Can my tenant use the deposit as the last month’s rent?

Many tenants are under the false impression that they can simply instruct the landlord to use the security deposit as the last month’s rent.

A good lease agreement would mention specifically that this is not permitted, since the main function of the security deposit is to protect the landlord against any damages to the property caused by the tenant during their occupation, as well as any unpaid rent and outstanding fees.

If your lease agreement with your tenant does not make provision therefore, you will have to depend on the Rental Housing Act. The Rental Housing Act specifically states that:

on the expiration of the lease, the landlord may apply such deposit and interest towards the payment of all amounts for which the tenant is liable”.

It is therefore clear that the Rental Housing Act also intends for the deposit to be utilised only after the lease has been terminated (whether by early cancellation or expiration).

The tenant therefore is absolutely not entitled to use the deposit as the last month’ s rental and you may deal with his non-payment as such:  a non-payment.  In theory, this may mean that you may write him a Letter of Demand, demanding that he make payment of his arrears within 20 business days.  In practice however, you are likely not to proceed in issuing a summons against him until such time as you know whether or not you are going to use the deposit for any repairs of any damages, or whether you will be able to use the deposit towards the non-payment.

Read more about the security deposit here.

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