Interest on your last month’s rent deposit

If you paid a last month’s rent deposit, your landlord must pay you interest on it every year, at the same rate as that year’s rent increase guideline.

Which deposits are allowed

• A last month’s rent deposit, of no more than one month’s rent (or one week’s rent if you pay weekly). It has to be asked for on or before you sign the lease, and it can only be used for your last month’s rent.
• A refundable key deposit, returned when you give back the keys.
• Damage or security deposits aren’t allowed in Ontario.

How the interest works

Every year, your deposit earns interest at the rate of the rent increase guideline in effect when the interest is due. If your deposit is less than your current monthly rent, your landlord can use the interest to raise the deposit up to that amount. Any interest left over must be paid to you.

For example, if your deposit is $2,000, your rent hasn’t changed, and interest came due in 2026 when the rate was 2.1%, your landlord owes you $42 for that year.

• Rates in recent years: 2022: 1.2% · 2023: 2.5% · 2024: 2.5% · 2025: 2.5% · 2026: 2.1% · 2027: 1.9%. In 2021, the rate was 0%.

If your landlord hasn’t paid it

Ask your landlord in writing to pay the interest. If they don’t, the law lets you take the unpaid interest off a future rent payment, with a note explaining why. Talk to a free legal clinic first, so it can’t be mistaken for unpaid rent.

You can also apply to the Landlord and Tenant Board with Form T1. There is a one-year time limit, so don’t wait.

Based on: Residential Tenancies Act, 2006, ss. 105, 106, 120 and 135; O. Reg. 516/06, s. 17. Sources: Residential Tenancies Act, 2006 · O. Reg. 516/06 (general regulation) · Ontario: residential rent increases.