WHAT IS A SECURITY DEPOSIT?

A security deposit is a sum of money that is paid when two parties enter into a contract or agreement. The deposit protects one of the two parties from possible financial payments of the other. Security deposits are often seen in the framework of lease agreements. The owner of the structure or equipment being leased can request a deposit for damage, theft or loss. The person, who collects the security deposit, returns the money when the contract is terminated. If there are damages or other issues, the payment is taken from the security deposit.
This article gives information about rental housing security deposits, the Residential Tenancies Act and rules governing security deposits in different territories and provinces.

What is a Rental Security Deposit?

Rental security deposits are utilized to settle rental debts or damages to the residence being leased. In most provinces, landlords should apply with the Office of the Rentalsman which is now part of Service New Brunswick. This is a government service that provides information regarding rental rights and obligations. It also intercedes between landlords and tenants to settle problems without having to resort to legal means. The landlord and tenant regulations are implemented by the provincial or territorial Residential Tenancy Agency.

What is the Residential Tenancies Act?

In Canada, the Residential Tenancies Act governs all matters pertaining to landlord-tenant relations.
Wikipedia states that the “Residential Tenancies Act, 2005(RTA) is the law in the province of Ontario, Canada, that governs landlord and tenant relations in residential rental accommodations. The Act received royal assent on June 22, 2006 and was proclaimed into law on January 31, 2007. The Act repealed and replaced the Tenant Protection Act, 1997. It is believed that the new Act will better serve the interests of both tenants and landlords.”
Furthermore, “The Tenant Protection Act removed the dispute resolution process, including evictions and rent increases, from the Ontario court system and placed it in the hands of the Ontario Rental Housing Tribunal. It was heavily criticized for a provision under which landlord applications for eviction would be automatically granted without a hearing unless the tenant filed a notice of dispute within five days. This requirement was not obvious from the standard Tribunal forms that were served on tenants. Many tenants, particularly those with poor literacy skills or whose first language was not English or French, would show up for the hearing date mentioned on the notice they received only to be told that the hearing had been cancelled and they had already been evicted. This controversial provision, which had been the subject of a complaint to the Ombudsman of Ontario, has been removed from the new Act.”

What is the Amount of Security Deposit that Tenants should give to Landlords?

In Quebec, landlords are not allowed by law to demand security deposits from tenants. In Ontario, landlords may ask for the last rental month in advance. For residents of British Columbia, landlords are permitted to collect an extra half month of rental as security deposit. In other provinces, property-owners normally require from one-and-a-half to one month for security deposits.
In most places, there is a prescribed interest rate that spells out the amount of interest than must be paid. In some provinces, landlords are not allowed to keep the deposit. It is the responsibility of the provincial rental authority to keep this amount. Once the occupancy comes to an end, the security deposit is returned to the tenant minus the deductions that have been agreed upon. If there is a dispute, both parties are required to appear before the court or arbitrator for a speedy resolution. There are prescribed dates for returning security deposits.

Security Deposit is a Protection for Landlords and Tenants

While laws on security deposits vary, the goal is to protect the interests of both landlords and tenants in Canada. It has been said that laws are pro-tenant but in reality these have been modified to be fair to all parties concerned.

References

wisegeek.com
consumerinformation.ca
wikipedia.org
globalpropertyguide.com