By: Ernest Woo LLB and Jayson Schwarz LLM
Every time someone begins to negotiate a lease for a residential premise, the issue of security deposits and post-dated cheques needs to be dealt with. Consumers are often unaware of their rights and obligations and so have an unequal bargaining position with a potential landlord. Here are some comments on both issues. We hope they help.
Security Deposits
A deposit is usually demanded by the landlord in order to use all or part of the deposit to cover any damages to the property caused by the tenant or to cover rent should a tenant fail to make a rent payment. The legal limit for deposit and the type of deposit allowed will vary from province to province. A tenant may also be able to get interest on the security deposit when the tenancy ends or is terminated. Check with your local Landlord and Tenant Board to get up to date information on your rights.
In Ontario, for example, a landlord can demand a rent deposit equal to one month’s rent, or the rent for one rental period, whichever is less. If the rent payments are made weekly, the deposit cannot be more than one week’s rent. If the rent payments are monthly, the deposit cannot be more than one month’s rent. However, it is illegal for a landlord in Ontario to demand a security deposit, for potential damages to a rental unit[1]. Due to this, many landlords have tried to use creative ways to come up with charges to get around the rule for security deposits. However, the Ontario Residential Tenancies Act prohibits any other additional charges[2]. Your landlord cannot directly or indirectly require or attempt to require from a tenant any fee or deposit of this nature.
In British Columbia, the rules are different. A security deposit can be demanded. However, it cannot be more than half the one month’s rent. If a landlord accepts a security deposit that is greater than this amount, you have the right as a tenant to deduct the overpayment from your next rent payment or recover your overpaid rent. A landlord may also demand a pet damage deposit which would cover damages to the property caused by your pet.
Post-Date Cheques
This will also vary from province to province. A post-dated cheque is a cheque that is dated for a future date. In the context of landlord and tenants, it is usually a cheque dated for the day rent is due for the remainder of the tenancy agreement. The reason for post-dated cheques is that a cheque will be incapable of being cashed until the date of the cheque.
This is convenient for both the landlord and the tenant. The landlord will not have to hound the tenant for cheques every month and tenant will get the benefit of post-dating, namely, the landlord will be prevented from depositing all the cheques at once. However, in practice, sometimes things do not go as smoothly. Due to the large amount of cheques and the automated process in most of the country’s financial institutions, sometime cheques may be cashed early. These causes issues as the bank may hit you with fees should your account have insufficient funds and go into overdraft. This is important to keep in mind should your landlord requests post-dated cheques.
For example, in Ontario and Manitoba, landlords may request post-date cheques but a tenant is not required to provide them. However, once a landlord and tenant agree to a method of payment, it cannot be changed unless both the landlord and tenant agree. In other provinces, such as British Columbia or Manitoba, post-dated cheques may be requested by landlords.
So remember, in the rush of signing a tenancy agreement and moving into a new place; do not neglect to read over your tenancy agreement. You should never agree to a requirement in your tenancy agreement if you are unsure of its effect!
Ernest Woo LLB is the articling student at Schwarz Law LLP and Jayson Schwarz LLM is the senior partner at the firm.
Disclaimer: The article provided herein is for general information purposes only and not intended as or to be relied upon for legal advice. Consult with a lawyer for your unique situation.
[1] RTA s.105
[2] RTA s. 134