Rent deposit (last month’s rent)임대 보증금 (마지막 달 월세)

What is it?

A rent deposit is one month’s rent that the landlord collects up front when you rent a home. People often call it "last month’s rent" (LMR). As the name says, it is used as the rent for your last month.

It is not like the large deposits used in Korea. Ontario’s Residential Tenancies Act, 2006 (the RTA) allows a landlord to collect only this one kind of security deposit (section 105). A damage deposit (money held in case you damage the home) is not allowed.

The landlord can only ask for a rent deposit on or before the day you sign the lease (section 106 (1)). A landlord cannot add one later for a tenant who already lives there.

How much can it be?

No more than the lesser of one month’s rent and the rent for one rental period (for example one week in a weekly tenancy) (section 106 (2)). If the rent is $2,400 a month, the rent deposit can be at most $2,400.

If the rent goes up lawfully, the landlord may ask you to top up the deposit to match the new rent (section 106 (3)). The landlord can use the interest on the deposit to do that (section 106 (7)).

In the Ontario standard lease, section 8 records the rent deposit and section 9 the key deposit. There is no box for any other deposit.

What about interest?

The landlord must pay you interest on the rent deposit every year. The rate is the rent increase guideline in effect when the interest is due (section 106 (6)). Ontario has published a guideline of 2.1% for 2026 and 1.9% for 2027.

For example, on a $2,400 deposit in a year with a 2.1% guideline, the interest is $50.40. If the landlord does not pay it, you may deduct that amount from a later rent payment (section 106 (9)).

After a rent increase, the landlord may use the interest to top up the deposit instead of paying it in cash. But only the amount needed to bring the deposit up to the new rent can be kept this way; any interest left over must still be paid to you (section 106 (7)). Either way, it is good practice to work it out every year and tell you in writing.

When and how is the deposit used?

• Only as the rent for the last rental period (usually the last month) before the tenancy ends (section 106 (10)). You should not be asked to pay the last month’s rent again.
• It cannot be used for repairs or cleaning. If a tenant damages the unit, the landlord must apply to the Landlord and Tenant Board (LTB) separately.
• If you signed a lease but the landlord cannot give you the unit, the deposit must be repaid (section 107 (1)).
• If the home is sold, the new landlord cannot ask for a new deposit (section 106 (4)). The deposit carries over to the new owner.
• If you ask, the landlord must give you a receipt for rent and for the deposit (section 109). If you paid in cash, always get a receipt.

If you were asked for an illegal deposit

If you paid money the law does not allow, such as a damage deposit, a pet deposit, a "cleaning fee" or a two-month deposit, you can file Form T1 (Tenant Application for a Rebate) with the LTB to get it back (section 135). You must apply within one year of paying (section 135 (4)).

Collecting a deposit the Act does not allow, not paying the yearly interest, or not applying the deposit to the last month’s rent are offences (section 234). On conviction the fine can be up to $100,000 for an individual and $500,000 for a corporation (section 238).

Even if the lease says "damage deposit $1,000" and you signed it, that clause has no effect. A lease term that goes against the RTA is void (section 4).

Paying many months of rent in advance

In the Korean community it is common for newcomers and students with no Canadian credit history to pay 6 or 12 months of rent at once to get a place. A landlord cannot require this as a condition of renting (sections 134 (1) and 105), because no deposit above one month’s rent is allowed.

The Act does not say in so many words what happens when a tenant suggests it first. This can be judged case by case, so confirm it with a legal clinic, a lawyer or the LTB before you pay. If you do pay ahead, get a receipt that shows the date and which months the money covers, and write in the lease how it will be applied.

Example

If you are the landlord

• Collect at most one month’s rent, and only on or before signing. Write the amounts in sections 8 and 9 of the standard lease and give receipts.
• Do not collect damage, pet or cleaning deposits. Protect yourself with tenant screening (credit check, references) and, if needed, an LTB application.
• Every year, work out the deposit interest. After a rent increase you may keep only the amount needed to top up the deposit; pay the rest to the tenant, and tell the tenant in writing.
• A key deposit must be refundable and no more than the expected replacement cost. Return it as soon as the keys come back.