Is a Security Deposit Legal in Ontario?

The Short Answer: No.

In Ontario, security deposits and damage deposits are illegal. Your landlord cannot require you to pay any deposit beyond the last month's rent deposit when you sign a lease. This is not a grey area — it is explicitly prohibited by the Residential Tenancies Act, 2006 (RTA).

What the Law Says

Section 105 of the RTA states that the only deposit a landlord can collect is a rent deposit equal to one month's rent (or one rental period, whichever is less). This deposit can only be applied to your last month's rent — not to repairs, cleaning, or damages.

Section 106 sets out the rules for this rent deposit:

• It cannot exceed one month's rent
• The landlord must pay you interest on it annually at the guideline rate
• It can only be applied to the last rental period
• It must be returned if never applied

Section 107 prohibits landlords from requiring a deposit as a condition of entering into a tenancy agreement, unless it is the last month's rent deposit described in section 106.

Common Illegal Deposit Requests

Toronto landlords frequently request deposits that violate the RTA:

• "Damage deposit" — Illegal. There is no provision for damage deposits in Ontario.
• "Key deposit" beyond replacement cost — A landlord may charge a refundable key deposit, but only for the actual replacement cost of the keys, not an inflated amount.
• "Pet deposit" — Illegal. Landlords cannot charge extra for pets.
• "First and last plus security deposit" — The "security deposit" portion is illegal. First month's rent and last month's rent deposit are permitted.
• "Post-dated cheques" — A landlord cannot require you to provide post-dated cheques as a condition of the tenancy (RTA s. 108).

What If You Already Paid a Security Deposit?

If you paid an illegal deposit, you have options:

1. Ask for it back — Your landlord is obligated to return any amount collected beyond the last month's rent deposit.
2. File a T1 Application at the Landlord and Tenant Board (LTB) — This is the formal process to recover money your landlord owes you.
3. Deduct it from rent — Some tenants offset the illegal deposit against rent, though this carries risk. Consult a legal clinic first.

Why This Matters for Your Lease

If your lease contains a clause requiring a security or damage deposit, that clause is void and unenforceable under section 4 of the RTA. The rest of your lease remains valid — only the illegal clause is struck out.

This is exactly the kind of clause RenterShield catches. Upload your lease to see if it contains illegal deposit requirements or other RTA violations.