A set of keys on a wooden table.

July 13th, 2018

Are key deposits legal in Ontario?

As a landlord, you want to know that whoever rents your property will a) get their rent cheques to you on time each month, and b) participate in the property’s upkeep by treating it with respect, and alerting you to any problems that may result in damage.

Measures against delinquency include a legally binding lease agreement and the collection of first and last month’s rent, and property insurance that covers rented spaces can help keep you protected against damage. But while these legalities offer protection against the largest potential financial losses, there are many expenses still not covered. 

A classic example is the keys (or whatever mechanism is used to gain entrance) for the property. While a landlord has the option of swallowing the cost for replacements, you may alternatively opt to charge a key deposit at the time a new tenant occupies the property.

What is a key deposit?

A key deposit is a sum of money a tenant gives a landlord to hold until the safe return of the key(s) to a rented space. This deposit may include the key to the unit, as well as the key to a building’s main entrance, garage and other shared spaces. As well, this deposit can be used to cover other mechanisms like garage remotes and fobs.

A key deposit cannot encompass other potential expenses. For example, the deposit cannot be expanded to include potential cleaning or repair costs. The key deposit is for keys (and other mechanisms) only.

What is the law for key deposits in Ontario?

Whether or not a landlord can legally demand a key deposit from a prospective or current tenant depends on provincial law. In Ontario, key deposits are legal, provided they meet certain requirements.

Key deposits in Ontario must be refundable – i.e. the tenant gets their money back upon returning the keys. In other words, the landlord cannot charge a fee for giving a tenant keys.

The second requirement is that the deposit cannot exceed the expected cost of replacing the keys – e.g. the deposit for two keys cannot be $50, since the cost of cutting a single key is usually under $5. The number of keys given, as well as the replacement cost of any other entrance mechanisms involved, will determine the maximum amount the key deposit can be set.

What about additional keys?

If a tenant requests an additional key or entry mechanism, the landlord is within their legal right to demand payment. However, the payment cannot include a service charge and must be equal to the cost of acquiring the new key.  

There is an exception to this law, though. If the tenant requires a new key because of an action taken by the landlord – e.g. the landlord changes the locks – then the landlord cannot charge the tenant for new keys, nor withhold the tenant’s initial key deposit. The landlord can, however, keep the original key deposit as a security for the new set of keys. The landlord must also provide the new keys to the tenant free of charge.