If Tenant Breaks Lease Can I Keep Security Deposit

You have just broken a charter, probably considering your tenant violated its terms or the constabulary. For instance, they may have paid the hire late too many times or just a portion of information technology; participated in illegal activities, similar selling drugs on, within, or almost your property; violated a no-pets clause by keeping a pet or five; affected the safety of others, or caused damage to your property.

Or your tenant bankrupt the lease, maybe because you failed to run across your obligations as a landlord every bit specified by the Ontario Residential Tenancies Act (the Act), or they changed their heed about occupying your property, or both of y'all reached an agreement to do so.

Whichever the case, assuming you carried out the lease termination procedure correctly, the next fix of rules you'll want to familiarize yourself with are those concerning security deposits.

To start y'all off, allow'south examine one of the courtroom decisions that clarified circumstances when a landlord is obligated to return a tenant's deposit and when they are entitled to go on it.

Ms. Sarah Musilla Vs. Avcan Management Inc.

In this instance , Avcan Management (the landlord) accepted Ms. Musilla's rental application for a ane-twelvemonth charter, in which she paid a deposit equivalent to one month's rent. But vi months prior to the first of the tenancy, Ms. Musilla backed out of the arrangement, declined to sign the charter, and went alee to asking her deposit back.

However, the landlord refused to do and so and said that they were prepared to give her possession of the belongings. Just she did non take information technology.

Avcan Direction was unable to re-hire the property until two months subsequently the date of possession.

Ms. Musilla and then sued to get her security eolith dorsum. At offset, she applied to the Landlord and Tenant Board (LTB). Her awarding was denied and the case was ruled in favor of the landlord.

Afterward, she appealed the decision to the Ontario Divisional Court, where the case was ruled in her favor. On peak of that, the landlord was asked to pay her legal costs.

Returning Rental Deposits

Section 107 (1) of the Residential Tenancies Act (RTA) states that a landlord shall return the amount paid as a eolith in the event possession is non given to the prospective tenant. (Note that the hire eolith cannot be more than the rent for i rental period. For example, if the rent payment is being made monthly, the deposit can't be more than a single month's rent).

The Ontario Divisional Court held that the above section is limited to a fair result. This is where a landlord is unwilling or unable to requite possession to the prospective tenant.

Initially, the LTB, in relation to the above case, had held that tenants can't unliterary break a lease simply before the commencement of the tenancy and then request their deposit back (meaning landlords can continue the deposit).

But the Divisional courtroom clarified that there are a multifariousness of situations where Section 107(1) doesn't apply. In reference to the case in a higher place, they argued that what Ms. Musilla signed wasn't a lease because of its wording. (It was a rental application in which the prospective tenant would execute a lease earlier moving in).

Therefore, the deposit she gave during the rental awarding wasn't exactly a security deposit since no tenancy was established. Under the RTA, Avcan Management was, therefore, not authorized to keep Ms. Musilla'due south deposit for refusing to execute the lease.

Another instance worth mentioning where y'all cannot keep a security eolith is in the case of damages. In Ontario, a landlord can neither collect a damage deposit nor use the tenant's last calendar month's rent eolith to embrace the damages washed to the rental premises.

The same applies to other situations, similar the tenant terminating the lease early, aberrant cleaning costs, unpaid utilities, amid others.

Usually, what you are expected to do when a tenant damages your rental unit or leaves damage to the unabridged premises is to serve them a discover of termination and/or request them to cover the damages. If they fail to comply with either of those, you tin can apply to the LTB and allow them establish if there are whatever damages and what actions are to be taken.

Retaining Rental Deposits

To reply the earlier question, "Can a landlord keep a security deposit for breaking a charter?", the answer is "yep".

In the higher up ruling, the court specified circumstances when a landlord can keep a security deposit. Basically, there are instances where section 107(ane) doesn't apply.

Put simply, where a tenant has declined to accept possession of the unit from a willing landlord, you are allowed to retain their security deposit provided the following conditions are met:

• The deposit obtained from the tenant was accepted purely equally security for/payment of terminal month's rent and done in accord with section 105(i) and 106(x) of the RTA. That implies that any deposit accustomed as security for whatever other tenant obligation disqualifies you lot from retaining the deposit.
• You tried to minimize the damages by re-renting the rental holding, but nevertheless suffered a loss of rent. Withal, if you were able to mitigate the damages fully, you will likely accept to requite the deposit back to the tenant.

After Signing The Charter Understanding

According to the RTA, the hire deposit can only exist used for the purpose it was collected for; i.e., to cover hire for the concluding rental period just before the tenancy comes to an end. That ways that if the tenant fails to make the normal rent payment for the last calendar month earlier they move out, you are allowed to use their deposit (plus any involvement on the deposit that you owe them) to offset the terminal rent payment.

Security Deposits For Keys

Another question we become asked frequently is, "Can a landlord request a deposit for keys in Ontario?"

The respond is "aye", but the following conditions have to be satisfied:

• The amount of the eolith should be refundable and not above the bodily/expected price of replacing the cardinal(due south) in the effect that the tenant fails to return them.

As for when to give the deposit back, this should be done at the end of the tenancy when the tenant hands over the primal(south).

Wrap-Upward

In light of all nosotros've looked at, it would be better as a landlord to always review your tenancy agreement forms regularly just to make sure that they reflect the most recent changes and adjustments in the Residential Tenancies Act.

Let the wordings reflect the deposit's utilise, which is solely for the last calendar month's rent. Also, include a clause virtually withholding the deposit every bit security until yous have been able to minimize the amercement that are a result of the tenant's default.

That aside, you tin can ever speak to a legal professional or consult with a top property management company simply to have a greater idea of which direction to take when faced with the question, "Can a landlord continue a security deposit for breaking a lease or residential tenancy?"

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Source: https://buttonwood.ca/can-landlord-keep-security-deposit-for-breaking-lease/

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