What deposit can a Toronto landlord legally collect?

In Ontario, the only deposit a landlord can legally collect is last month's rent (LMR) — capped at one month's worth on a monthly tenancy, or one week's worth on a weekly one. Security deposits, damage deposits, pet deposits, and cleaning deposits are all prohibited under the Residential Tenancies Act. A refundable key deposit is the single narrow exception. That is the entire legal list.

This trips up new and out-of-province landlords constantly, because most other jurisdictions allow a separate damage deposit. Ontario does not. Asking for one — or labelling extra money a 'security deposit' — is not just unenforceable; it can be ordered returned in full, with interest, at the Landlord and Tenant Board.

The only legal deposit: last month's rent

You can collect a deposit equal to one month's rent and apply it to the final month of the tenancy. It is not a damage fund, an emergency reserve, or money you can draw against during the lease — it is pre-paid rent for the last month, and nothing else. On a $2,800 unit, the LMR deposit is $2,800, full stop.

The deposit is collected once, at the start, and it is keyed to the rent. When rent rises legally over the years, a landlord may ask the tenant to top up the LMR deposit to match — but only by the same guideline amount, and only alongside a valid increase.

What you cannot collect — at all

There is no legal damage deposit in Ontario. There is no pet deposit (and a blanket no-pets clause is itself unenforceable under s. 14 of the Act). There is no cleaning deposit, no 'security' deposit, and no last-month-plus-damage combination. Any money collected under those labels can be ordered returned in full, plus interest.

The honest reframe: the deposit was never your protection against a bad tenant. A single month of rent does not cover serious damage or months of non-payment, and you legally cannot hold it for either. What actually protects a landlord is who you hand the keys to — a screening decision, not a deposit decision.

The one exception: a refundable key deposit

A landlord may collect a key deposit for keys, fobs, or garage remotes — but only an amount equal to the actual cost of replacing them, and it must be fully refundable when the items are returned. A $20 fob deposit is fine. A '$300 key deposit' that is really a disguised damage deposit is not, and the LTB treats the excess as an illegal charge.

Keep the key deposit separate, document the replacement cost, and return it promptly at move-out. It is the only deposit besides last month's rent that survives a challenge.

You owe interest on the deposit every year

Last month's rent earns interest for the tenant, paid annually, at the same rate as that year's rent increase guideline. For 2026 that rate is 2.1%. The interest can be paid out directly or applied toward the top-up when rent increases — but it is owed every year the deposit is held, not just at move-out.

Tenants can claim unpaid back-interest at the LTB during the tenancy or within a year of leaving. It is a small amount annually, but it accrues, and forgetting it is a common, avoidable landlord error. Set a reminder for the tenancy anniversary.

Payment method is the tenant's choice

A landlord cannot require post-dated cheques or automatic withdrawals as a condition of renting (RTA s. 108). You can accept them if a tenant offers, but you cannot demand them, and you cannot reject an otherwise-qualified applicant for declining. The same applies to charging a fee for paying by a particular method.

This matters at the application stage: writing 'must provide 12 post-dated cheques' into a listing is a quiet compliance error that a sophisticated tenant — or a paralegal — will notice.

Where the real protection comes from

Because the deposit is capped at one month and can only be applied to one month, the leverage that keeps a tenancy safe is entirely front-loaded into screening. FastLease runs five layers on every applicant: credit, income-to-rent ratio, employment verification, two prior-landlord references contacted by phone, and document authentication. An applicant who clears only four of the five is not put forward.

That is the trade the deposit rules force. You cannot buy protection with a bigger deposit, so you have to earn it with a better tenant — which is a question of distribution (enough qualified applicants to choose from) and diligence (actually checking them). Both are things a landlord controls.