- A landlord may collect a last month's rent (LMR) deposit of no more than one month's rent (or one rental period), and it must be applied to the final month of the tenancy — never to damage.
- The LMR deposit must earn interest every year, at the same rate as the annual rent increase guideline.
- Damage deposits, key deposits beyond actual cost, pet deposits, and “cleaning deposits” are not allowed under the Residential Tenancies Act.
- When rent goes up, the landlord can ask you to top up the LMR deposit so it still equals one month's rent.
- If a landlord keeps or misuses your deposit, you can apply to the Landlord and Tenant Board (often a T1) to get it back with interest.
The Short Answer
In Ontario, the only rent-type deposit a landlord can require is a last month's rent (LMR) deposit of up to one month's rent, and it can only be applied to the final month of the tenancy. It must earn interest every year at the rent-increase guideline rate. Damage deposits, pet deposits, and cleaning deposits are illegal. If a landlord keeps or misuses your deposit, you can apply to the Landlord and Tenant Board to recover it with interest. You can estimate what you are owed with our last month's rent interest calculator, and our landlord and tenant lawyers can help if a deposit is being handled improperly.
What a Landlord Can Collect
- A last month's rent deposit — no more than one month's rent (or one rental period)
- A refundable key deposit equal to the actual replacement cost of the key, fob, or remote
- Post-dated cheques or automatic payments only if the tenant agrees — a landlord cannot require them
Deposits That Are Illegal
The following are not permitted under the Residential Tenancies Act:
- Damage or security deposits
- Pet deposits
- Cleaning deposits
- Key deposits that exceed the actual cost of the key or device
If you paid a damage deposit or similar illegal charge, you can ask the Landlord and Tenant Board to order it returned. Agreeing to pay it does not make it legal.
Interest on Your Deposit
The landlord must pay interest on the LMR deposit once a year, at a rate equal to the annual rent increase guideline in effect. Over a multi-year tenancy this adds up, and it is a right many tenants do not realize they have. If the interest has never been paid or credited, it is owed.
Use our Last Month's Rent Interest Calculator to estimate the interest that should have accrued on your deposit over the length of your tenancy.
Top-Ups When Rent Increases
Because the LMR deposit must equal one month's rent, a landlord may ask you to top it up after a lawful rent increase so the deposit still matches the new rent. The annual interest you are owed is commonly applied toward that top-up. Either way, you should receive credit for the interest — it does not simply disappear.
Getting Your Deposit Back
In the normal course, you do not receive the LMR deposit as a cash refund — it is applied to your actual last month of rent, meaning you do not pay rent that month. What can still be outstanding is unpaid interest, or the whole deposit if the landlord tries to keep it improperly (for example, for alleged damage). Those amounts are recoverable through the Board.
The T1 Application
A T1 (Tenant Application for a Rebate) is the usual route to recover money a landlord collected or retained illegally, including an unlawful deposit or unpaid deposit interest. You set out what was collected, why it was not permitted, and what you are owed. Keep your lease, receipts, and payment records — they are the core evidence.
What Landlords Should Get Right
- Collect only a lawful LMR deposit (and, if needed, a key deposit at actual cost)
- Pay or credit the annual interest — do not let it accumulate unpaid
- Never apply the LMR deposit to damage or cleaning
- Handle alleged damage as a separate claim, not by seizing the deposit
Common Mistakes
These are illegal in Ontario and can be ordered returned to the tenant.
Deposit interest accrues every year at the guideline rate — unpaid interest is money owed to the tenant.
The last month's rent deposit can only be applied to the last month's rent.
Tenants who cannot prove what they paid struggle to recover it. Keep the lease and all receipts.
If a deposit is being withheld or misused, call our Toronto landlord and tenant team at 416-274-2222 for a free consultation.
Frequently Asked Questions
A landlord can require a last month's rent (LMR) deposit of no more than one month's rent (or one rental period's rent for non-monthly tenancies). They can also charge a refundable key deposit equal to the actual cost of the key or device. That is essentially it.
No. Ontario landlords cannot collect a damage deposit, a security deposit for damage, a pet deposit, or a cleaning deposit. The last month's rent deposit is the only rent-type deposit allowed, and it can only be used for the last month's rent.
No. The LMR deposit can only be applied to the rent for the final month of the tenancy. Using it for damage, cleaning, or anything else is not permitted. A landlord who believes a tenant caused damage must claim that separately, not raid the LMR deposit.
Yes. The landlord must pay interest on the LMR deposit every year, at a rate equal to the rent increase guideline in effect at the time. In practice this is often applied by having the interest top up the deposit to match a new, higher month's rent, or paid to the tenant.
Because the LMR deposit must equal one month's rent, a landlord can ask you to top it up when the rent legally increases. The annual interest you are owed is often used toward that top-up. You should receive credit for the interest either way.
Usually you do not get it “back” in cash — it is applied to your actual last month of rent, so you simply do not pay rent that month. You are still owed any unpaid interest. If a landlord wrongly keeps it or applies it improperly, you can apply to the Landlord and Tenant Board to recover it with interest.
First and last month's rent is allowed (the “last” is the LMR deposit). An additional damage deposit is not allowed. If you already paid an illegal deposit, you can seek its return through the Board.
The deposit still applies only to a last month of rent. Ending a tenancy early raises separate issues about notice and the landlord's duty to try to re-rent — but it does not convert the LMR deposit into a penalty the landlord simply keeps. Get advice if a landlord is treating your deposit as a cancellation fee.