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What is a security deposit and what can it be used for?
A security deposit is money paid by a tenant to a landlord at the beginning of the rental agreement. The landlord holds the security deposit for the length of the rental agreement. At the end of the rental agreement, the landlord may keep part or all of the security deposit for three reasons:
- cleaning expenses
- damage in excess of normal wear and tear
- unpaid rent
Landlords wanting to keep a security deposit must serve the tenant with a Notice to Keep Security Deposit Form 8.
How much can a landlord charge for a security deposit?
A landlord can ask for a security deposit of up to one months’ rent, if the rent is paid monthly, or up to one weeks’ rent, if the rent is paid weekly. A landlord is not permitted to collect a separate pet security deposit or the last months’ rent in addition to a security deposit.
If a landlord collects a security deposit greater than one months’ rent, the tenant can apply to the Rental Office for the return of the portion of the security deposit above the monthly rent amount. A security deposit earns interest from the date it is paid to the landlord. Calculate the interest owed with this user friendly security deposit calculator.
What are some best practices to follow for security deposits at the beginning and end of the rental agreement?
Landlords and tenants should consider the following best practices at the beginning and end of the rental agreement:
- Once the security deposit is paid, the landlord should provide the tenant with a receipt stating the amount of the security deposit, the date the security deposit was paid, the address of the rental unit, and the names of the landlord and tenant.
- The landlord and tenant should complete a move-in inspection at the time the rental agreement begins and complete a written report on the condition of the rental unit. The report should include any damage that exists at the beginning of the rental agreement. A sample inspection report is available on the Rental Office’s website. The landlord and tenant should take pictures of any damage that exists at the time the rental agreement begins.
- The landlord and tenant should complete a move-out inspection before the tenant leaves the rental unit. The landlord and tenant should take pictures of any damage that exists at the time the rental agreement ends.
Does a landlord have to pay interest on a security deposit?
Yes. A security deposit earns interest from the date it is paid to the landlord. Calculate the interest owed with this user friendly security deposit calculator.
What happens to the security deposit at the end of the rental agreement?
After a tenant moves out, a landlord has 10 days to return the security deposit, with interest, or serve the tenant with a Notice to Keep Security Deposit Form 8 explaining the reasons the landlord wants to keep all or part of the security deposit and the cost for each reason. In order to receive this Notice, the tenant should provide a forwarding address to the landlord. The timeline for delivering the Notice to Keep Security Deposit can be extended by the Rental Office.
The amount claimed by the landlord can be greater than the security deposit, however, the maximum award the Rental Office can issue to the landlord for cleaning expenses and damage is the security deposit amount.
If a tenant disagrees with the reasons or amounts claimed by the landlord, the tenant can file an Application by Tenant to Dispute Security Deposit Form 9. This application must be filed with the Rental Office within 15 days of the date the tenant receives the Notice to Keep Security Deposit. The timeline for filing the Application by Tenant to Dispute Security Deposit can be extended by the Rental Office.
When the landlord receives a copy of the filed application, they must pay the security deposit, including interest, to the Rental Office. The security deposit can be paid to the Rental Office in cash or by cheque payable to the “Island Regulatory and Appeals Commission.”
If a landlord does not return the security deposit to the tenant or provide the tenant with a Notice to Keep Security Deposit within 10 days of the date the tenant leaves the rental unit, the tenant can file an Application for an Order Form 2 with the Rental Office seeking the return of the security deposit.
What are the reasons that allow a landlord to keep a security deposit?
The burden of proof is on the landlord to establish valid reasons for keeping a security deposit. A landlord may keep all or part of a security deposit if:
- the tenant did not clean before moving out;
- the tenant has damaged the unit beyond normal wear and tear;
- the tenant owes rent to the landlord.
At the end of the rental agreement, the tenant is required to have the rental unit in a condition of “ordinary cleanliness.” The Act states that the standard of ordinary cleanliness is a required part of all rental agreements and an agreement for the tenant to maintain a higher level of cleanliness is not enforceable.
The security deposit can be kept by a landlord for intentional and unintentional damage caused by a tenant or a person that the tenant allows into the rental unit. The security deposit cannot be used for the repair of damage that is “normal wear and tear”. Normal wear and tear is caused by the day to day activities of living in a rental unit. For example, minor scuff marks on the flooring caused by kitchen chairs.
Either party can contact the Rental Office if they require further explanation.
What evidence is required for a security deposit hearing?
Unless the security deposit dispute is resolved, an application to the Rental Office will lead to a hearing. A Notice of Hearing will be sent to the parties which provides a deadline for evidence to be submitted and the time and date that the hearing will be held. For all security deposit hearings, a copy of any written rental agreement should be submitted as evidence.
If the cleanliness of the rental unit is in dispute, the parties should provide evidence showing the condition of the rental unit at the time the tenant left the unit. This evidence may include documents such as pictures of the rental unit, written statements from cleaners and/or invoices from cleaners.
To keep a security deposit, a landlord must establish three factors:
- The damage was caused by a willful or negligent act;
- The damage was caused by the tenant or someone the tenant permitted in the rental unit; or
- The damage must exceed normal wear and tear.
For damage claims, the parties should provide evidence regarding the condition of the damaged item at the beginning and end of the rental agreement (for example, an inspection report). The parties should also provide invoices or estimates for the repair or replacement cost of the damaged item.
For an unpaid rent claim, a rent ledger showing the tenant’s payments should be submitted as evidence. The parties should also submit evidence of any termination notices served by the landlord and the tenant.
What can a tenant do if a landlord refuses to return a security deposit after the tenant moves out?
What can a tenant do if he does not agree with the reasons on the Notice of Intention to Retain Security Deposit?
The tenant has 15 days to file an Application Re Determination of Security Deposit Form 9 with the Rental Office.
What can a tenant do if a forwarding address was provided but the landlord has failed to return the security deposit or send a Notice of Intention to Retain Security Deposit?
The tenant can file an Application with the Rental Office Form 2.
Can a tenant hold the keys until the landlord returns the security deposit?
No. If a tenant does not return the keys the landlord may charge for changing the locks and in some cases, charge rent for each day the tenant has the keys.
Should a tenant and landlord take pictures after the apartment is cleaned or vacated?
Photos can be used as evidence if a dispute arises about cleanliness or damages. Tenants or landlords can present pictures, video tape, receipts or evidence by witnesses at a hearing to substantiate their claims.
What can a landlord do if a tenant has caused damages to a rental unit but has not paid a security deposit?
The landlord can pursue any action for damages with the Small Claims Division of the Supreme Court of Prince Edward Island.
What happens to a tenant’s security deposit if a landlord sells a rental unit?
It is the responsibility of the landlord to pass on the security deposit with interest to the new landlord. The new landlord will be responsible for returning the funds, including interest, to the tenant at the end of the rental agreement.
Can a tenant get the security deposit back if he changes his mind and does not move in?
No, in most cases. However, it is advisable for either party to contact the Rental Office if this situation occurs.
Can a landlord terminate a rental agreement if the tenant does not pay a security deposit?
Yes. A landlord may serve a tenant with a Notice of Termination if the tenant did not pay the requested security deposit within 30 days of entering into a rental agreement.