Last Month's Rent (LMR) Deposit
Medium RiskA deposit, permitted in some provinces, that a landlord collects at the start of a tenancy and applies to the tenant's final month of rent rather than holding as damage security.
In Plain English
A last month's rent (LMR) deposit is money you pay upfront that goes toward your actual last month in the unit — not a damage deposit. In Ontario, it's the only rent deposit a landlord can collect, it can't be used for damage or cleaning, and it must earn you interest every year at the rent-increase guideline rate. When you're on your way out, it pays your final month; you don't pay that month separately.
Why It Matters for Tenants
Tenants routinely lose money by confusing an LMR deposit with a damage deposit, or by never claiming the annual interest they're owed. In Ontario the interest can add up over a long tenancy, and a landlord can't lawfully keep the LMR for anything other than the last month's rent.
Risk Level
Medium risk because the rules are clear but widely misunderstood. Landlords sometimes try to treat the LMR as a damage deposit, or fail to pay the required annual interest — both are violations a tenant can challenge.
Example Clause
The Tenant shall pay a last month's rent deposit of $2,000 upon signing, to be applied by the Landlord to the rent for the final month of the tenancy. The deposit shall accrue interest annually at the rate prescribed by the Residential Tenancies Act.
This is a representative example for educational purposes. Actual lease language varies.
Common Mistakes Tenants Make
- Confusing the LMR deposit with a damage deposit — in Ontario they are not the same
- Never claiming the annual interest owed on the deposit
- Letting a landlord apply the LMR to cleaning or damage, which isn't permitted
Provincial and State Variations
Ontario allows only an LMR deposit (capped at one month) and requires annual interest at the guideline rate — a separate damage deposit is illegal. Quebec bans deposits entirely. BC, Alberta, Manitoba, and most other provinces instead allow a security/damage deposit rather than a dedicated LMR deposit.