What deposits and upfront payments can a landlord legally collect in Ontario, and which charges are not allowed?

You can collect only limited Ontario rental deposits in most residential tenancies: last month’s rent and, in some cases, a refundable key deposit. Damage deposits, pet deposits, and other security-style charges are generally not allowed, so both landlords and tenants need to get the paperwork and payment terms right from the start.

For landlords, this is a compliance issue. For tenants, it is often the first place a lease goes off track. At AVS Hospitality, a Toronto property management company, we regularly see otherwise solid tenancies complicated by illegal upfront charges, unclear receipts, or confusion about how last month’s rent should be handled.

In 2026, the safest approach is simple: match every upfront payment to a rule in the Residential Tenancies Act or the standard lease, and avoid inventing extra fees. If a charge does not clearly fit the law, it is usually a red flag.

What Ontario rental deposits are legal?

The legal options are narrow: a landlord can usually require a rent deposit for the last rental period and may ask for a refundable key deposit in limited circumstances. Ontario’s Residential Tenancies Act says the only security deposit a landlord may collect is a rent deposit collected under the Act, and Ontario’s standard lease guide says landlords can collect only last month’s rent and a refundable key deposit. The Act and the standard lease guide line up on that point.

That matters because many lease-signing mistakes come from using the word “deposit” too loosely. A payment is not legal just because both sides agreed to it. If the charge tries to secure damage, cleaning, pets, or general performance of the lease, it can still be unenforceable.

Can a landlord ask for last month’s rent in Ontario?

Yes, a landlord can ask for last month’s rent, but only on or before entering into the tenancy agreement. The Act allows a rent deposit at the start of the tenancy, and the amount cannot be more than one rent period or one month, whichever is less. It must be applied to the last rent period before the tenancy ends, not used as a damage fund or a general holdback under the Residential Tenancies Act.

For example, if rent is paid monthly, the deposit cannot exceed one month of rent. If rent is paid weekly, the cap is one week of rent. Therefore, asking for two months as a mandatory deposit is not the same as asking for lawful last month’s rent.

Landlords also need to remember the deposit follows the tenancy. If ownership changes, a new landlord generally cannot demand a second rent deposit where one has already been paid for that unit under the Act.

Does last month’s rent count as a damage or security deposit?

No. Last month’s rent is strictly for the last rent period, not for damage, cleaning, unpaid utilities, or lease breaches. Ontario’s standard lease guide says a rent deposit cannot be used as a damage deposit, and that is one of the clearest rules around Ontario rental deposits.

This is where landlords often create avoidable disputes. If a tenant leaves damage behind, the answer is not to keep last month’s rent for repairs. Instead, the landlord may need to pursue the proper Landlord and Tenant Board process or another lawful recovery route, depending on the issue.

At AVS Hospitality, a Toronto property management company, this is exactly why clean records matter. Proper rent ledgers, move-in documentation, and compliant lease terms help separate lawful rent handling from later damage claims.

Can a landlord charge a key deposit in Ontario?

Yes, but only if the key deposit is refundable and not more than the expected direct replacement cost. Ontario’s standard lease guide allows a refundable key deposit, and Ontario Regulation 516/06 permits a refundable deposit for keys, remote entry devices, or cards only up to the expected direct replacement cost.

That means a landlord cannot use a key deposit as a disguised security deposit. If replacing a fob and key would reasonably cost a certain amount, the deposit should track that cost. Charging an inflated flat amount “just in case” is risky.

Meanwhile, the purpose of the deposit matters too. The deposit should relate to returning keys, fobs, or entry cards at move-out. Steps to Justice explains that a landlord can use a key deposit only to replace entry devices that are not returned.

What charges are not allowed when signing a lease?

Several common charges are not allowed, even if they appear in a lease. In practice, the biggest problem items are damage deposits, security deposits, pet deposits, cleaning deposits, and similar upfront fees that go beyond lawful Ontario rental deposits.

Charge	Usually allowed?	Why
Last month’s rent deposit	Yes	Allowed at or before signing, capped by one rent period, and used for the last rent period.
Refundable key deposit	Yes, limited	Must be refundable and tied to expected direct replacement cost.
Damage deposit	No	Not a permitted deposit under the Act or standard lease guidance.
Pet deposit	No	Not a permitted upfront charge under Ontario rental rules.
Cleaning deposit	No	Cannot be used as an extra security-style payment.
General security deposit	No	The Act limits security deposits to lawful rent deposits.

Ontario’s standard lease guide also warns that extra lease terms cannot require deposits, fees, or penalties that the Act does not permit. So even if a clause is printed in the lease, it may still be void.

Can a tenant offer prepaid rent in Ontario?

Sometimes, yes, but there is an important difference between a tenant voluntarily offering prepaid rent and a landlord requiring an illegal extra deposit. The safest compliance position is that landlords should not demand extra prepaid months as a condition of getting the unit unless the payment clearly fits the law.

Because this area can become fact-specific, landlords should be careful with wording. A “voluntary” offer is not truly voluntary if it is demanded from every applicant or tied to approval. Therefore, if you are documenting prepaid rent, make sure the file shows who proposed it, what period it covers, and that it is not being treated as a damage or security deposit.

This is the kind of work a property manager takes off your plate. Our tenant placement process helps landlords structure applications, lease terms, and move-in payments without creating avoidable compliance problems.

What are the most common mistakes with Ontario rental deposits?

The most common mistakes are asking for the wrong amount, calling a charge “refundable” when it is still illegal, and failing to explain what the payment is for. Those errors can lead to disputes, repayment claims, and a weak position at the Landlord and Tenant Board.

• Collecting more than one month or one rent period as a mandatory rent deposit.
• Labeling a damage deposit as “security” or “move-in protection.”
• Charging a key deposit that is higher than replacement cost.
• Trying to use last month’s rent to cover repairs or cleaning.
• Adding side fees in a lease instead of using the standard lease properly.
• Failing to give clear receipts for each payment.

Notably, landlords in Toronto, Mississauga, Brampton, Hamilton, and Vaughan face the same provincial rules, even though local market practices may differ. Market pressure does not change what the Act allows.

How should landlords and tenants document upfront payments properly?

Every upfront payment should be identified in writing, matched to a lawful category, and receipted clearly. That means stating whether the payment is last month’s rent or a refundable key deposit, the exact amount, and when or how it will be applied or returned.

Using the standard lease helps because it already separates rent deposits from key deposits and makes it harder to hide illegal charges in custom wording. AVS Hospitality, a Toronto property management company, recommends keeping a clean payment trail from application to move-in, especially when handling Ontario rental deposits across busy markets like Toronto and Mississauga.

If you want more guidance on compliant leasing workflows, AVS Hospitality publishes practical landlord resources focused on Toronto property management and Ontario rental rules.

What is the bottom line on Ontario rental deposits?

The bottom line is that lawful Ontario rental deposits are limited, and most creative upfront charges are not worth the risk. Last month’s rent is allowed within strict limits, a refundable key deposit may be allowed at replacement-cost level, and damage-style deposits are generally offside.

For both landlords and tenants, the easiest way to avoid disputes is to slow down at lease signing. First, identify each payment. Next, confirm the legal purpose. Finally, make sure the lease and receipt say the same thing.

Frequently Asked Questions

Can a landlord in Ontario ask for first and last month’s rent?

A landlord can require the first rent payment when it is due and can also require a last month’s rent deposit at or before signing the tenancy agreement. The key limit is that the deposit portion cannot exceed one rent period or one month, whichever is less, and it must be used for the last rental period.

Is a damage deposit legal in Ontario?

In most residential tenancies covered by the Residential Tenancies Act, a damage deposit is not legal. Ontario limits security deposits to a lawful rent deposit, which is usually last month’s rent. If a landlord wants compensation for damage later, they usually need to use the proper legal process rather than keeping an illegal upfront deposit.

How much can a landlord charge for a key deposit in Ontario?

A key deposit must be refundable and should not be more than the expected direct replacement cost of the key, fob, or entry card. It cannot be inflated to cover general risk or possible damage. If the tenant returns the entry devices, the deposit should be returned according to the lease terms and the law.

Can a landlord keep last month’s rent for cleaning or repairs?

No. Last month’s rent is meant to pay for the final rent period before the tenancy ends. It is not a cleaning deposit, repair fund, or penalty pot. If there is a dispute about damage or other losses, the landlord usually needs to follow the proper Landlord and Tenant Board process instead of repurposing the rent deposit.

What should a tenant do if they paid an illegal deposit in Ontario?

A tenant should keep receipts, the lease, messages, and any proof of what the payment was called or required for. In many cases, the tenant can ask for the money back and, if needed, apply to the Landlord and Tenant Board. Clear records matter because they help show whether the charge was really an illegal deposit.