What happens to a deposit when a rental property is sold?

Deposit responsibility generally transfers with the tenancy. The sale records should reconcile the deposit, interest, and tenant ledger for the new landlord.

Last Month’s Rent Deposit Rules in Canada

The phrase “last month's rent” creates expensive confusion because it can describe two legally different things: prepaid rent that must be used for the final rental period, or security held against unpaid obligations and returned unless a lawful claim is made. The label on the e-transfer does not decide which rules apply, the tenancy law does.

Rent deposit and security deposit are not interchangeable

Prepaid rent

Last-month rent deposit

Money reserved for a future rent period. In Ontario, the landlord must apply it to the final rent period and cannot use it to repair damage.

Refundable security

Security or damage deposit

Money held against liabilities defined by local law. It remains the tenant’s money unless the parties agree to a deduction or the landlord follows the required claim process.

Calling a prohibited extra charge “last month's rent,” “key money,” a “holding fee,” or a “cleaning deposit” does not necessarily make it lawful. Most statutes look at what the payment actually does, when it was required, and whether the total exceeds the permitted deposit.

Rental deposit limits across Canada at a glance

Province	Standard deposit	Maximum	What landlords need to know
Ontario	Last-month rent deposit	Up to one rent period or one month, whichever is less	Applied only to the final rent period; damage and pet deposits are not permitted
British Columbia	Security deposit	½ month’s rent	No separate first-and-last requirement or key money; a separate pet deposit may be allowed
Alberta	Security / damage deposit	1 month’s rent	Held in an interest-bearing trust account; it does not automatically become final-month rent
Saskatchewan	Security deposit	1 month’s rent	Only 50% may be required when the agreement is entered; the balance is due within two months of possession
Manitoba	Security deposit	½ of the first month’s rent	Using it for last month’s rent requires the landlord’s consent
Québec	No security or last-month deposit	First month’s rent only	A landlord cannot require a security, key, or last-month deposit
New Brunswick	Security deposit	1 month’s rent; 1 week for weekly tenancies	A separate last-month prepayment is prohibited; deposit is remitted to the provincial office
Nova Scotia	Security deposit	½ month’s rent	Held in trust; the landlord must return it or start the claim process within the statutory deadline
Prince Edward Island	Security deposit	1 month’s rent; 1 week for weekly tenancies	Only one security deposit; it earns prescribed interest
Newfoundland and Labrador	Security deposit	¾ month’s rent; 2 weeks for weekly tenancies	It is security, not rent or a holding deposit

This table covers common private residential tenancies. Subsidized housing, care homes, mobile-home sites, employer housing, weekly tenancies, service animals, and other exempt arrangements can follow different rules.

Ontario: the deposit really is for the last rent period

Ontario is the province most closely associated with “first and last.” A landlord may require a rent deposit on or before entering the tenancy agreement. The cap is the lesser of one month's rent and one rental period, so a weekly tenancy is capped at one week, not one month.

Use

Final rent period only

Damage deposit

Not permitted

Interest

Payable annually

The landlord must apply the deposit to the last rental period before the tenancy ends. It cannot be redirected to cleaning, damage, unpaid utilities, or other claims. A refundable key deposit may be collected, but only within the permitted replacement-cost framework. When lawful rent rises, Ontario's interest and top-up rules can be used to keep the rent deposit aligned with the current rent.

Québec: only the first month can be required in advance

Québec takes the opposite approach. A lessor may require the first month's rent when the lease is signed, even if the tenancy begins later. The lessor cannot require a security deposit, key deposit, last-month deposit, or another additional charge, and cannot require postdated cheques.

First month

May be required

Last month

Cannot be required

Security deposit

Cannot be required

If the parties freely agree to a payment method such as postdated cheques, they can follow that agreement, but it cannot be imposed as the condition for obtaining the dwelling. Preserve proof of every rent payment; the Tribunal administratif du logement notes that proof matters if payment is later disputed.

British Columbia: half a month, not first and last

A BC landlord may request one security deposit of no more than half of one month's rent. If pets are permitted, one separate pet-damage deposit of up to another half-month may also be allowed, regardless of the number of pets. A landlord cannot stack on “first and last month's rent,” key money, or another invented deposit category.

The security deposit is not the last rent payment. At the end of the tenancy, the landlord generally has 15 days after the later of the tenancy ending and receiving the tenant's forwarding address to return the deposit with interest, obtain written permission for a deduction, or apply for dispute resolution. Move-in and move-out condition reports are central to preserving a damage claim.

Alberta, Saskatchewan, and Manitoba

Alberta

Up to one month’s rent

The security or damage deposit is fixed by the rent at the start of the tenancy and cannot be increased later. It must be placed in an interest-bearing Alberta trust account within two banking days. The prescribed minimum interest rate for 2026 is 0%, but the trust and accounting duties still apply. A tenant should not simply skip the final rent payment on the assumption that the deposit covers it.

Saskatchewan

Up to one month’s rent

A landlord may require only half of the total deposit when the tenancy agreement is entered. The remaining half is payable within two months after the tenant takes possession. The deposit must be held in an authorized investment or trust account, and the lease cannot say the landlord automatically keeps it at move-out.

Manitoba

Up to half of the first month’s rent

Manitoba's ordinary security deposit is capped at half of the first month's rent. Separate rules permit a pet-damage deposit of up to one month's rent and, in qualifying buildings, a tenant-services security deposit. A tenant may use the security deposit for last month's rent only with the landlord's consent.

Atlantic Canada: four different administration systems

New Brunswick

Up to one month; one week for weekly tenancies

A landlord may ask for the first rent payment and a security deposit, but cannot ask for first and last month's rent. A collected security deposit must be delivered to the Tenant and Landlord Relations Office within 15 days. A landlord's claim is generally due within seven days after the tenancy ends.

Nova Scotia

Up to half a month’s rent

The deposit must be placed in trust within three days. At the end, the landlord must return it with applicable interest or file the required security-deposit claim within 10 days. Normal wear and tear is not tenant damage.

Prince Edward Island

Up to one month; one week for weekly tenancies

A landlord can require only one security deposit, when the tenancy agreement is entered. It must go into an interest-bearing account within two banking days. Within 15 days after the tenancy ends, the landlord must return it with interest, make an agreed written deduction, or file to keep some or all of it.

Newfoundland and Labrador

Up to ¾ month; two weeks for weekly tenancies

The statute describes the payment as security, not rent, a landlord asset, or a holding deposit. A receipt is required. The deposit must generally be returned within 10 days after the tenancy ends unless the parties agree in writing or a claim is pursued through the Residential Tenancies Office.

What about Yukon, the Northwest Territories, and Nunavut?

The territories also use security-deposit models rather than Ontario-style last-month rent deposits. Yukon permits one security deposit up to one month's rent and now requires the landlord's written consent before a tenant uses it as final-month rent. The Northwest Territories permits up to one month for non-weekly tenancies, with half payable at the start and the balance within three months. Nunavut's legislation caps the deposit at one month for non-weekly tenancies and one week for weekly tenancies.

Northern housing programs, staff accommodation, subsidized units, and remote-community arrangements can have additional terms. Check the current territorial form and Rental Office guidance before collecting or applying a deposit.

A four-step deposit workflow for landlords

1
Classify the payment before requesting it
Is it first rent, prepaid final rent, a security deposit, a pet deposit, or a refundable key deposit? If local law does not authorize that category, do not rename and collect it.
2
Record the amount and custody rules
Issue the required receipt, identify the tenant and unit, and move the money into the trust account or provincial deposit system within the local deadline.
3
Document condition at both ends
Use dated, signed condition reports and supporting photos. A deposit is not a substitute for evidence, and several jurisdictions restrict damage claims when inspections are missing.
4
Calendar the return or claim deadline
Do not wait for a dispute. Record the tenancy end date, forwarding-address date where relevant, claim deadline, interest, deductions, evidence, and returned balance.

The records that should stay with the lease

✓Signed lease and deposit clause
✓Deposit receipt and payment confirmation
✓Trust-account or remittance record
✓Move-in condition report and photos
✓Rent increases, interest, and top-ups
✓Move-out report and tenant response
✓Invoices supporting any deduction
✓Return payment or filed claim

A clean record makes deposit administration easier and also supports the broader move-in workflow. Pair it with a consistent tenant-screening process and the first-time landlord guide so the financial and tenancy records begin together.

Frequently asked questions

Can a landlord ask for first and last month’s rent in Canada?+

There is no Canada-wide rule. Ontario permits a last-month rent deposit within its statutory cap. Québec and New Brunswick prohibit a separate last-month prepayment. Other provinces generally regulate a security deposit instead, so landlords must follow the local deposit model.

Can a security deposit be used as last month’s rent?+

Usually not automatically. A security deposit remains security until it is returned, lawfully deducted, or applied by agreement or order. Manitoba and Yukon guidance expressly require landlord consent before it is used as final-month rent.

Can a landlord charge both a damage deposit and last month’s rent?+

Do not assume so. Ontario permits the last-month rent deposit but not a damage deposit. BC permits a capped security deposit but rejects a separate first-and-last requirement. Total-payment and deposit-category rules differ elsewhere.

Can a landlord keep a deposit for normal wear and tear?+

A security deposit is generally not available for normal wear and tear. Claims should be tied to a lawful category and supported by condition reports, photos, invoices, rent records, and the required notice or application.

Does a landlord have to pay interest on a deposit?+

It depends on the jurisdiction and deposit type. Ontario, BC, Manitoba, PEI, Yukon, and other jurisdictions have interest rules, while prescribed rates may be 0% in some years. Use the current official calculator or rate table.

What happens when a rental property is sold?+

Deposit responsibility generally follows the tenancy or is transferred through the applicable system. The sale documents should reconcile each tenant deposit, accumulated interest, and supporting ledger so the new landlord can meet the eventual return or application obligation.

Legal information, not legal advice.This guide summarizes common deposit rules as checked on August 1, 2026. Statutes, regulations, prescribed interest rates, forms, deadlines, and special-housing rules can change. Review the current authority for the property's jurisdiction or obtain advice from a qualified local professional before collecting, retaining, or applying a deposit.

Official sources

All sources accessed August 1, 2026.