Security Deposit Clause: What It Means and What's Legal
A security deposit clause outlines how much you must pay upfront, how it's held, and when you get it back. In Ontario, this clause is heavily regulated — many landlords include terms that are actually illegal.
What Is a Security Deposit?
A security deposit is money paid to your landlord before you move in. It is meant to protect the landlord against unpaid rent or damage beyond normal wear and tear.
In Ontario, the law is clear: a landlord can only collect a last month's rent deposit. This means the deposit must be applied to your final month of tenancy — not used as a general damage fund. Calling it a "security deposit" or "damage deposit" and using it any other way is a violation of the Residential Tenancies Act, 2006 (RTA).
Your Legal Rights in Ontario
- The maximum security deposit in Ontario is one month's rent — no more.
- The deposit must be applied toward the last month's rent, not held as a general damage fund.
- Your landlord must pay you interest on the deposit every year, at the provincial rent increase guideline rate.
- If the landlord does not use the deposit for last month's rent, they must return it with all accrued interest.
- Requesting a damage deposit in addition to the last-month's-rent deposit is illegal in Ontario.
What to Watch for in Your Lease
Security deposit clauses are one of the most commonly abused sections of a residential lease. Here are the red flags our analyzer looks for:
- Deposit exceeding one month's rent
- Lease calls the deposit a “damage deposit” or “cleaning deposit” (illegal in Ontario)
- No mention of interest on the deposit
- Clause says deposit can be used for “any damages at landlord’s discretion”
- Landlord does not provide a receipt for the deposit
- Clause waives your right to recover the deposit
Damage Deposits Are Illegal in Ontario
Some landlords include a clause requiring a separate "damage deposit" or "key deposit" in addition to the last month's rent. This is not permitted under the RTA. If your lease contains such a clause, you are not legally required to pay it — and you can file an application with the Landlord and Tenant Board (LTB) to recover any amount already paid.
Questions to Ask Your Landlord
- →How will my deposit be held — in a separate trust account?
- →How and when will you pay me the annual interest?
- →Under what specific circumstances would you deduct from my deposit?
- →Will you provide a written move-in inspection report so we agree on the property's condition?