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  • Writer's pictureThe Kaplan Team

LET'S TALK The dos and dont's of rental deposits

Updated: Oct 14, 2019

It is fast becoming a common occurrence that landlords manage their own rentals. Websites and Apps have made this possible. However, landlords and tenants alike need to be aware of their rights and responsibilities as they will not have a rental agent assisting them throughout the process.

One of the important aspects of a rental agreement is the deposit. It is important to understand the legal requirements pertaining to rental deposits. These requirements are clearly set out in section 5 of the Rental Housing Act (“RHA”); which governs residential tenant-landlord relationships. Section 5 of the RHA requires that the deposit and interest must be managed as follows:

(c) The landlord may require a tenant, before moving into the dwelling, to pay a deposit which, at the time, may not exceed an amount equivalent to an amount specified in the agreement or otherwise agreed to between the parties.

(d) The landlord must invest the deposit in an interest-bearing account with a financial institution. The landlord must, subject to paragraph (g), pay the tenant interest at the rate applicable to such account which may not be less than the rate applicable to a savings account with that institution. The tenant is entitled to ask the landlord to provide him with written proof of the interest that is accruing on the deposit, and the landlord must provide him with such proof.

The above subsection is subject to paragraph (g) which paragraph states:

(g) On expiration of the lease, the landlord may apply such deposit and interest towards the payment of all amounts for which the tenant is liable under the said lease, including the reasonable cost of repairing damage to the dwelling during the lease period and the cost of replacing lost keys. The balance of the deposit and interest, if any, must be refunded to the tenant by the landlord not later than 14 days of restoration of the dwelling to the landlord.

The Act also requires landlords to provide tenants with a receipt for the deposit, which states the date on which the deposit was paid, the amount, the name of the tenant, the address for which the deposit was paid, the type of dwelling (house, flat, cottage), and the landlord’s name and signature.

Another crucial element pertaining to a rental deposit is the inspection of the property. If an inspection has not been completed, it will severely prejudice the parties’ respective rights to claim against the deposit (in the case of the landlord) or to have the deposit refunded (in the case of the tenant). It is vital for inspections to be undertaken jointly by both landlord and tenant. This inspection must take place before the tenant takes occupation and again when the lease is due to expire. It is always advisable to formulate a list of defects before taking occupation. Both parties can sign off on this list to prevent disputes when the lease expires.

This list should be attached to the lease agreement.

There is also an important procedure that must be followed when repaying the deposit. Once the final inspection has been completed, the landlord must determine if there are any damages. If there is no claim for damages and the tenant does not owe rent or additional charges, the landlord must refund the deposit within seven days of the expiry of the lease. If an amount is owed, the landlord must refund the balance (if any) of the deposit within 14 days.

In the event of a tenant refusing to partake in the final inspection, the landlord has 21 days from the expiry of the lease to repair any damages and refund the tenant the balance of the deposit.

Lastly, if a tenanted property is sold, it is the outgoing owner’s responsibility to ensure that the tenants’ deposit is paid over to the new owner. Should the outgoing owner fail to do so, the tenant is entitled to claim the deposit from the new owner.

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This article is not intended to constitute legal advice and is produced for information purposes only and to provide a general understanding of the legal position relating to the topic. It is recommended that advice relating to the specific circumstances of your situation be sought from our attorneys before acting upon the content of this article. This article was written at a particular point in time and accordingly may not always reflect the most recent legal developments, if any, applicable to the relevant topic. Kaplan Blumberg and its partners and/or employees, are not responsible for any consequences which may follow upon any decision taken to act upon the information provided in this article.

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