A landlord in Ontario can collect exactly one deposit: last month’s rent. Section 105(1) is categorical — “The only security deposit that a landlord may collect is a rent deposit collected in accordance with section 106.” Damage deposits, pet deposits and cleaning deposits are illegal, refundable or not.
It is capped at the lesser of one rent period and one month’s rent, it can only be collected on or before the tenancy agreement is entered into, and it can only ever be applied to the last rent period — never to damage.
Interest is payable on it annually, at a rate equal to the rent increase guideline in effect when the payment becomes due. That is 2.1% for 2026 and 1.9% for 2027. If your landlord does not pay it, s.106(9) lets you deduct it from a later rent payment yourself.
How much can a landlord ask for as a deposit in Ontario?
One rent period’s worth, and no more. Section 106(2): “The amount of a rent deposit shall not be more than the lesser of the amount of rent for one rent period and the amount of rent for one month.”
For a monthly tenancy that is one month’s rent. For a weekly tenancy it is one week’s. There is no first-and-last-plus-damage tier; the “first and last” people talk about is the first month’s rent, which is just rent, plus the one lawful deposit.
Timing matters too. Section 106(1) permits a landlord to require a rent deposit “if the landlord does so on or before entering into the tenancy agreement.” A demand for a deposit three months into a tenancy is not authorised by s.106 at all.
Two further protections people rarely know about:
- A new owner cannot ask for it again. Section 106(4): a landlord “shall not require a tenant to pay a rent deposit if the tenant has already paid a rent deposit to the prior landlord.” If your building sells, the deposit follows.
- If you never get possession, it comes back. Section 107(1) requires repayment of the deposit if vacant possession of the unit is not given to the prospective tenant.
What can the deposit actually be used for?
The last rent period, and nothing else. Section 106(10): “A landlord shall apply a rent deposit that a tenant has paid to the landlord or to a former landlord in payment of the rent for the last rent period before the tenancy terminates.”
Note “shall apply.” It is not optional and it is not a fund the landlord holds against damage. The Board’s guide says it directly: the deposit “cannot be used for anything else, such as repairing damage to the rental unit.” Ontario’s Guide to the Standard Lease says the same: “A rent deposit cannot be used as a damage deposit.”
How much interest is owed on last month’s rent?
Section 106(6): a landlord “shall pay interest to the tenant annually on the amount of the rent deposit at a rate equal to the guideline determined under section 120 that is in effect at the time payment becomes due.”
So the interest rate tracks the rent increase guideline for the year the payment falls due.
| Deposit held | Interest due in 2026 (2.1%) | Interest due in 2027 (1.9%) |
|---|---|---|
| $1,800 | $37.80 | $34.20 |
| $2,200 | $46.20 | $41.80 |
| $2,600 | $54.60 | $49.40 |
| $3,000 | $63.00 | $57.00 |
| $3,500 | $73.50 | $66.50 |
Those are worked examples on round-number deposits so you can find the nearest one to yours. Multiply your deposit by 0.019 for 2027.
And if it is neither paid nor applied, s.106(9) gives you a self-help remedy: “Where the landlord has failed to make the payment required by subsection (6) when it comes due, the tenant may deduct the amount of the payment from a subsequent rent payment.”
Which other charges are legal, and which are not?
Section 134(1) is the prohibition. “Unless otherwise prescribed,” no landlord shall “collect or require or attempt to collect or require from a tenant, prospective tenant or former tenant of the rental unit a fee, premium, commission, bonus, penalty, key deposit or other like amount of money whether or not the money is refundable.”
The “unless otherwise prescribed” opening matters, because O. Reg. 516/06, s.17 sets out a closed list of the payments that are exempt from that prohibition. There are nine, and the ones a residential tenant will actually meet are these:
| Charge | Status | Authority |
|---|---|---|
| Last month’s rent deposit, capped at one rent period | Legal | s.105(1), s.106 |
| Refundable key, fob or card deposit, not more than the expected direct replacement cost | Legal | O. Reg. 516/06 s.17 para. 3 |
| Additional keys or fobs requested by the tenant, at no more than direct cost | Legal | s.17 para. 1 |
| Replacement keys at direct replacement cost — unless the landlord changed the locks on their own initiative | Legal | s.17 para. 2 |
| NSF charges levied by the bank, passed through | Legal | s.17 para. 4 |
| An NSF administration charge of no more than $20 | Legal | s.17 para. 5 |
| A unit-transfer charge at the tenant’s request, no more than $250 | Legal | s.17 para. 8 |
| Damage deposit or security deposit | Illegal | s.105(1), s.134(1)(a) |
| Pet deposit | Illegal | s.105(1), s.134(1)(a) |
| Non-refundable cleaning fee | Illegal | s.134(1)(a) — not in the s.17 list |
| Non-refundable key money | Illegal | s.134(1)(a) expressly names key deposits “whether or not refundable”; only the refundable, at-cost version in s.17 para. 3 is exempt |
| Charging for a rent receipt | Illegal | s.109(1) — receipts must be provided “free of charge” |
Ontario’s Guide to the Standard Lease confirms the headline items, listing as unenforceable any additional lease term that would “require the tenant to pay deposits, fees or penalties that are not permitted under the act (e.g., damage or pet deposits, interest on rent arrears).”
Can a landlord require post-dated cheques or automatic debit?
No. Section 108 is short and absolute: neither a landlord nor a tenancy agreement shall require a tenant or prospective tenant to provide post-dated cheques or other negotiable instruments for rent, or to permit automatic debiting of an account, automatic credit card charging or any other form of automatic payment.
You may agree to either. The Board’s guide puts the practical point well: once a method of payment is agreed, “it cannot be changed unless both the landlord and tenant agree.” So a landlord cannot switch you onto pre-authorised debit unilaterally either.
How do I get an illegal charge back?
File a T1, “Tenant Application for a Rebate of Money the Landlord Owes.” Section 135(1) lets a tenant or former tenant apply for an order that the landlord pay back “any money the person collected or retained in contravention of this Act.” Section 135(2) extends it to a prospective tenant — so an unlawful application fee paid by someone who never got the unit is recoverable.
The T1 also covers the deposit issues on this page: the landlord charged more than the lawful rent, did not apply the deposit to the last rental period, did not return a deposit where you never got possession, or owes you interest on it.
A checklist for the start of a tenancy
- One deposit only, no more than one month’s rent, collected on or before you sign.
- Get a receipt. It is free by law under s.109(1).
- If a key deposit is asked for, ask what the fob actually costs to replace and confirm in writing that it is refundable. That is the only version the regulation permits.
- Say no to pet, damage and cleaning deposits. They are not legal in Ontario however they are labelled.
- Diarise the deposit interest. Once a year, at the guideline rate. Ask for it in writing; if it does not come, s.106(9) lets you take it off a rent payment.
- Diarise the one-year limitation on anything you think was charged unlawfully.
Landlord, and not sure your paperwork holds up?
Send me your lease and your deposit and receipt practice and I will tell you where it is offside before a tenant does. If you are weighing whether to keep the unit or sell it, I will give you that read at the same time. No pitch, no obligation.
connect@jatindua.com · 437-987-1925 · Book a free consultation
Confidential. Reviewed personally and answered within 24 hours. I never share, sell or distribute your information.
Frequently asked questions
Is a damage deposit legal in Ontario?
No. Section 105(1) of the Residential Tenancies Act provides that the only security deposit a landlord may collect is a rent deposit under section 106. Damage deposits, pet deposits and cleaning deposits are prohibited, whether or not they are refundable, under section 134(1)(a).
How much deposit can a landlord ask for in Ontario?
No more than the lesser of one rent period’s rent and one month’s rent, under section 106(2). For a monthly tenancy that is one month. It can only be required on or before the tenancy agreement is entered into, under section 106(1).
How much interest is owed on last month’s rent deposit in Ontario?
Interest is payable annually at a rate equal to the rent increase guideline in effect when the payment becomes due, under section 106(6). That is 2.1% for payments falling due in 2026 and 1.9% for 2027. On a $2,600 deposit that is $54.60 for 2026 and $49.40 for 2027.
What if my landlord never paid me deposit interest?
Section 106(9) lets you deduct the amount from a subsequent rent payment. You can also file a T1 application with the Landlord and Tenant Board, but section 135(4) bars any order on an application filed more than one year after the money was collected or retained.
Can my landlord use my last month’s rent deposit for damage?
No. Section 106(10) requires the landlord to apply the deposit to the rent for the last rent period before the tenancy terminates. The Board’s guide states it cannot be used for anything else, such as repairing damage, and Ontario’s Guide to the Standard Lease says a rent deposit cannot be used as a damage deposit.
Are key deposits legal in Ontario?
Only in one form. Section 134(1)(a) prohibits key deposits whether or not refundable, but O. Reg. 516/06 section 17 paragraph 3 exempts a refundable key, fob or card deposit that is not greater than the expected direct replacement cost. A non-refundable key charge, or one above replacement cost, is illegal.
Can a landlord require post-dated cheques in Ontario?
No. Section 108 prohibits a landlord or a tenancy agreement from requiring a tenant or prospective tenant to provide post-dated cheques or to permit automatic debiting, credit card charging or any other automatic payment. A tenant may agree to those methods voluntarily.
Can a landlord charge an application fee or a credit check fee in Ontario?
Section 134(1)(a) prohibits collecting a fee from a prospective tenant, and the exemptions in O. Reg. 516/06 section 17 are a closed list that does not include an application or credit-check fee. That is a reading of the two provisions together rather than a statement published by the government, so treat it as the argument to make rather than a quotable rule.
Sources
- Residential Tenancies Act, 2006, S.O. 2006, c. 17 (e-Laws). Sections 6.1, 105, 106, 107, 108, 109, 120, 134 and 135. Consolidation current from 1 July 2026; accessed 10 August 2026.
- O. Reg. 516/06 under the Residential Tenancies Act, 2006 (e-Laws). Section 17, the closed list of payments exempt from the s.134 prohibition. Consolidation current from 21 July 2026.
- Government of Ontario — Rent increase guideline. The 2026 figure of 2.1% and the 2027 figure of 1.9% that set the deposit interest rate. Page updated 23 June 2026.
- Landlord and Tenant Board — A Guide to the Residential Tenancies Act. Deposit caps, the prohibition on using the deposit for damage, and payment-method rules.
- Government of Ontario — Guide to Ontario’s Standard Lease. Confirms a rent deposit cannot be used as a damage deposit, and lists damage and pet deposits among unenforceable lease terms.
- LTB Form T1 instructions. The grounds for a rebate application, including unpaid deposit interest and illegal charges.
Related reading
- Ontario’s 2027 rent increase guideline is 1.9% — N1 dates and the math
- Is your Etobicoke rental actually rent-controlled?
- The Ontario LTB forms guide — which form does what
- The Etobicoke rental market: a guide for landlords and tenants
- The N4 notice for non-payment of rent, explained
About the author — Jatin Dua, Etobicoke real estate agent
I am Jatin Dua, a Realtor with RE/MAX Quantum Realty, working out of 799 The Queensway in Etobicoke. Deposit interest is the single most commonly skipped obligation I see in small landlords’ paperwork, and illegal fees are the most commonly charged. Both are cheap to fix and expensive to be caught on.
Reach me at connect@jatindua.com or 437-987-1925.