ontario.ca

And for everyone: this is why every payment needs a receipt and a record. When rent and deposits move through LIVIO, both sides hold the same paper trail, and "what deposit?" never gets to be an argument. Proof protects good landlords and good tenants alike.