‍Collecting Rent & Deposits Legally in Ontario: Stay Compliant, Stay Sane

Collecting rent and deposits seems simple, until you discover the Residential Tenancies Act, 2006 (RTA) has more opinions about the process than your most particular relative at Thanksgiving. Getting it wrong can lead to illegal charges, unintended tenancies, and headaches nobody ordered. 

I'm Weiting - CEO and Co-Founder of Openroom. After losing $35K+ from tenants who didn't pay rent, I've spent a few thousand hours dissecting the rental compliance laws of Canada to share knowledge I wish I knew about rental housing to prevent you from repeating my mistakes.

I've spoken to thousands of housing providers and residents - one can say I'm a little more than obsessed about everything in this realm. I breathe, sleep, and dream about Openroom - the future to a transparent and connected rental ecosystem.

Here’s your landlord-friendly, RTA safe roadmap.

What You Can Charge

Under the RTA, lawful fees include:

• Last Month’s Rent (LMR) deposit: This is held to be applied to the last rental month. The landlord pays annual interest on this deposit. 
• Key deposit: Only a reasonable amount reflecting the actual replacement costs.
• NSF (bounced payment) fee: Fees are capped at the RTA-allowable amount if costs were incurred, regardless of the amount of fees incurred by the landlord.

What you can’t charge includes cleaning fees, damage deposits, pet deposits, rent prepayment, mortgage fees, late fees, or application fees.

The landlord is limited to what they can charge. However, if the landlord uses a third-party service for the application process, the tenant may be required to pay a fee to the third-party for the processing. This fee does not get paid to the landlord.

Payment Options Must Be Free

Tenants must have at least one free method to pay rent. You cannot require a rent payment method that costs the tenant money, such as a mandatory bank draft. 

Acceptable options include:

• Email money transfer (EMT).
• Cheque.
• Bank draft.
• Cash with appointment.

The landlord also cannot require 12 post-dated cheques, even if you think it would bring you inner peace.

Collect Only From The Tenant

You may only collect deposits or rent from the legal tenant(s) named on the lease, or someone paying on their behalf. The key to success is the receipt must always be issued in the tenant’s name.

Do not collect rent from:

• guarantors
• occupants
• boyfriends, siblings, cousins, roommates, or anyone who “basically lives there”

Even if Grandma writes the rent cheque, the receipt goes to the tenant. 

Be aware, if you take money from an occupant and issue receipts in their name, or allow them to make maintenance, parking, or service requests as though they hold tenancy rights, you may inadvertently create a new, unauthorized tenancy relationship. It’s not about one payment, it’s about a pattern of treating a person like a tenant. 

Be safe and only communicate with the legal tenant regarding matters of the tenant.

Rental Trio

OK, time for our Rental trio: the top 3 takeaways for tenants and landlords alike.

• Rent comes from the tenant. 
• Receipts go to the tenant. 
• Rights stay with the tenant. 

Stick to what the RTA allows, document everything, and your rent collection will be lawful, clean, and drama-free.

• Residential Tenancies Act, 2006 (RTA) : Ontario's legislation that governs the rights and responsibilities of residential landlords and tenants, including rules about deposits, rent collection, and evictions.
• Last Month's Rent Deposit Interest : Ontario's annual rent increase guideline page where landlords can find the current interest rate they must pay on last month's rent deposits (matches the rent increase guideline percentage).
• NSF (Non-Sufficient Funds) Fee Limit - CLEO : Community Legal Education Ontario's guide explaining that landlords can only charge a maximum of $20 for NSF/bounced cheque fees in Ontario, not the higher bank fees.
• Key Deposit Rules - Ontario : CLEO's guide explaining that key deposits must be refundable and cannot exceed the actual replacement cost of keys, fobs, or access cards.
• Landlord and Tenant Board (LTB) : The tribunal that adjudicates disputes between landlords and tenants in Ontario and enforces the Residential Tenancies Act.
• Evidence Package Template - Openroom : A free downloadable template from Openroom to help landlords and tenants organize their evidence packages for LTB hearings in a clear, professional format.