What Could Happen If a Landlord Uses a Key Deposit For a Reason Other Than Key Replacement?
It Is Lawful For a Landlord to Require a Key Deposit If Solely Allocated For the Purpose of Replacing the Key. It Is Unlawful to Use the Key Deposit For Any Other Purpose. The Key Deposit Must Be In An Amount Equivalent to Cost of Replacing the Key. If Otherwise, a Tenant May Apply to the Landlord Tenant Board For Remedy.
A Helpful Guide On How to Determine Whether a Key Deposit Is Legal and What Conditions Apply
A landlord may lawfully require a key deposit; however, such a deposit is subject to various conditions including the requirement that the key deposit be limited to an amount equivalent to the direct costs to replace the key whereas "direct costs" means only the cost of a replacement key (or entry card or other access device) as charged by the supplier without any further sum such as compensation for inconvenience to the landlord.
The conditions are mandated per the Residential Tenancies Act, 2006, S.O. 2006, Chapter 17 as read in combination with O. Reg. 516/06, being a regulation to the Residential Tenancies Act, 2006, which state:
Residential Tenancies Act, 2006, section 134(1)(a):
134 (1) Unless otherwise prescribed, no landlord shall, directly or indirectly, with respect to any rental unit,
(a) collect or require or attempt to collect or require from a tenant, prospective tenant or former tenant of the rental unit a fee, premium, commission, bonus, penalty, key deposit or other like amount of money whether or not the money is refundable;
Complete Reading Required
At first glance, if someone were to only read the Residential Tenancies Act, 2006 including section 134(1) without further review of section 17, paragraph 3 within O. Reg. 516/06, it would appear that a key deposit is unlawful. Accordingly, significant confusion and disputes may, and sometimes do, arise.
Illegal Applying of Deposit Monies
Sometimes a landlord will use a key deposit for a purpose other than replacing the key such as applying key deposit money to the cost of repairing damage. Per the law shown above, applying key deposit money for anything other than the direct costs of replacing the key is unlawful. Ironically, even using the key deposit money for the purpose of repairing a damaged door appears as unlawful.
When a landlord misapplies or withholds key deposit, a tenant may apply to the Landlord Tenant Board for an Order per section 135(1) of the Residential Tenancies Act, 2006 directing the landlord to properly return the key deposit money to the tenant. Specifically, section 135(1) states:
135 (1) A tenant or former tenant of a rental unit may apply to the Board for an order that the landlord, superintendent or agent of the landlord pay to the tenant any money the person collected or retained in contravention of this Act or the Tenant Protection Act, 1997.
When applying to the Landlord Tenant Board for return of key deposit monies unlawfully withheld or applied to another concern, the tenant must use the mandatory Form T1 document as required by the Landlord Tenant Board.
A landlord may require a key deposit; however, the amount of the deposit must be limited to the direct cost of replacing the key (or card or other access device). The direct cost means that the sum of the deposit must be equivalent to the amount charged by the supplier of the key. The landlord is unable to charge a sum that includes compensation for inconvenience to the landlord, or other sum. Additionally, a key deposit must be applied only to the replacement of a key. It is unlawful for a landlord to apply monies held as a key deposit for any reason such as rent shortfall, repairs of damage, or for loss of anything other than the replacement of the key.