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;
O. Reg. 516/06, section 17, paragraph 3:
3. Payment of a refundable key, remote entry device or card deposit, not greater than the expected direct replacement costs.
Complete Reading Required
When first reviewed, if a person only reads the Residential Tenancies Act, 2006 including section 134(1) without digging deeper to include a review of section 17, paragraph 3 within O. Reg. 516/06, it would initially appear that a key deposit is unlawful. Accordingly, significant confusion and debates do arise from which legal disputes occur.
Illegal Applying of Deposit Monies
A landlord will sometimes attempt to use a key deposit for a purpose outside the intent and legal condition that the deposit be restricted to the purpose of replacing the key such as using key deposit money to pay for damage repairs. As shown within the law cited above, using key deposit money for any purpose other than the direct costs of replacing the key is unlawful. Ironically, using the key deposit money to pay the cost of repairing a damaged door appears unlawful.
When a landlord misuses or withholds key deposit, a tenant may seek an Order from the Landlord Tenant Board in accordance to section 135(1) of the Residential Tenancies Act, 2006. . Upon satisfaction that the landlord improperly made use or withheld the key deposit, the Landlord Tenant Board may issue an Order directing the landlord to 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.