A tenant in Toronto moved out, and the locker owner kept their "security deposit" — then ghosted. When they asked what to do, the answer surprised everyone who'd rented anywhere else: in Ontario, that deposit was illegal from the moment it was collected.

If you learned renting from American TV, American articles, or an American landlord, you probably assume a security deposit is just how renting works. In Ontario, it's backwards. Here's the actual law, what landlords can legally collect, and what to do if someone took money they shouldn't have.

The one-line version

Ontario landlords cannot collect security deposits, damage deposits, pet deposits, or cleaning fees. The only two lawful deposits are last month's rent and a small refundable key deposit. Everything else is an offence under the Residential Tenancies Act.

What the law actually says

Section 105 of the RTA prohibits landlords from requiring or receiving a security deposit. Section 234 makes collecting one an offence — not a grey area, not a technicality.

The lawful deposits, and only these:

  1. Last month's rent deposit (sections 105–106). Collected once, at the start of the tenancy, and it must be applied to the final month's rent. The landlord also owes you interest on it every year — most tenants never know this, and most landlords never pay it.
  2. Refundable key deposit (O. Reg. 516/06, s.17). Capped at the direct replacement cost of the key or fob. A $50 fob gets a $50 deposit, not $300.

That's the complete list. Damage deposits, pet deposits, guest deposits, "move-in fees" — all unlawful for RTA-covered tenancies. And here's the part that shocks people: it doesn't matter if you agreed to it. Section 4 of the RTA says you can't contract out of these protections, even voluntarily. A clause in your lease saying "tenant agrees to a $500 damage deposit" is void the day it's signed.

Why everyone is confused

Almost all rental advice on the internet is American. In most US states, security deposits of one month's rent are standard and regulated. So tenants moving to Ontario — and new landlords Googling "how much deposit can I charge" — land on confident, detailed, completely wrong answers.

The Ontario rule exists for a reason: it caps how much money a landlord can demand before handing over the keys, which matters most to the tenants with the least leverage. Landlords aren't left defenceless — they're just expected to protect themselves with screening (income verification, references, rental history) instead of cash held hostage.

If you're a tenant and paid one

You can get it back. Tenants can file a T1 application with the Landlord and Tenant Board under section 135 to claw back any illegal deposit or fee — even if you offered to pay it voluntarily. Practical steps:

  • Ask in writing first. Many landlords refund immediately once they learn the rule; some genuinely didn't know.
  • Keep everything. The lease clause, e-transfer records, texts where the deposit was demanded.
  • File the T1 if they refuse. The Board can order the money returned.

One caution: the last month's rent deposit is not the landlord "keeping" your money — it's applied to your final month. Don't confuse the two when you move out; give proper notice and the deposit covers that last month automatically.

If you're a landlord

Collect these and only these: last month's rent, plus a key deposit capped at replacement cost. Then protect yourself the legal way:

  • Screen properly. Income verification, employment confirmation, references from previous landlords, and a real conversation. A good tenant beats a deposit every time.
  • Give receipts. Section 109 requires rent receipts on request — and organized paperwork wins at the Tribunal.
  • Pay the annual interest on the rent deposit. It's the law, and it's the kind of detail that signals you're a landlord who knows the rules.

Charging an illegal deposit doesn't just risk a T1 rebate — it hands your tenant a documented offence the first time there's any other dispute. It's the most expensive "protection" you can buy.

The pattern

Ontario's rental law keeps coming back to the same idea: limit what landlords can take up front, and settle disputes after with evidence. Security deposits, the 7-day N4, the ban on arbitrary fees — they're all the same philosophy. Tenants: know that the money you hand over on day one has strict legal limits. Landlords: your protection is screening and paperwork, not deposits.

This post explains the law as written; it isn't legal advice. For disputes, talk to a paralegal or legal clinic.

Sources

  • Residential Tenancies Act, 2006, S.O. 2006, c. 17 — ss. 105–107 (deposits), s. 135 (tenant applications), s. 234 (offences): https://www.ontario.ca/laws/statute/06r17
  • O. Reg. 516/06, s.17 — key deposit cap: https://www.ontario.ca/laws/regulation/060516
  • "Which kinds of deposits and advance rent payments are lawful?" — Residential Tenancies Ontario: http://residential-tenancies-ontario.blogspot.com/2021/08/which-kinds-of-deposits-and-advance.html
  • TenantRights.ca — "Recover Your Rental Deposit After Moving Out in Ontario": https://tenantrights.ca/ontario/recover-your-rental-deposit-after-moving-out-in-ontario