Know this about tenant deposits

Know this about tenant deposits

MAIN IMAGE: Paul Stevens, CEO of Just Property

Staff Writer 

One of the most contentious stages of a lease period is when the lease is terminated, and discussions around the return of the deposit begin.

“The Rental Housing Act (RHA) governs how deposits and interest earned are handled. The RHA states that landlords may require tenants to pay a deposit before moving into a dwelling and that such a deposit may not be greater than the deposit amount agreed between the landlord and the tenant. In other words, this amount is a point of negotiation and agreement; it may be led by market norms, the landlord’s appetite for risk, the type of property, the tenant’s credit history and other factors,” says Paul Stevens, CEO of Just Property.

According to Stevens, the RHA also dictates those deposits:

  • Must be invested by the landlord in an interest-bearing account with a financial institution. Best practice is to hold the deposit in a dedicated Trust account, independent of the business/ landlord’s operating account
  • That “the interest rate applicable to such account may not be less than the rate applicable to a savings account with that financial institution” and
  • Tenants can request written proof of how much interest was earned on the deposit while it was in the account, and the landlord needs to show the tenant proof if requested.

The process and timelines for paying back deposits is also addressed in the RHA. It states that deposits must be “repaid to the tenant together with any interest accrued to such account on the expiration of the lease.” This can be achieved within 7 days of the end of the lease if certain conditions are met.


According to the RHA, both the tenant and landlord/ representative property practitioner need to attend the incoming and outgoing inspections. This way, both parties will be aware of any damages that are placed on record, and if they happened before or after the tenant moved in. This evidence allows the tenant and landlord/ representative property practitioner to navigate the common issue of normal wear and tear more easily versus damage to property, intentional or not.

Tenants and landlords should keep copies of the inspection report and date-stamped photographs for their own record and in case other records are misplaced or damaged. Tenants should make sure that things like all lights, plugs and stove plates work and should also remember to record issues about the exterior too. The inspection report should include descriptions for each photograph as it can be difficult to remember details down the line.

Tenants should review the landlord’s or representing agent’s incoming inspection report and associated photographs. Insist that the records be edited if anything has been omitted or misrepresented. Careful attention here will help to avoid future disputes. When it’s time for the exit inspection, tenants will have accurate, documented proof of the condition of the property from when they moved in.

Careful exit

At Just Property, detailed property inspections address each room and area of the property, individually listing:

  • The items in each space (e.g., ceiling, electrical sockets, floor, lights/ light fittings, curtains/ blinds, cupboards, skirting and walls),
  • Their current condition (e.g., clean/ dirty, working/ not working, cracked/ undamaged),
  • Recommendations (e.g., landlord to repair/ tenant to replace) and
  • Associated photographs as evidence

When it is time to exit a property, tenants should take the time to review the incoming and any interim inspection reports and should compare the current condition of the property with what was recorded.

If there are complicated matters tenants are best advised to talk to the landlord or managing agent to agree on a way forward, including the scope of remedial work, the contractor to be used and the anticipated costs. Keeping a paper trail of all communication between the tenant and property practitioner is important. This allows for transparency from both parties.

Deposit paid

If the property is in tip-top condition and there are no damages, the tenant should receive their full deposit.

There are milestones at 7 and 14 days after the termination of the lease, and then another 14 days after the restoration of a property if there were damages. If there are outstanding amounts from the tenant, then the landlord can use the deposit to pay for anything such as outstanding rent or utilities and damages to the property.

A full deposit return is not guaranteed. It is best to have saved up for a new deposit and the first month’s rent before terminating your old lease.

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