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The short answer
In Ontario, a landlord holding your last month's rent deposit must pay you interest on it every year at the rent increase guideline rate for that year, which Ontario sets at 2.1% for 2026 and 1.9% for 2027. The landlord can pay the interest to you or add it to the deposit. If they do neither, you can deduct the amount from your next rent payment or apply to the Landlord and Tenant Board.
The rule
Steps to Justice, the Ontario legal information service run by CLEO (reviewed 17 June 2021), sets out how rent deposits work under Ontario's Residential Tenancies Act:
- A landlord may take a rent deposit of no more than one month's rent for a monthly or yearly tenancy, or one week's rent for a weekly tenancy.
- It is used for your final period of rent. It cannot be used for damage or other costs, and pet or damage deposits are not allowed.
- The landlord must pay interest on the deposit each year, at a rate equal to the rent increase guideline for that year.
- The landlord pays it by giving you the interest or adding it to your deposit.
- If the landlord does not pay, you can deduct the amount from your next rent payment or apply to the Landlord and Tenant Board (LTB).
Ontario's standard lease guide (updated 27 October 2025) confirms that the law limits the amount of a rent deposit and how it is treated, and that it cannot be used as a damage deposit.
The rate for each year
The guideline is published by the Ontario government. Its rent increases page (updated 23 June 2026) lists:
| Year | Rent increase guideline |
|---|---|
| 2025 | 2.5% |
| 2026 | 2.1% |
| 2027 | 1.9% |
The guideline also caps most rent increases, but newer units first occupied as homes after 15 November 2018 are exempt from that cap. The Steps to Justice page ties the interest rate to the guideline itself and does not say those newer units are treated differently for deposit interest. If you rent a newer unit and your landlord says no interest is due, ask the LTB.
Working it out
Example only, with invented figures. Funmi rents a two-bedroom apartment in Scarborough at $2,000 a month and paid a $2,000 last month's rent deposit when she moved in on 1 March 2025.
| Deposit year | Guideline used | Deposit | Interest |
|---|---|---|---|
| 1 Mar 2025 to 28 Feb 2026 | 2025: 2.5% | $2,000 | $50.00 |
| 1 Mar 2026 to 28 Feb 2027 (if the $50 was added to the deposit) | 2026: 2.1% | $2,050 | $43.05 |
In the example, which guideline year applies to an anniversary that straddles two calendar years is a detail the Steps to Justice page does not settle; we used the year in which each deposit year began. If your landlord uses the other year, the difference is small, but ask them to show the calculation.
If Funmi's rent rises with the guideline, the deposit added to over the years helps it keep pace with the last month's rent it is meant to cover.
How to claim unpaid interest
- Check your records. Find the date you paid the deposit, the amount, and any receipts or bank transfer confirmations.
- Ask in writing. Email or write to the landlord with your calculation and ask whether they will pay it or add it to the deposit.
- Deduct if unanswered. Steps to Justice says you can deduct unpaid interest from your next rent. Tell the landlord in writing exactly what you are deducting and why, and pay the rest of the rent on time.
- Apply to the LTB if there is a dispute. The LTB can be reached at 1-888-332-3234, the number given on Ontario's tenancy pages.
If you have rented for years and never received interest
Some tenants only learn about the rule when they are about to move, and newcomers who paid a deposit in their first weeks in Canada are easy to miss. Work out each year's interest from the date you paid the deposit, using the guideline for each year, and write it down as a table before you approach the landlord. A landlord who has added nothing to the deposit for several years may owe several years' interest. The Steps to Justice page does not say how far back a claim can go, so if a large sum is involved, ask the LTB or a legal clinic before deducting it from rent.
Moving out
When you leave, the deposit, plus any interest added to it, pays your final month's rent. If the deposit with interest is more than the last month's rent, ask how the difference will be settled, and get the answer in writing. Give notice in the form your lease and the LTB require, and keep a copy of the notice with your deposit records, so the final month is a simple accounting exercise rather than an argument. See also Ontario's rent deposit rules and tenant insurance.
Where Pryme fits
If you also pay or collect rent in Lagos or Abuja, a Pryme account holds naira alongside USD, GBP and EUR, and you can generate a verifiable receipt through VerifyDoc.ai when you pay a landlord in Nigeria, so either side can check it is genuine. See receipts and Send.
Questions people ask
Does my landlord have to pay interest on last month's rent in Ontario?
Yes. Each year the landlord must pay interest on the deposit at the rent increase guideline rate, either to you or by adding it to the deposit.
What is the interest rate on last month's rent in Ontario for 2026?
It follows the rent increase guideline, which Ontario set at 2.1% for 2026. The guideline is 2.5% for 2025 and 1.9% for 2027.
What can I do if my landlord does not pay the interest?
Steps to Justice says you can deduct the amount from your next rent payment or apply to the Landlord and Tenant Board.
Can a landlord use last month's rent for damage?
No. The deposit is for your final rent period, and damage or pet deposits are not allowed in Ontario.
Sources
- Steps to Justice (CLEO): Do I have to pay a deposit when I rent a new place? (reviewed 17 June 2021) · accessed Oct 2026
- Government of Ontario: Residential rent increases (updated 23 June 2026) · accessed Oct 2026
- Government of Ontario: Guide to Ontario's standard lease (updated 27 October 2025) · accessed Oct 2026
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