Understanding the Tenant’s Deposit

The Rental Housing Act (RHA) sets out very clear rules around residential deposits to protect both landlords and tenants and to ensure the relationship is fair, transparent and free from unlawful practices. Below is a summary of how deposits must be handled, when they may be withheld, and how to avoid disputes at the end of the lease.

How deposits work under the Rental Housing Act

How much should the deposit be?

The RHA does not prescribe a set amount, but industry norms are:

• One month’s rent for an unfurnished property.
• Two months’ rent for a furnished property.
• Two months’ rent is commonly requested for foreign nationals (industry practice, not law).

The deposit and first month’s rent are usually payable once the rental application is approved, the lease is signed, and before occupation.

How must the deposit be held?

Legally, the landlord or agent must:

• Place the deposit in an interest-bearing account with a financial institution (if a property practitioner is holding it, this will be in a regulated trust account).
• Ensure that all interest accrues to the tenant.
• Provide written proof of the account and the interest earned at any time on the tenant’s request.

Can a Landlord Legally Withhold the Deposit?

Yes – but only in specific circumstances, and only in accordance with the Rental Housing Act.

The RHA aims to protect both parties from unfair or illegal practices. A landlord may withhold part or all of a deposit only to cover:

• Damage to the property beyond fair wear and tear.
• Unpaid rent.
• Unpaid municipal charges or services.
• Any other amounts expressly allowed in the lease.

A landlord cannot withhold the deposit:

• For items listed on the entry inspection / defects list.
• For “wear and tear” or ageing of the property.
• For issues not caused by the tenant.
• For defects that existed before the tenant moved in.

The Act is clear. If damage is not recorded during the entry inspection, the tenant cannot be held liable at the end of the lease.

Refund Time Frames Under the RHA

1. If no money is owed and no repairs are needed

The landlord must refund the full deposit plus interest within 7 days after the lease ends.

2. If deductions for repairs or charges are required

The landlord must:

• Use the deposit to effect repairs.
• Provide invoices/quotes as proof.
• Refund the balance plus interest within 14 days after repairs are completed.

3. If the landlord/agent misses the exit inspection

If the landlord fails to attend the scheduled end-of-lease inspection:

• The property is deemed returned in good condition.
• The landlord must refund the full deposit plus interest within 7 days.

4. If the tenant does not attend the exit inspection

If the tenant does not respond or refuses to participate:

• The landlord may inspect alone.
• Lawful deductions may be made.
• The balance must be refunded within 21 days after lease expiry.

Deposit handling is not optional – it is a legal obligation.
When managed correctly, it protects the landlord financially and ensures tenants are treated fairly.