Real Estate 101

Opinion: How are damage deposits regulated Canada-wide?

It’s not cheap to rent properties, especially in BC and Ontario where rent often costs tenants 30% or more of their annual income. Here's what you need to know and three ways you can protect yourself as a tenant

While some Canadians might rent to avoid the cost and responsibility of owning a property, they still often treat their rental abodes like their very own home. This shows when renters take pride in their living space and ensure the property is pristine come move-out day. However, even if renters check off all the must-dos on their move-out checklist, and are confident that the property will meet and/or even exceed the landlord’s expectations, it doesn’t guarantee them that they will get their full deposits back—an assumption that could cost them, big time. That’s why we wanted to look at how rental damage deposits are regulated in Canada since it can vary by province.

Let’s take a look at the cost of renting, how damage deposits are used and how to protect yourself as a rental tenant in Canada.

The cost of renting

Apartment-for-rent-sign-federal-budget-2018
Flickr / great_sea

It’s not cheap to rent properties, especially in British Columbia and Ontario where rent is costing tenants over 20% of their annual income. The price only increases when you consider the addition of renter’s insurance, damage deposits or pet deposits—which can be additional charges based on provincial regulations. Therefore, as tenants, knowledge of your rights and responsibilities is crucial. It’s important that you understand your provincial regulations as far as renters’ rights go and also to understand what your landlord is obligated to do as a property owner on your behalf. Sure, it’s wonderful to not have to worry about owning a home and all of the maintenance that comes along with that responsibility, but renting has just as many important details and concerns that Canadians may not realize. I learned this lesson the hard way just last year.

It was a typical Monday morning, minus the fact that my husband and I had just driven for seven hours to our new rental unit in an unfamiliar city. After completing the walk-through of our new apartment, I decided to go through my usual routine of checking my online banking, to which I do at least three times a week. Therefore, it didn’t take more than a few seconds for me to notice that something was wrong. There was $1,400 missing from my account—the exact amount of our previous damage deposit. Assuming this had to be some kind of mistake, I called my bank to ask what happened to the cheque. That’s when they told me someone had cancelled it, after returning it to us during the walk-through just 48 hours prior.

How are damage deposits used across Canada?

man-pays-deposit-for-rental-unit

According to the Canadian Mortgage and Housing Corporation (CMHC), each province and territory has different standards as far as which types of deposits are legal. Most provinces, aside from Ontario and Quebec, allow landlords to ask their tenants for security or damage deposits. Typically, these deposits cannot exceed the last month’s rent. In Ontario, landlords may ask for a rent deposit, but this is not to be used to cover any damages. In Quebec, the landlord has no right to ask for a deposit of any kind.

As far as why there are no damage deposits allowed in Ontario, Toronto-based paralegal, Dan McIntyre, says it’s for one very important reason: “the landlord should not be able to act as judge and jury when it comes to property damage.” A common dispute among landlords and their tenants, damage deposits are difficult to standardize. Prevalent reasons for tenants to lose their deposit include missed rent payments, property damage or what landlords deem a property unclean. However, something many tenants ask themselves is what the property owner may consider clean or damaged? “Many times, landlords forget to consider wear and tear on a property, which is merely due to ageing,” said McIntyre.

After speaking with my landlord to question why this cheque had suddenly been cancelled with no form of communication—she said it was because we had not scheduled a move-out day and the building owner found damages in the hallway of our unit. My husband and I were unaware that we needed to schedule a move-out day as the landlord had never mentioned this to us. As for the damage, we asked for any evidence they could provide, confident that we had not caused any. Nothing was shared.

The process of moving out

a couple moving out of a rental apartment

In Alberta, which is where I had been renting, landlords are legally required to make two property inspections at the end of the lease. Therefore, if the property owner is dissatisfied with the unit conditions, the tenants have time to address the issues. Once a tenant moves out, the landlord must provide a written statement including any deductions that would include a cleaning fee or damage corrections. The balance must then be returned to the tenant within 30 days’ time. Our final weeks and days in the unit were not at all like this description based on the landlord and tenancy boards requirements. We did what most tenants do on their last day, which includes: returning the keys, completing a quick but thorough walk-through of the unit and saying our goodbyes. The property owner handed us our cheque and we left the property assuming all was good. Boy, were we wrong.

After a long and painful conversation discussing what they felt had gone wrong with our move out, it was clear that she was not interested in a compromise. So, I started to explore my options. “Whoever controls the money controls the situation,” said McIntyre. I started to realize how true that statement was after just a few hours of research. My husband and I considered taking the dispute to Small Claims Court. However, the idea of having to worry about the long and painful process was overwhelming. We decided it might be best to count our losses. “That’s exactly what works in the landlord’s favour,” said McIntyre. He said that because “any small claim has a whole lot of formalities” and requires people to invest a lot of time and money, “it’s best to try and straighten it out before you move out.”

3 ways to protect yourself as a tenant

a tenancy agreement protects the tenant and landlord

The best way to avoid having any uncontrollable issues arise as a renter is to ensure the landlord or property owner you choose is experienced. There are three ways to quickly assess your future living situation and the individuals who will be accepting your rent cheques.

  1. Interview them
    Have an in-person meeting with the landlord to discuss his/her communication style, experience level and what the typical move-in and move-out process is. Always sign a lease to protect both parties.
  2. Ask the right questions
    It’s always a good idea to have a list of questions prepared to ask your future landlord, just as they will want to ask you questions about your history as a tenant. These questions can help you spot any red flags. “If the landlord starts asking questions that are out of bounds, that’s a red flag,” said McIntyre. Out-of-bounds questions could include anything surrounding sexual orientation, religious beliefs or personal health.
  3. Get everything in writing
    Landlords are required to communicate with their tenants in writing. Therefore, it’s important to know your rights and keep a record of all situations that arise during your time living in a unit. Photos, emails and written documents should be filed and kept until you have moved out of the property and completed all walkthroughs.

At the end of the day, my husband and I came to a resolution with our landlord that did not please either party but was better than the alternative of all or nothing. The landlord agreed to return half of our damage deposit. However, after speaking with multiple professionals and reading more information about tenants’ rights, it’s clear that had we filed through Small Claims Court, we would have received the entire deposit back. Having the knowledge and background to support our arguments would likely have been enough to appease the landlord. Unfortunately, many Canadians learn the hard way that they have more rights than they realize when it comes to renting properties.

Moving into a new place is exciting. But before you rent any property, know exactly what you are getting before you sign that dotted line on the lease.

Alyssa Davies
Alyssa Davies

Alyssa is a personal finance blogger who focuses on mixing finances with laughter. Through her blog, Mixed Up Money, she helps people relate, learn and become inspired. She recently joined Zolo as the content specialist and brings her passion for property and smart money matters to this growing brand.