Canada Tenancy Deposit Interest Rate FAQ (Province-by-Province)

Most Canadian provinces require landlords to pay interest on the security deposit (also called damage deposit) when refunding it to the tenant. The rates differ widely, the calculation methods differ, and Quebec — uniquely — does not allow security deposits at all. This FAQ summarises the deposit rules and current interest rates for each major province as of May 2026.

Q1. Why do landlords pay interest on deposits?

Provincial residential tenancy statutes recognise that the landlord holds the tenant’s money during the tenancy. To prevent landlords from earning a return at the tenant’s expense, statutes require interest to be paid on refund. The rates are typically below market interest, but reflect the legislative intent.

Q2. What is the deposit limit and interest rate in Ontario?

Last month’s rent (LMR) deposit only. Ontario does not allow damage deposits. Under Residential Tenancies Act 2006 (RTA), s.106, the landlord may require:

• Last month’s rent as a deposit, equal to the rent for one rental period (one month for monthly tenancies).
• No damage or pet deposits.
• No key deposits beyond replacement cost.

Interest rate (2026): 2.5% — set annually by the Landlord and Tenant Board (LTB) under RTA s.106(6) at the annual rent increase guideline. Calculation: rate × deposit, paid annually, applied to next month’s rent unless the tenant requests cash payment.

Source: Ontario LTB rent guideline notices.

Q3. What is the deposit limit and interest rate in BC?

Up to 50% of one month’s rent for security deposit. Pet damage deposit also up to 50% of one month’s rent. Total: max 100% of one month’s rent.

Under Residential Tenancy Act, s.20, the landlord must pay interest on the deposit at the prescribed rate. The rate is set by Residential Tenancy Regulation s.5 at the prime interest rate of the principal banker to the BC government, less 2%. The current rate is reviewed quarterly.

For 2026: the rate is approximately 0.45% as of January 2026 (subject to update per regulation).

Interest accrues from the date the landlord received the deposit until the date it is returned. The landlord must include the interest in the refund at end of tenancy.

Q4. What is the deposit limit and interest rate in Alberta?

Maximum security deposit: one month’s rent (RTA s.46(1)).

Under RTA s.46.4, the landlord must pay interest at the rate prescribed by Security Deposit Interest Regulation, Alta. Reg. 21/2004. The rate is set annually based on the Bank of Canada bank rate.

For 2026: 1.6% (set by the Minister; check the regulation for current rate). The interest is compounded annually and added to the refund.

Refund is due within 10 days of termination under s.46.5.

Q5. What is the rule in Quebec?

No security deposit allowed. Under Civil Code of Québec, Art. 1904, a lessor cannot demand any payment beyond the rent for the first month. Security deposits, damage deposits, key deposits, and “rent in advance” beyond one month are all prohibited.

If a Quebec landlord requires a deposit, the tenant can recover the full amount via the Tribunal administratif du logement (TAL).

There is no interest question because there is no deposit.

Q6. What about Saskatchewan, Manitoba, and the Maritimes?

Saskatchewan — Residential Tenancies Act 2006, s.30. Security deposit max 1 month’s rent. Interest at the Saskatchewan rate (currently 0.0% — set at zero for several years).

Manitoba — Residential Tenancies Act, s.31. Deposit max half month’s rent. Interest at the rate prescribed annually (currently 0.05% — historically very low).

Nova Scotia — Residential Tenancies Act, s.13. Deposit max half month’s rent. Interest historically prescribed but rates are very low.

New Brunswick — Residential Tenancies Act, s.13. Deposit held by the Rentalsman (custodial scheme similar to NZ Tenancy Services). Interest paid by Rentalsman at prescribed rate.

PEI — Rental of Residential Property Act. Deposit max 3 weeks’ rent. Interest at prescribed rate.

Newfoundland and Labrador — Residential Tenancies Act 2018. Deposit max 3 quarters of one month’s rent. Interest at prescribed rate.

Q7. How is interest calculated?

Most provinces use simple interest based on:

• Deposit amount × annual rate × time held (in years or fraction).

Some compound annually. The provincial regulations are specific. For multi-year tenancies, interest can accumulate meaningfully.

Example (Alberta, 1 year tenancy, CA$2,000 deposit, 1.6% rate):

• Interest = 2,000 × 0.016 × 1 = CA$32.
• Total refund = 2,000 + 32 = CA$2,032 (less any lawful deductions).

Q8. When must the deposit (with interest) be returned?

Strict deadlines apply:

• Alberta — 10 days after termination (s.46.5).
• BC — 15 days after end of tenancy or receipt of forwarding address, whichever later (s.38).
• Ontario — last month’s rent applied automatically; no separate return.
• Saskatchewan — 7 business days after termination (s.32).

Failure to return on time triggers:

• Landlord forfeits the right to claim deductions.
• Tenant can apply to RTB/LTB for full deposit refund.
• In BC, double the deposit under s.38(6) if landlord fails to return or apply for retention within 15 days.

Q9. What deductions can a landlord make?

Across all provinces, deductions are allowed only for:

• Unpaid rent (where the deposit is not LMR).
• Damage caused by the tenant beyond fair wear and tear.
• Cleaning if the property was not left in reasonably clean condition.
• Replacement of missing items listed in inventory.

Improvements, fair wear and tear, and pre-existing damage are not deductible. Deduction must be itemised in writing.

Q10. How does this compare to other countries?

Canada’s interest-on-deposit regime is broadly similar to:

• Sweden — no security deposit cap but rare in practice.
• France — 1 month’s rent for unfurnished, 2 months for furnished, no statutory interest.
• Germany — 3 months’ rent maximum, must be in interest-bearing account.

It contrasts with:

• NYC, USA — interest required (for buildings of 6+ units).
• NZ — 4 weeks’ rent in custodial scheme, interest paid by Tenancy Services.
• UK — 5 weeks’ rent in tenancy deposit protection scheme, no statutory interest but interest accrues in some schemes.

Dialogue: a Landlord refunds correctly

🐣 Chick: “Tenant moved out 1 May. BC tenancy. Deposit CA$1,500.”

🐮 Cow: “Calculate interest from move-in date to 1 May at the BC prescribed rate.”

🦉 Owl: “Move-in 1 May 2024. So 24 months. Rate during the period varied — average roughly 0.5%.”

🐣 Chick: “Interest = 1,500 × 0.005 × 2 = CA$15. Refund = CA$1,515.”

🐮 Cow: “Less any lawful deductions for damage or cleaning, with itemised receipts.”

🦉 Owl: “And return within 15 days of receiving the forwarding address. Late return triggers double-the-deposit liability under s.38(6).”

🐣 Chick: “Always send by registered mail with proof.”

Common mistakes

Forgetting interest. Many landlords return the deposit without interest. Tenants can apply for the missing interest at any time.

Wrong rate. Provincial rates change annually. Use the rate at the time of refund, not the rate at lease signing.

Mixing damage deposit with last month’s rent. Ontario does not allow damage deposits. BC allows up to 100% (50% security + 50% pet). Don’t apply Ontario rules in BC or vice versa.

Quebec deposits. Asking for any deposit beyond first month’s rent is prohibited under Art. 1904. Tenant recovers fully via TAL.

Late return. BC’s double-deposit penalty under s.38(6) is severe. Return within 15 days or apply for retention via RTB.

Closing notes

Tenancy deposit interest is a small dollar amount but a clear legal rule. Compliance is administrative — track move-in dates, calculate interest at refund, document deductions. Foreign and out-of-province landlords should set up automatic reminders for deposit return deadlines and provincial interest rates.

A Gyoseishoshi (行政書士) prepares bilingual deposit refund packs with interest calculations. A Canadian lawyer should advise on contested deposit refund disputes or where deductions exceed CA$5,000.

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Disclaimer

Legal information, not legal advice. MmowW Scrib🐮 is operated by a licensed Gyoseishoshi (行政書士) office in Japan. We are not Canadian lawyers. For contested deposit refund disputes or RTB/LTB hearings, consult a provincially-licensed lawyer or tenant advocacy service.

Sources

• Ontario Residential Tenancies Act 2006, s.106 — https://www.ontario.ca/laws/statute/06r17
• BC Residential Tenancy Act, s.20 and s.38 — https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/02078_01
• Alberta Residential Tenancies Act, s.46-46.5 — https://kings-printer.alberta.ca/1266.cfm?page=R17P1.cfm
• Civil Code of Québec, Art. 1904 — https://www.legisquebec.gouv.qc.ca/en/document/cs/CCQ-1991
• Canada Mortgage and Housing Corporation, Rental housing — https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research