As a Landlord, you are in the business of managing risk. There is a lot of risk in owning a property – market instability, environmental damage, claims and disputes, hikes in taxes fees and interest rates, bad tenants, bad neighbors, and on, and on, and on.
Most landlords have no time to read the Residential Tenancies Act (or RTA), which is the law governing landlords, tenants, and rental properties. This is a long piece of writing, and large sections are written by lawyers, for lawyers. However, there is one item that is written very VERY clearly, multiple times.
Landlords shall not collect any type of deposit from tenants, except for the Last-Month rent.
This s..t is not allowed – and here are the sections of the RTA that state this: 105, 106, 107, 134, and others…and penalties are also specified.
So before the gloom sets in, let’s break this down a bit.
1. As a Landlord, you probably want to charge this deposit as an assurance against tenants damaging things on your property, or losing keys, or being negligent while their pets scratch the daylights out of your floors…. You are not wrong in wanting that, but there are better ways to deal with this –
Selecting quality tenants in the first place using tenant-finding services, like GV Estate (the people bringing this information goodness to you).
Write into the contract that pets should wear surface-protective gear while inside the home
Making the tenants responsible for replacing lost keys
Conducting monthly inspections of the home to see the wear-and-tear and take action before significant damages have been done
Etc….just talk to us, we deal with this every day
2. A series of Questions for you to consider:
Question: Even if you could charge a deposit, how much do you expect prospective tenants to agree to? Probably a few hundred bucks? Remember, tenants don’t need to rent from you, they can go to another landlord…
Question: Do you think 300 bucks is going to cover significant damages done by the tenants (broken appliances, damaged floors, cigarette smoke inside the home…etc.)?
Question: Do you think that even if all of the above happened in your home, you are legally entitled to keep the deposit? NO, YOU CANNOT. I have gone to court cases where bad tenants were suing landlords for keeping the deposit…guess what the Landlord Tenant Board said: “Landlord will return the deposit, and if wishes, will file a separate suit against the tenants”.
Question: What’s the worst that could happen if I do it anyway? I’ve seen the following outcomes:
Landlords being fined
Landlords losing the right to offer their property for rent
Landlords paying damages to tenants
If Landlords are paying mortgage, the mortgage company gets notified, and financial penalties are levied by them…not good at all.
3. As you are considering investment risk, consider the death deposit as one risk you want to avoid taking…it’s just not worth it.