My most popular post is about rental deposits. Considering that it’s a simple subject, I’m surprised there is so much controversy and confusion regarding the rules. Today I got a question from a tenant about this subject and so I’ll take another kick at the can. Hopefully I can add some clarity to Ontario rental deposits.
We looked at a place paid a deposit and signed a lease for a rental unit for June 1st. We signed Feb 28. Something major has come up an we may not be able to move. Are we able to break the lease? Can we assume our deposit is non refundable?
The answer to your question is two part because the law has changed somewhat. In the past a rental deposit would be automatically forfeit and the landlord could rerent the unit upon hearing that the tenants were refusing possession. However, a landlord cannot collect double rent for a unit so if the unit is rerented the deposit must be refunded. This is a decision made by the Court of Appeal for Ontario Musilla v. Avcan Management Inc
Specifically this section here is very precise…
When one looks at the words of s. 107(1), it is notable that the landlord is to return the deposit if vacant possession is “not given” to the prospective tenant. The words “not given” suggest that it is the refusal or inability of the landlord to provide the premises that triggers the obligation to return the deposit to the prospective tenant. In the present case, however, it was the tenant’s action in refusing to take the unit that prevented her from taking possession, not any act of the landlord.
 This interpretation accords with common sense and fairness. To permit a tenant, who is legally obligated to take possession, to regain a rent deposit where the landlord has done everything it was required to do in order to give possession would render meaningless the concept of a rent deposit to secure the tenant’s obligation to pay rent.
 Sections 105(1) and 106(10) of the Act provide that a landlord may only take a deposit as security against the payment of the last month’s rent. The landlord may not take a deposit to secure any other obligation. Thus, if a tenant breaches a tenancy agreement and the landlord, in accordance with its obligation to mitigate its damages, is able to re-rent the premises without suffering any loss of rent, the landlord is not entitled to retain the rent deposit. The landlord cannot realize double payment by use of a deposit, nor can it apply the funds to any other purpose.
How I would deal with this situation is like this…
- Inform the landlord that you cannot take the place as soon as you can in writing.
- Apologize for backing out of the contract.
- Ask for your deposit back.
- Inform the landlord of their obligations by letting them know of their legal obligations by giving them a copy of the legal decision in Court of Appeal for Ontario Musilla v. Avcan Management Inc
- Don’t act like they should know, no one is going to spend their spare time looking for bizarre rulings on Canlii (Ok, one person)
- Give them a chance to rerent the unit.
- Monitor if the unit is being advertised where you found your ad.
- Wait for money
- June 1st 2014 if you did not get any money back go check the unit.
- If they are legitimately trying to rerent the unit and the unit is not rented June 1st tough luck to you.
- If the unit is occupied or they are not trying to rerent the unit then threaten them with legal action. The earliest date you can do this is June 2nd so be nice before this date.
- Keep fingers crossed.