Security Deposit Rental Agreement

A security deposit is an important matter when it comes to the relationship between a landlord and tenant, as an alarming number of disputes arise over the security deposit. Simply put, the security deposit is money or property that is given to the landlord by the tenant as security, before the tenant moves in. This deposit is held by the landlord throughout the rental agreement, and generally amounts to one month’s rent.

The deposit is generally paid by the tenant to the landlord within 30 days of having entered into the rental agreement, and when the tenant moves out, the landlord is required to pay him/her the whole of the security deposit, along with any interest, within 10 days.

The trouble arises because the security deposit is generally meant to be returned to the tenant after the rental agreement is over, but the landlord has the right to use that money if the tenant moves out without cleaning up, without having paid the last rental payment that was due, or if the tenant has done some sort of damage to the unit. In this case, the landlord needs to serve the tenant a Notice of Intention to Retain Security Deposit, and if the tenant disagrees with this, s/he needs to submit an application within 15 days of having received the notice to the Office of the Director of Residential Rental Property.

In order to prevent disputes and arguments, the security deposit rental agreement should be an essential clause in the lease. The exact wording may depend on which Canadian province you live in, but the information should generally include the following:

• State the amount of the security deposit that will be collected – at most, this can be two month’s rent. However, if the rent was paid on a weekly basis, then the security deposit will be one or two weeks’ worth of rent.
• Mention the place where the security deposit will be held, and the interest rate at which it will be held – keep in mind that this interest rate needs to be paid to the tenant at the time the security deposit is returned.
• Clearly outline the scenarios in which the landlord will be allowed to keep the security deposit – this is the most problematic section, so make sure both parties agree with all the reasons that are outlined.
• Mention exactly how the security deposit will be returned to the tenant at the time of the termination of the rental agreement.