Do landlords pay interest on last-month-rent deposits in Ontario?
Yes. Under the Residential Tenancies Act, an Ontario landlord who holds a last-month-rent (LMR) deposit must pay the tenant annual interest at the same rate as that year's rent-increase guideline — 2.5% for both 2024 and 2025. The landlord may apply the interest to a lawful rent increase or pay it to the tenant.
How is last-month-rent interest calculated?
Multiply the deposit by the applicable guideline rate for each year it was held. For example, a $1,800 LMR deposit at a 2.5% guideline earns $45 in interest for the year. If the rent (and therefore the required LMR) rises, the landlord may ask the tenant to top up the deposit to equal the new monthly rent.
Can a landlord keep the interest?
No. The interest belongs to the tenant. The landlord must either pay it out or, in Ontario, may credit it against a lawful annual rent increase or use it to top up the LMR deposit to match the new rent. Unpaid interest can be claimed by the tenant at the LTB.
Are last-month-rent deposits the same as security deposits?
No. Ontario prohibits general damage/security deposits — a residential landlord may only collect a rent deposit (applied to the last month) plus a refundable key deposit. This is different from US-style security deposits, which cover damage and unpaid rent.