Ontario · Rent deposits
Last Month's Rent Deposit in Ontario: Rules, Interest and Top-ups (2026)
In Ontario, the only deposit most landlords can collect is a last month's rent deposit. It has strict rules: a maximum amount, annual interest owed to the tenant, and a single permitted use. This guide explains each one, including how the interest and top-up work in 2026.
Interest rate owed for 2026
2.1%
Equal to Ontario's rent increase guideline in effect when the interest payment is due.
How much you can collect
The deposit cannot be more than one month's rent if rent is paid monthly, or one week's rent if rent is paid weekly. Other than a refundable key deposit, landlords cannot collect damage deposits, pet deposits or security deposits.
What the deposit can be used for
The deposit can only be used as the rent for the last month (or week) before the tenant moves out. It cannot be used for anything else, such as repairing damage to the unit. Damage has to be pursued separately.
Annual interest
Every year, the landlord must pay the tenant interest on the deposit. The rate equals the rent increase guideline in effect when the interest becomes due: 2.1% for interest that comes due in 2026. For example, a $2,000 deposit held for a full year earns $42 of interest at 2.1%.
Topping up the deposit
When you lawfully raise the rent, you can ask the tenant to increase the deposit by the same amount so it still equals one month's rent. You can use the interest owed on the deposit toward that top-up, with the tenant paying any difference.
Managing the deposit each year
- 1
Record the deposit
Note the amount and the date it was paid, and give the tenant a receipt.
- 2
Calculate interest yearly
On each anniversary, apply the guideline rate in effect that year to the deposit.
- 3
Pay or apply the interest
Pay the interest to the tenant, or apply it to top up the deposit if the rent has increased.
- 4
Top up with a rent increase
When you give an N1 rent increase, you can ask for the deposit to rise by the same amount.
- 5
Apply it to the last month
Use the deposit as the rent for the final rental period when the tenant moves out.
Missed interest is a common tenant claim
Tenants can apply to the LTB for unpaid deposit interest. A yearly reminder tied to the lease anniversary keeps the interest paid and documented.
Frequently asked questions
Can an Ontario landlord ask for first and last month's rent?
Yes. A landlord can collect the first month's rent plus a last month's rent deposit of no more than one month's rent (one week's for weekly tenancies).
What interest rate applies to a last month's rent deposit in 2026?
2.1%, which is Ontario's 2026 rent increase guideline. The rate is the guideline in effect when the interest payment is due.
Can I keep the deposit interest to top up the deposit?
Yes. If the rent has gone up, the interest owed can be applied to top up the deposit so it matches the new rent.
Can I use the last month's rent deposit for damage?
No. It can only be used as rent for the last rental period. Damage has to be claimed separately, for example through the LTB.
Can I charge a security or damage deposit in Ontario?
No. Apart from the last month's rent deposit, only a refundable key deposit is allowed.
Deposits, interest and rent in one ledger
Automanagement tracks rent and deposits for every tenant, with Ontario's rules built in, so the yearly interest and top-ups are easy to keep right.
General information for landlords, not legal or tax advice. Rules change; confirm the current requirements with the Landlord and Tenant Board. Last reviewed 2026-09-27. Official source