As a landlord, one of your first ideas to protect your rental investment is to ask a deposit to your future tenants. There are different types of deposits. Which ones are you legally allowed to ask in your province? In which circumstances can you keep it?
Understanding the various deposits
There are different types of deposits:
- Rent deposit
- How much? It equals a period of rent, so for an annual lease it’s a month.
- When? You can use it only for the last month’s rent before the tenancy ends.
- Security deposit
- How much? Half of one month’s rent in British Columbia; One month’s rent in Alberta.
- When? You can use it to repair damage caused by your tenants.
- Pet deposit
- How much? Usually half of one month’s rent.
- When? You can only use it to repair damage caused by your tenant’s pet.
- Key deposit
- How much? The cost of replacing the keys.
- When? You can use it if your tenants don’t give you your keys back.
Be transparent with the applicants you meet and tell them if you are going to require a deposit from them. The best moment to collect it is at the moment of signing the lease with your new tenant.
Quebec – No deposit allowed
According to the Article 1904 of the Civil code of Quebec, asking for a deposit is illegal. The biggest landlord association in Quebec, CORPIQ, is actively lobbeying to change this as the province of Quebec is the only place in the Occidental world where landlords can’t ask for deposits. So very few options for Quebec landlords to protect their rents and properties… APRIL’s Landlord Protection is the most comprehensive solution to avoid the financial burden of unpaid rents and damage caused by tenants.
Ontario – The last month’s rent deposit
5 things you need to know about deposits in Ontario:
1. You can request a Key deposit as long as it refundable
2.You can ask for a “Last month’s deposit”.
3. If you increase your rent, you can ask your tenant to give you the difference to make the deposit match.
4. You have to pay your tenant interests on the deposit every year, the same rate as the Ministry of Housing’s rent increase guideline.
5. Despite many landlords’ frustration, asking for a security or a pet deposit is illegal in Ontario. So rely on APRIL’s Damage by tenants protection, it includes coverage for malicious and non malicious damage to your rental plus pet damage.
British Columbia – Security and pet deposits
5 things you need to know about deposits in B.C.:
1. Accepting a deposit means that a tenancy agreement has started and you can’t change your mind, so can’t your tenant.
2. You can give a lease termination notice to your tenants if they failed to pay you the deposit within 30 days.
3. You can only ask for ONE security or pet deposit per tenancy agreement.
4. Unlike Ontario, you can’t increase the deposit to match a rent increase.
5. You can’t automatically keep all or part of the deposit at the end of the tenancy.
Alberta – All-in-one deposit
5 things you need to know about deposits in Alberta:
1. You must transfer your deposit in a trust account within 2 days of the collection; until your tenants move out.
2. You must give annual interests to your tenants.
3. You can keep all or part of the deposit if your tenants didn’t pay their rent; damaged your rental or didn’t clean it; or didn’t give you the keys back.
4. You must send to your tenants an estimated or final statement of account within 10 days of their move. It would include the amount being returned to the tenant. If any deductions from the initial amount, you need to explain why and state the amounts. You must send along a cheque (if applicable).
5. If your tenants disagree and you don’t manage to come to an agreement after reading their point of view; you may end resolving this through the Provincial Court or the Residential Tenancy Dispute Resolution Service.