Landlord Wants an Extra 10% Deposit After Offer to Lease: Is It Enforceable?

AZ Real Estate Partners

Rental / Legal Practice

Landlord Wants an Extra 10% Deposit After Offer to Lease: Is It Enforceable?

Offer to Lease accepted, then the landlord asks for an extra 10% “credit deposit.” Signing is a legal trap; refusing might risk the deal. Check three things before deciding.

Offer to LeaseAmendmentRental DepositRTAOntario Rental

Why this matters

Ontario Residential Tenancies Act (RTA) caps residential rental deposits at one month’s rent — the Last Month’s Rent (LMR) deposit.
Key point: any additional deposit labeled “credit deposit,” “security deposit,” or “damage deposit” is illegal and unenforceable.

Hard limits under the RTA

Three RTA fundamentals on deposits: 1) landlords may only collect Last Month’s Rent as a deposit; 2) interest is owed annually at the Rent Increase Guideline rate; 3) other deposits — damage, pet, cleaning — exceeding actual cost are prohibited.

Common labels landlords use — Key Deposit, Damage Deposit, Pet Deposit, Cleaning Deposit — are all illegal in residential leases. Tenants have no obligation to pay them; amounts already paid can be recovered through the LTB.

关键点　Key Deposit is the only narrow exception — it may be collected if limited to actual key cost (typically $25-$50) and fully refunded when keys are returned.

What to do when the landlord proposes an amendment

Scenario 1: Offer to Lease Accepted, Then 10% Amendment Proposed

Once both parties sign Offer + Acceptance, the contract is in force. A post-signing amendment is a new proposal — tenants may refuse. Insist on the original Offer terms.

Scenario 2: Offer Not Yet Final, Landlord Adds Amendment

Still in negotiation — the landlord may propose terms, but tenants may equally refuse. Decline the amendment, retain original Offer documents.

Scenario 3: Landlord Threatens to Withhold Keys

If the Offer is accepted but landlord refuses delivery, tenant has remedies through LTB T2 (Tenant Rights). LTB can order performance and impose penalties. Hearings often take months, so tenants frequently abandon the unit and pursue refund.

Scenario 4: No Lease Agreement Signed but LMR Paid

In Ontario, Offer to Lease is binding even before formal Lease Agreement. Landlord cannot withhold LMR. Demand refund in writing; escalate to Small Claims Court if necessary.

Why landlords ask for extra deposits

Reason 1: Worry About Credit

Landlords concerned about tenants with Equifax under 600 or unstable income. Legal response is front-loaded screening — credit check and employment letter before Offer, not deposits after.

Reason 2: Worry About Damage

Landlords try to cover damage risk via deposits. Legal alternatives: detailed move-in inspection, require tenant insurance, claim damages through LTB Form L2 if needed.

Reason 3: "Everyone Else Charges 10%"

Some GTA property managers normalized 10-20% extra deposits informally. Normalization isn’t legalization.

Reason 4: Fear of Career Bad Tenants

Real risk, but legal response is strong reference check + income verification + LMR — not additional deposits.

Acceptable alternatives tenants can offer

1) 12-month lease (not month-to-month); 2) 12 postdated cheques at signing; 3) co-signing guarantor; 4) 3-6 months of bank statements. All legal, all reassure landlords.

Suggested response wording

“I’ve reviewed the proposed amendment for an additional 10% deposit. Under Ontario RTA Sections 105 and 106, residential deposits are capped at one month’s rent (Last Month’s Rent). I’ve prepared LMR and first month per the accepted Offer to Lease. I can provide 12 postdated cheques and an employer letter as added assurance. Looking forward to confirming move-in.”

关键点　Citing the statute + offering alternatives almost always resolves the issue — most landlords know the amendment is unenforceable. It’s negotiation, not confrontation.

FAQ

I already signed the amendment agreeing to 10% — can I undo it?

Yes. RTA-violating clauses are unenforceable regardless of signature. File LTB Form T1 (Tenant Application for Rebate) to recover the illegal portion. Filing fee is $53.

Are pet, cleaning, and damage deposits all illegal?

Yes, all prohibited in Ontario residential leases. Only LMR and a small Key Deposit at actual cost are allowed.

If I refuse the amendment, can the landlord refuse keys?

No. Once Offer to Lease is signed, landlord must deliver. LTB Application T2 is the remedy, though slow. Many tenants opt to walk and pursue refund instead.

Can I voluntarily offer two months LMR to reassure the landlord?

Not recommended — even voluntary, the excess remains illegal and refundable. Use postdated cheques, a guarantor, or 6-month prepay options instead.

How much interest is owed on LMR?

At the annual Rent Increase Guideline rate. 2026 guideline is 2.5%. Landlords must pay annually or credit the next rent. Many don't; tenants can demand at move-out.

CONTACT

Arthur Zhao

Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · CLHMS & GUILD Elite · REAIS

VP & Branch Manager, Bay Street Group Inc.

📞 416-888-6161
🌐 arthurzhao.realtor
✉️ arthurzhaorealtor@gmail.com

For information only. Not legal or mortgage advice. Consult a licensed professional for your situation.

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