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Rent, security deposits and interest

Given that each province and territory has its own residential tenancy acts, each will have their own rules and regulations about security deposits and interest.

Security deposits

Allowable rent deposits vary and depending in what jurisdiction you reside, landlords usually have the right to ask for a last month security deposit.

Security deposits are usually one-time payments that a tenant pays before moving into the premises. The landlord has the obligation to outline how much of a security deposit the tenant has to pay before moving in. The amount can generally not be more than one month’s worth of rent and the landlord usually has to hold the deposit until the end of the tenancy.

In many provinces, like Alberta, a landlord may keep the tenant’s security deposit when the tenant is planning to move out, if there is a good reason for keeping it or deducting an amount from it. Such reasons may include, but are not limited to:

  • The tenant owes money for rent;
  • The tenant has damaged the property and the landlord completed the inspection reports;
  • The tenant has not cleaned the property and the landlord completed the inspection reports;
  • The tenant has not returned the keys; or
  • The tenant owes money for fees.

In many provinces, too, the amount of the security interest depends on the term of the tenancy.

For example in Newfoundland and Labrador the security deposit that is charged is at the following rate depending on tenancy:

  • 3/4 of the first month's rent;
  • Weekly tenancy: no more than the amount of the rent payable for the first 2 weeks.

In Manitoba, the rule is that the landlord cannot collect more than one half of the first month’s rent. If the landlord has no claims against the deposit and accrued interest, it must be returned to the tenant within 14 days of the end of the tenancy. If a claim is made, the landlord is required to notify the tenant of the claim within 28 days. 

As you can see, the rules may differ from province to province and you will have to consult the appropriate legislation of your province or territory for the rules on security deposits for your province or territory.

Interest

If a tenant decides to move out, the initially collected deposit is returned to him/her. The way landlords often do it is instead of having to cut a cheque to the tenant after the last rent is paid, they just use the security deposit as the last month’s rent.

There is often a difference between the amount of the initial rent deposit and the rent as a tenant departs. If the tenant has not given the landlord additional money during the tenancy to increase the amount of the deposit, part of the interest owed, if applicable, is often used to cover the difference between the initial deposit amount and the amount of the last month's rent.

If you have issues with security deposits, interest and other tenant issues, you may want to consult a lawyer.

Read more:

Deposits CMHC

Security Deposits Alberta