Canada Tenancy Deposits: Provincial Differences FAQ

Tenancy deposit rules in Canada are exclusively provincial — there is no federal residential tenancy law under the Constitution Act, 1867 s.92(13). Each province sets its own rules on deposit type, maximum amount, interest rate, and return timing. This FAQ covers Ontario, British Columbia, and Alberta.

Q1. What types of deposits are allowed in Ontario?

Under RTA, 2006 s.106, only one type of deposit is permitted in Ontario: last month’s rent (LMR), equal to one month’s rent. Security deposits, damage deposits, pet deposits, and key deposits above replacement cost are not lawful. Any payment beyond LMR plus actual key replacement cost is recoverable by the tenant under RTA s.135.

Q2. What is the LMR interest rate in Ontario for 2026?

Under RTA s.106(6), the landlord must pay annual interest on the LMR at the rent increase guideline rate. For 2026, the rate is 2.1%. Interest may be paid directly to the tenant or applied as a credit toward the next month’s rent. Failure to pay is an offence under RTA s.234.

Q3. What types of deposits are allowed in British Columbia?

Under BC RTA, SBC 2002 s.19:

• Security deposit — maximum half a month’s rent;
• Pet damage deposit — maximum additional half a month’s rent (only if pets permitted under s.18(2));

Total maximum deposits in BC: 1 month’s rent (0.5 + 0.5 if pet allowed). Multiple security deposits are not permitted.

Q4. What is the BC deposit interest rate for 2026?

Under the BC Residential Tenancy Regulation s.4(2), the deposit interest rate is set annually. For 2026, the rate is 0% — landlords owe no interest on either the security deposit or pet damage deposit during the tenancy.

Q5. What types of deposits are allowed in Alberta?

Under Alberta Residential Tenancies Act, SA 2004 s.44, only a security deposit is permitted. Maximum: one month’s rent. The deposit may be paid in installments if the landlord and tenant agree.

Q6. Does Alberta require the deposit to be held in a trust account?

Yes. Alberta RTA s.46 requires the landlord to hold the security deposit in a trust account at a recognized financial institution and to pay interest at the rate prescribed by regulation. The landlord must provide a written statement to the tenant indicating the location of the account.

Q7. What is the deposit return timing in each province?

If the BC landlord neither returns the deposit nor applies to the RTB within 15 days, the tenant may recover double the deposit under BC RTA s.38(6).

Q8. Can a landlord demand “first and last month” up front in Ontario?

The first month’s rent is not a deposit — it is rent for the first month of occupancy. The last month’s rent (LMR) is a deposit under s.106. So “first and last” is lawful. “First, last, and security deposit” is not lawful in Ontario — there is no security deposit in this jurisdiction.

Q9. Can a landlord demand “post-dated cheques” as a condition of the tenancy?

Ontario — Under RTA s.108, a landlord cannot require post-dated cheques or automatic payment as a condition of tenancy. A tenant who agrees voluntarily can do so, but cannot be required to.

British Columbia — Under BC RTA s.6(3), similar protections apply via the standard terms.

Alberta — No specific statutory prohibition, but a court may find such a clause unconscionable in circumstances.

Q10. What is a “key deposit”?

Ontario, BC, and Alberta all permit a refundable key deposit equal to the actual replacement cost of the key or fob. Anything beyond replacement cost is unlawful and recoverable.

In Ontario, RTA s.105 explicitly allows a refundable key deposit equal to the replacement cost; in BC and Alberta, the principle is the same under contract law.

Q11. Can a landlord deduct from the deposit for cleaning?

Ontario — N/A (no security deposit; LMR is rent only).

British Columbia — Yes, but only with a signed Condition Inspection Report under BC RTA s.23. Without the CIR (or if the landlord failed to offer two CIR opportunities), the deposit must be returned in full under s.24.

Alberta — Yes, with itemization. Itemized statement must be provided within 30 days under Alberta RTA s.46.

Q12. What evidence is needed to support deposit deductions?

British Columbia — Move-in and move-out CIRs, photographs, repair invoices. Alberta — Inspection report (recommended, not required), photographs, repair invoices.

The landlord bears the burden of proof in deposit-claim disputes.

Q13. Can a tenant use the deposit to cover rent?

Ontario — Yes, the LMR is automatically applied to the last month of the tenancy by definition.

British Columbia — No. BC RTA s.39 prohibits using the security deposit to cover rent during the tenancy. A tenant who tries to “live out” the deposit can be evicted for non-payment under BC RTA s.46.

Alberta — No. Same principle as BC.

Q14. What happens to the deposit when the property is sold?

Under all three provincial RTAs, the deposit transfers with the property. The new owner inherits the deposit obligation. The seller should account for the deposit in the closing adjustments and document the transfer to the tenant.

Q15. What is a “pet damage deposit”?

A pet damage deposit is allowed only in British Columbia under BC RTA s.19(2), capped at half a month’s rent. Ontario and Alberta do not have a separate pet damage deposit category.

In Ontario, “no pets” clauses are void under RTA s.14. In BC, “no pets” clauses are permitted under s.18(2). In Alberta, “no pets” clauses are permitted by contract.

Q16. Are deposit caps the same for furnished units?

Ontario — Yes, the LMR cap (1 month) applies regardless of furnishings.

British Columbia — Yes, the half-month cap (s.19) applies regardless of furnishings. A landlord cannot charge a higher deposit because the unit is furnished.

Alberta — Yes, the 1-month cap (s.44) applies regardless of furnishings.

Q17. What is the penalty for charging illegal deposits?

Ontario — Recovery of overpaid amount + potential offence prosecution under RTA s.234 (fine up to CAD $50,000 individual / CAD $250,000 corporation).

British Columbia — RTB may order return of overpayment + fines under BC RTA s.95.

Alberta — Court-ordered return; difficult to recover absent litigation.

Q18. Quick comparison table

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Sources

• Ontario Residential Tenancies Act, 2006 — https://www.ontario.ca/laws/statute/06r17
• BC Residential Tenancy Act SBC 2002 c.78 — https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/02078_01
• Alberta Residential Tenancies Act SA 2004 c.R-17.1 — https://kings-printer.alberta.ca/1266.cfm?page=R17P1.cfm&leg_type=Acts
• BC Residential Tenancy Branch — https://www2.gov.bc.ca/gov/content/housing-tenancy/residential-tenancies
• Alberta Service Alberta tenancy — https://www.alberta.ca/landlords-tenants