Security Deposits in Residential Tenancies (19:VI): Difference between revisions

Latest revision as of 08:02, 30 August 2024

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on August 15, 2024.

A. Definitions

A landlord may require a tenant to pay one security deposit as a condition of entering into a tenancy agreement (RTA, s 17). “Security deposit” is defined very broadly. It can include money, property, rights, or otherwise almost any other item of value to be held by a landlord for the purpose of securing the performance of a tenant’s obligations under the tenancy agreement and the RTA; however, a security deposit does not include a post-dated cheque for rent, a pet damage deposit, or a fee prescribed under RTR ss. 6 and 7 (RTA, s 1); for more information, see RTB PG 29: Security Deposits.

A pet damage deposit is similar to a security deposit, but is held by the landlord as security for damage to the rental property caused by a pet (RTA, s 1). Unlike a security deposit, the definition of a pet damage deposit does not exclude post-dated cheques for rent (RTA, s 1).

B. Payment of the Security Deposit and Pet Damage Deposit

1. Amount

A security deposit or a pet damage deposit must not exceed one half of the monthly rent (RTA, s 19(1)).

2. Number

A landlord is permitted to accept a maximum of one security deposit (RTA, s 20(b)) and one pet damage deposit (RTA, s 20(d)) within a tenancy agreement.

3. Timing

A landlord is not entitled to a security deposit from a tenant after the agreement has already been formed (RTA, s 20(a)).

A landlord is only permitted to require a pet damage deposit from a tenant when the tenant enters into the tenancy agreement, or the point at which the landlord agrees that the tenant may keep a pet they acquired during the tenancy on the residential property (RTA, s 20(c)).

4. Consequences of Non-Compliance

If a landlord accepts a security deposit or a pet damage deposit that is greater than 1/2 of one month's rent, the tenant may deduct the overpayment from rent or otherwise recover the overpayment (RTA, s 19(2)).

Failure to pay a lawful security deposit is a ground for ending the tenancy (RTA, s 47(1)(a)). The landlord may give a one-month eviction notice if the tenant fails to pay the security deposit within 30 days of the due date under the tenancy agreement.

C. Return of Security Deposit and Pet Damage Deposit

A tenant must provide their landlords with a forwarding address in writing within one year after the end of the tenancy (RTA, s 39). Once both the tenancy has ended and the landlord has received the tenant’s forwarding address in writing, the landlord has 15 days to do one of the following:

return the security deposit or pet damage deposit to the tenant, with interest (RTA, s 38(1)(c)); or
make an application for dispute resolution to retain the deposit (RTA, s 38(1)(d)).

If the landlord fails to complete either of those two options and the tenant still has a valid right to the deposit, the tenant may apply for dispute resolution (RTA, s 38.1(1)). After this, the landlord may not make a claim against the security deposit or any pet damage deposit and must pay the tenant double the amount of the security deposit, pet damage deposit, or both (RTA, ss 38(6)).

If a tenant fails to provide their forwarding address in writing within one year after the end of the tenancy, they lose the right to have their security deposit or pet deposit returned, and the landlord may keep them (RTA, s 39). A landlord may also keep a security deposit or pet damage deposit if the tenant agrees in writing or if ordered by the RTB (RTA, s 38(4)).

Leases may not include a term providing that the landlord automatically keeps all or part of the deposit at the end of a tenancy (RTA, s 20 (e)). The right of a landlord or tenant to respectively keep or retrieve the security deposit or pet deposit depends on their compliance with the requirements governing condition inspection reports.

1. Interest on Security Deposit

Interest on a security deposit or pet damage deposit is calculated from the date the tenant pays the deposit to the day before the security deposit is paid back to the tenant. If the deposit is disputed at dispute resolution, the interest is calculated from the date the tenant paid the deposit up until the date the Arbitrator orders its return (usually the date of the hearing).

Interest on a security deposit or pet damage deposit is calculated as follows: for each one-year period beginning on January 1, the rate will be 4.5% below the prime lending rate of the principal banker to the province on January 1st of that year, compounded annually (RTR, s 4). The interest payable on security and pet damage deposits for 2024 is 2.7%.

There is an online deposit interest calculator here.

2. Change of Landlord

Where a security or pet deposit is paid to a landlord, and the property is then subsequently sold, the obligations regarding the security deposit and pet damage deposit pass to the new property owner, meaning they become responsible for repaying the security deposit and pet damage deposit when the tenancy ends (RTA, s 93).

D. Non-Refundable Fees

The RTA allows landlords to charge some non-refundable fees to a tenant in accordance with section 7 of the RTR. They do not form part of the security deposit or pet deposit (RTA, s 1).

Some of these allowable non-refundable fees are:

direct cost of replacing keys or other access devices (RTR, s 7(1)(a));
direct cost of additional keys or other access devices requested by the tenant (RTR, s 7(1)(b));
a service fee charged by a financial institution to the landlord for the return of a tenant’s cheque (RTR, s 7(1)(c));
a move-in or move-out fee charged by a strata corporation to the landlord (RTR, s 7(1)(f));
a fee for services or facilities that are requested by the tenant and not required to be provided under the tenancy agreement (RTR, s 7(1)(g)).

The following fees must only be charged if laid out in the tenancy agreement (RTR, s 7(2)):

an administration fee for a tenant’s cheque returned by their financial institution or for late payment of rent, which must not exceed $25 (RTR, s 7(1)(d)); and
a fee for moving between rental units within the residential property if the move was requested by the tenant, which must not exceed the greater of $15 and 3% of the monthly rent (RTR, s 7(1)(e)).

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-{{REVIEWED LSLAP | date= July 1, 2022}}
+{{REVIEWED LSLAP | date= August 15, 2024}}
 {{LSLAP Manual TOC|expanded = landlord}}
+== A. Definitions ==
+A landlord may require a tenant to pay one security deposit as a condition of entering into a tenancy agreement (''RTA'', s 17). “Security deposit” is defined very broadly. It can include money, property, rights, or otherwise almost any other item of value to be held by a landlord for the purpose of securing the performance of a tenant’s obligations under the tenancy agreement and the ''RTA''; however, a security deposit does not include a post-dated cheque for rent, a pet damage deposit, or a fee prescribed under ''RTR'' ss. 6 and 7 (''RTA'', s 1); for more information, see RTB PG 29: Security Deposits.
-== '''A. General''' ==
+A pet damage deposit is similar to a security deposit, but is held by the landlord as security for damage to the rental property caused by a pet (''RTA'', s 1). Unlike a security deposit, the definition of a pet damage deposit does not exclude post-dated cheques for rent (''RTA'', s 1).
-A requirement that a tenant pay a security deposit is an express term of the standard agreement. Security deposit is defined in s 1 of the ''RTA'' very broadly. It can include money or property or almost any other item of value to be held by a landlord for the purpose of securing the performance of a tenant’s obligations under the agreement and the ''RTA'' (e.g. the payment of rent and the obligation to leave the rental unit in the same condition they were received). A security deposit is a deposit which may cover a variety of costs to the landlord. A security deposit does '''not''' include a post-dated cheque for rent, a pet damage deposit, or a fee prescribed under RTR ss. 6 and 7. See Policy Guideline 29: Security Deposits.
+== B. Payment of the Security Deposit and Pet Damage Deposit ==
-A landlord can only request a security deposit from a tenant as a condition of entering into a tenancy agreement, not after the agreement has been formed. However, pursuant to s 20, if a landlord permits a tenant to keep a pet on the residential property the landlord may require the tenant to pay a pet damage deposit in accordance with s 19 at the time the tenant moves in with a pet, or at the time a tenant acquires a pet.
+=== 1. Amount ===
-== '''B. Requirements Under the ''RTA''''' ==
+A security deposit or a pet damage deposit must not exceed one half of the monthly rent (''RTA'', s 19(1)).
-=== 1. Amount ===
-A security deposit demanded or received must not exceed one half of the monthly rent (''RTA'', s 19(2)). Only one security deposit can be required for each rental unit (s 20(b)). A landlord can also ask for an additional ½ month rent as a pet damage deposit (s 19(1)). The tenant may, '''with the landlord’s written permission''', set off all or part of a security deposit against the rent that is due from them (s 21). Any excess security deposit paid (more than ½ of the amount payable as rent at the beginning of the tenancy) to the landlord may be set off by the tenant without the landlord’s permission (s 19(2)). Failure to pay a lawful security deposit is a ground for ending the tenancy (s 47(1)(a)). The landlord may give a one-month end of tenancy notice if the tenant fails to pay the security deposit within 30 days.
+=== 2. Number ===
-=== 2. Inspection Reports ===
+A landlord is permitted to accept a maximum of one security deposit (''RTA'', s 20(b)) and one pet damage deposit (''RTA'', s 20(d)) within a tenancy agreement.
-The RTA requires landlords and tenants to do move-in (ss 23 and 24) and move-out (ss 35 and 36) condition inspection reports. The rights to the security deposit of a landlord or tenant who does not participate in the condition inspection process may be extinguished.  It is extremely important that tenants take part in inspections for their own protection. It is very useful to take dated photographs during both move-out and move-in inspections.
+=== 3. Timing ===
-If a landlord does not conduct any one of the required condition inspections (either for move-in or move-out), doesn’t fill out a Condition Inspection Report as requested, doesn’t give a copy of the filled out report to the tenant, or doesn’t offer the tenant at least two opportunities to attend the inspection on a mutually agreed upon day, then the landlord loses their right to claim against the security deposit or pet damage deposit for damage to the unit. They may still claim against the deposit for other kinds of loss, such as unpaid rent.
+A landlord is not entitled to a security deposit from a tenant after the agreement has already been formed (''RTA'', s 20(a)).
-If the landlord abides by all the regulations concerning the condition inspections but the tenant did not participate in the condition inspection on both opportunities, then the tenant loses their right to claim their deposit back.
+A landlord is only permitted to require a pet damage deposit from a tenant when the tenant enters into the tenancy agreement, or the point at which the landlord agrees that the tenant may keep a pet they acquired during the tenancy on the residential property (''RTA'', s 20(c)).
-== '''C. Return of Security Deposit and Pet Damage Deposit''' ==
+=== 4. Consequences of Non-Compliance ===
-When a tenant moves out, they must provide their landlords with a forwarding address in writing. The security deposit must be returned to the tenant, '''with interest''', or the landlord must file for dispute resolution to retain the deposit, within 15 days of the later of the following two: the date at which the tenancy ends, or the date the landlord receives the tenant’s forwarding address, which '''must be in writing.'''
+If a landlord accepts a security deposit or a pet damage deposit that is greater than 1/2 of one month's rent, the tenant may deduct the overpayment from rent or otherwise recover the overpayment (''RTA'', s 19(2)).
-If a landlord does not comply with s 38(1) of the ''RTA'' (fails to return deposits within 15 days and fails to file for dispute resolution) and the tenant still has a valid right to the deposit, the tenant may apply for dispute resolution. After this, the landlord may not make a claim against the security deposit or any pet damage deposit and '''must pay the tenant double the amount of the security deposit, pet damage deposit, or both''' (s 38(6)).
+Failure to pay a lawful security deposit is a ground for ending the tenancy (''RTA'', s 47(1)(a)). The landlord may give a one-month eviction notice if the tenant fails to pay the security deposit within 30 days of the due date under the tenancy agreement.
-Leases may not include a term providing that the landlord automatically keeps all or part of the deposit at the end of a tenancy (s 20 (e)).
+== C. Return of Security Deposit and Pet Damage Deposit ==
-According to ''RTA'' s 38(8), the landlord can repay security deposits by cheque, personal service methods, or electronic fund transfers.
+A tenant must provide their landlords with a forwarding address in writing within one year after the end of the tenancy (''RTA'', s 39). Once both the tenancy has ended and the landlord has received the tenant’s forwarding address in writing, the landlord has 15 days to do one of the following:
+*return the security deposit or pet damage deposit to the tenant, with interest (''RTA'', s 38(1)(c)); or
+*make an application for dispute resolution to retain the deposit (''RTA'', s 38(1)(d)).
-=== 1. Interest on Security Deposit ===
+If the landlord fails to complete either of those two options and the tenant still has a valid right to the deposit, the tenant may apply for dispute resolution (''RTA'', s 38.1(1)). After this, the landlord may not make a claim against the security deposit or any pet damage deposit and must pay the tenant double the amount of the security deposit, pet damage deposit, or both (''RTA'', ss 38(6)).
-Interest on a security deposit is calculated from the date the tenant pays the deposit to the day before the security deposit is paid back to the tenant. If the deposit is disputed at dispute resolution, the interest is calculated from the date the tenant paid the deposit up until the date the Arbitrator orders its return (usually the date of the hearing).
+If a tenant fails to provide their forwarding address in writing within one year after the end of the tenancy, they lose the right to have their security deposit or pet deposit returned, and the landlord may keep them (''RTA'', s 39). A landlord may also keep a security deposit or pet damage deposit if the tenant agrees in writing or if ordered by the RTB (''RTA'', s 38(4)).
-Interest on a security deposit is calculated as follows. For each one-year period beginning on January 1, the rate will be 4.5% below the prime lending rate of the principal banker to the province on January 1st of that year, compounded annually. There is an online deposit interest calculator at http://www.housing.gov.bc.ca/rtb/WebTools/InterestOnDepositCalculator.html
+Leases may not include a term providing that the landlord automatically keeps all or part of the deposit at the end of a tenancy (''RTA'', s 20 (e)). The right of a landlord or tenant to respectively keep or retrieve the security deposit or pet deposit depends on their compliance with the requirements governing condition inspection reports.
-:'''NOTE:''' Prime interest has been below 4.5% since 2008. Therefore, damage deposits paid in or after October 2008 have not accrued any interest (as of June 2022).
+=== 1. Interest on Security Deposit ===
-:'''NOTE:''' A tenant has only one year from the time the tenancy ends to supply the landlord with their forwarding address. If the tenant fails to forward the address within the one year limit the landlord may retain the security or pet damage deposit or both.
+Interest on a security deposit or pet damage deposit is calculated from the date the tenant pays the deposit to the day before the security deposit is paid back to the tenant. If the deposit is disputed at dispute resolution, the interest is calculated from the date the tenant paid the deposit up until the date the Arbitrator orders its return (usually the date of the hearing).
-:'''NOTE:''' A landlord does not have to return a deposit within 15 days if the tenant’s right to the return of the deposit (pet or security) has been extinguished for failing to participate in the condition inspection procedures.
+Interest on a security deposit or pet damage deposit is calculated as follows: for each one-year period beginning on January 1, the rate will be 4.5% below the prime lending rate of the principal banker to the province on January 1st of that year, compounded annually (''RTR'', s 4). The interest payable on security and pet damage deposits for 2024 is 2.7%.
-:'''NOTE:''' A pet damage deposit may be used only for damage caused by a pet to the residential property unless the tenant agrees otherwise.
+There is an online deposit interest calculator [https://www.housing.gov.bc.ca/rtb/WebTools/InterestOnDepositCalculator.html here].
 === 2. Change of Landlord ===
-Where a security or pet deposit is paid to a landlord, and the property is then subsequently sold, the security deposit can constitute a covenant that runs with the land. After the building is sold to the second landlord, the security deposit obligations carry over to that second person. So, a tenant who had lived in the building all along would be able to claim the return of their security deposit from a new landlord, even though the tenant had originally paid the security deposit to a different person. See s 93 of the ''RTA'' regarding covenants that run with the land.
+Where a security or pet deposit is paid to a landlord, and the property is then subsequently sold, the obligations regarding the security deposit and pet damage deposit pass to the new property owner, meaning they become responsible for repaying the security deposit and pet damage deposit when the tenancy ends (''RTA'', s 93).
-== '''D. Extra Deposits and Non-Refundable Fees''' ==
-The ''RTA'' allows landlords to charge some non-refundable fees to a to a tenant in accordance with section 7 of the RTA. For example, a landlord may charge for the direct cost of additional building access devices that are requested by the tenant.
+== D. Non-Refundable Fees ==
-Administration fees for returned cheques ($25) or moving between rental units on a single property can only be charged if the tenancy agreement specifically allows for it (RTR, s 7(1)(d)).
+The ''RTA'' allows landlords to charge some non-refundable fees to a tenant in accordance with section 7 of the ''RTR''. They do not form part of the security deposit or pet deposit (''RTA'', s 1).
-=== 1. Allowable Non-Refundable Fees ===
+Some of these allowable non-refundable fees are:
+*direct cost of replacing keys or other access devices (''RTR'', s 7(1)(a));
+*direct cost of additional keys or other access devices requested by the tenant (''RTR'', s 7(1)(b));
+*a service fee charged by a financial institution to the landlord for the return of a tenant’s cheque (''RTR'', s 7(1)(c));
+*a move-in or move-out fee charged by a strata corporation to the landlord (''RTR'', s 7(1)(f));
+*a fee for services or facilities that are requested by the tenant and not required to be provided under the tenancy agreement (''RTR'', s 7(1)(g)).
-* Direct costs of replacement keys;
+The following fees must only be charged if laid out in the tenancy agreement (''RTR'', s 7(2)):
-* Direct costs of any additional keys that a tenant request;
+*an administration fee for a tenant’s cheque returned by their financial institution or for late payment of rent, which must not exceed $25 (''RTR'', s 7(1)(d)); and
-* Bank service fees for NSF cheques plus a maximum late fee of $25; and
+*a fee for moving between rental units within the residential property if the move was requested by the tenant, which must not exceed the greater of $15 and 3% of the monthly rent (''RTR'', s 7(1)(e)).
-* Parking fees.
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