Ontario landlord guide

Last Month's Rent Deposit in Ontario: Limits, Interest and Key Deposits

  • Checked against official sources
  • 5 min read
  • General information, not legal advice

In short

In Ontario, the only deposit a landlord may collect is a rent deposit (usually called last month's rent). It must be requested on or before entering into the tenancy agreement, cannot be more than one month's rent (or one rent period, if shorter), and must be applied to the rent for the last rent period. Damage, security and pet deposits are not allowed. A refundable key, fob or card deposit is permitted only up to the expected direct replacement cost. Each year, the landlord must pay the tenant interest on the deposit at the rent increase guideline rate in effect when the payment is due: 2.1% for 2026. This guide is general information, not legal advice.

On this page
  1. What deposits can an Ontario landlord collect?
  2. How much can the last month's rent deposit be?
  3. How much interest do landlords owe on last month's rent in 2026?
  4. Can the interest be used to top up the deposit after a rent increase?
  5. What happens to the deposit at the end of the tenancy?
  6. What can a tenant do if the landlord doesn't pay the interest?

What deposits can an Ontario landlord collect?

Section 105 of the Residential Tenancies Act, 2006 (RTA) says the only security deposit a landlord may collect is a rent deposit collected under section 106. The Act defines a security deposit broadly: money, property or a right given to the landlord as security for the tenant's obligations, or to be returned when a condition happens.

  • Rent deposit (last month's rent): allowed, within the limits below.
  • Damage deposit, security deposit or pet deposit: not allowed. Ontario's standard lease guide gives damage and pet deposits as examples of extra terms that are void.
  • Refundable key, remote entry device or card deposit: allowed, but not more than the expected direct replacement cost (O. Reg. 516/06, s. 17).
  • Fees, premiums, commissions, bonuses, penalties or non-refundable key deposits: prohibited under section 134 of the RTA, whether or not the money is refundable, unless a regulation exempts them.

How much can the last month's rent deposit be?

Under section 106, a landlord may require a rent deposit only if they do so on or before entering into the tenancy agreement. The deposit cannot be more than the lesser of one rent period's rent and one month's rent. For a monthly tenancy that means one month's rent; for a weekly tenancy, one week's rent.

The deposit can only be used as rent for the last rent period before the tenancy ends. The Landlord and Tenant Board's guide to the RTA says it cannot be used for anything else, such as repairing damage to the unit.

If a building is sold, the new landlord cannot require a fresh rent deposit when the tenant already paid one to the previous landlord (s. 106(4)). The deposit stays with the tenancy.

How much interest do landlords owe on last month's rent in 2026?

Section 106(6) requires the landlord to pay the tenant interest annually on the rent deposit, at a rate equal to the rent increase guideline in effect when the payment becomes due. Ontario's published guideline is 2.1% for 2026 and 1.9% for 2027. See our guideline guide for how the guideline itself is set.

Worked example using the 2026 rate:

  1. Rent is $2,000 a month and the tenant paid a $2,000 rent deposit.
  2. Interest due in 2026: $2,000 x 2.1% = $2,000 x 0.021 = $42.
  3. The landlord owes the tenant $42 for that year.

Can the interest be used to top up the deposit after a rent increase?

Yes. If the lawful rent goes up, section 106(3) lets the landlord require the tenant to pay an additional amount to bring the deposit up to the new one-month maximum. Section 106(7) also lets the landlord deduct that shortfall from the interest owed; the deducted amount is deemed to form part of the tenant's rent deposit.

  1. Continuing the example, the landlord serves a proper rent increase notice and rent rises by 2.1%: $2,000 x 1.021 = $2,042.
  2. The maximum deposit is now $2,042, so the deposit is $42 short ($2,042 - $2,000).
  3. Interest owed is $42. The landlord may keep the $42 as a top-up instead of paying it out. The deposit becomes $2,042 and $0 changes hands.

A rent increase still needs proper written notice. See our N1 guide for the notice rules.

What happens to the deposit at the end of the tenancy?

Section 106(10) says the landlord must apply the rent deposit to the rent for the last rent period before the tenancy ends. The deposit cannot be held back to cover damage. A landlord who believes the tenant caused damage has to deal with it separately, for example through an application to the Landlord and Tenant Board.

If a prospective tenant paid a deposit but never gets vacant possession of the unit, section 107 requires the landlord to repay it. The exception is when the tenant agrees to rent a different unit from the same landlord instead.

What can a tenant do if the landlord doesn't pay the interest?

If the landlord does not pay the interest when it is due, section 106(9) allows the tenant to deduct the amount from a later rent payment. Separately, section 135 lets a tenant, former tenant or prospective tenant apply to the Landlord and Tenant Board for an order to repay money collected or retained in breach of the Act, such as an illegal damage deposit or an excessive key deposit. That application must be filed within one year after the money was collected or retained.

Keep a record for each tenancy: deposit amount, date paid, the guideline rate used each year, and how the interest was paid or applied. On request, landlords must give a free receipt for any rent or rent deposit paid (s. 109).

Frequently asked questions

Can a landlord ask for a security deposit in Ontario?

No. The only security deposit allowed is a rent deposit used for the last rent period. Damage, security and pet deposits are not permitted under the Residential Tenancies Act.

Is last month's rent mandatory in Ontario?

No. A landlord may require it, but only on or before entering into the tenancy agreement, and it cannot exceed one month's rent or one rent period, whichever is less.

What is the interest rate on last month's rent in Ontario for 2026?

The rate equals the rent increase guideline in effect when the interest payment is due. The 2026 guideline is 2.1%, so a $2,000 deposit earns $42. The 2027 guideline is 1.9%.

Are key deposits legal in Ontario?

A refundable deposit for keys, fobs or access cards is allowed, but it cannot be more than the expected direct replacement cost. Non-refundable key fees are prohibited.

Can a landlord use last month's rent to pay for damage?

No. The deposit must be applied to the rent for the last rent period before the tenancy ends. It cannot be used for repairs.

Does a new owner collect a new rent deposit when a building is sold?

No. A new landlord cannot require a rent deposit if the tenant already paid one to the previous landlord, except in a specific mortgage-sale situation set out in the Act.

Sources

  1. Residential Tenancies Act, 2006, S.O. 2006, c. 17 (ss. 105, 106, 107, 109, 134, 135)
  2. O. Reg. 516/06 (General), s. 17: exemptions from s. 134
  3. Ontario: Rent increase guideline
  4. Landlord and Tenant Board: A Guide to the Residential Tenancies Act
  5. Ontario: Guide to Ontario's standard lease

General information, not legal advice. For your situation, contact the Landlord and Tenant Board or a licensed paralegal or lawyer.