Bill 145 2010

An Act to amend the Residential Tenancies Act, 2006

Note: This Act amends the Residential Tenancies Act, 2006.  For the legislative history of the Act, see the Table of Consolidated Public Statutes – Detailed Legislative History at www.e-Laws.gov.on.ca.

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

   1.  Part I of the Residential Tenancies Act, 2006 is amended by adding the following section:

Security deposit

Limitations

   9.1  (1)  A landlord may only collect a security deposit that is,

  (a)  a damage deposit collected in accordance with Part VI.1; or

  (b)  a rent deposit collected in accordance with Part VII.

Definition

   (2)  For the purposes of subsection (1),

"security deposit" means money, property or a right paid or given by, or on behalf of, a tenant of a rental unit to a landlord or to anyone on the landlord's behalf to be held by or for the account of the landlord as security for the performance of an obligation or the payment of a liability of the tenant or to be returned to the tenant upon the happening of a condition.

   2.  (1)  Subsection 78 (4) of the Act is amended by adding the following paragraph:

    6.  The amount of any damage deposit, the date it was given and the last period for which interest was paid on the damage deposit.

   (2)  Subsection 78 (8) of the Act is repealed and the following substituted:

Credit for deposits

   (8)  In determining the amount payable by the tenant to the landlord, the Board shall ensure that the tenant is credited with the amount of,

  (a)  any rent deposit and interest on the deposit that would be owing to the tenant on the termination of the tenancy; and

  (b)  any damage deposit and interest on the deposit that would be owing to the tenant on the termination of the tenancy.

   3.  Subsection 87 (4) of the Act is repealed and the following substituted:

Amount of arrears of rent or compensation

   (4)  In determining the amount of arrears of rent, compensation or both owing in an order for termination of a tenancy and the payment of arrears of rent, compensation or both, the Board shall subtract from the amount owing the amount of,

  (a)  any rent deposit or interest on the deposit that would be owing to the tenant on termination; and

  (b)  any damage deposit or interest on the deposit that would be owing to the tenant on termination.

   4.  Subsection 89 (2) of the Act is repealed and the following substituted:

Same

   (2)  If the Board makes an order requiring payment under subsection (1) and for the termination of the tenancy, the Board shall set off against the amount required to be paid the amount of,

  (a)  any rent deposit or interest on the deposit that would be owing to the tenant on termination; and

  (b)  any damage deposit or interest on the deposit that would be owing to the tenant on termination.

   5.  The Act is amended by adding the following Part:

Part vi.1
rules relating to damage deposits

Damage deposit

Purpose of damage deposit

   104.1  (1)  Subject to subsection (2), the purpose of a damage deposit collected in accordance with this Part is to compensate a landlord for the cost to repair or, where repairing is not reasonable, to replace any property relating to a rental unit or residential complex that was wilfully or negligently damaged by a tenant, another occupant of the rental unit or a person whom the tenant permitted in the residential complex.

Not for ordinary wear and tear

   (2)  A damage deposit may not be used to compensate a landlord for costs relating to damage caused by ordinary wear and tear as determined in accordance with indicators that may be prescribed in the regulations.

Damage deposit may be required

   (3)  A landlord may require a tenant to pay a damage deposit with respect to a tenancy if the landlord does so on or before entering into the tenancy agreement.

Agreement re condition of rental unit

   (4)  If a landlord requires a tenant to pay a damage deposit, the landlord and the tenant shall agree in writing as to the rental unit's condition on the day that the tenancy begins.

Amount of damage deposit

   (5)  The amount of a damage deposit must not be more than 25 per cent of the amount of rent for one month.

Same

   (6)  If the lawful rent increases after a tenant has paid a damage deposit, the landlord may require a tenant to pay an additional amount to increase the damage deposit up to the amount permitted by subsection (5).

Qualification, new landlord

   (7)  A new landlord of a rental unit or a person who is deemed to be a landlord under subsection 47 (1) of the Mortgages Act shall not require a tenant to pay a damage deposit if the tenant has already paid a damage deposit to the prior landlord of the rental unit.

Same, exception

   (8)  Despite subsection (7), if a person becomes a new landlord in a sale from a person deemed to be a landlord under subsection 47 (1) of the Mortgages Act, the new landlord may require the tenant to pay a damage deposit in an amount equal to the amount with respect to the former damage deposit that the tenant received from the proceeds of sale.

Interest

   (9)  A landlord of a rental unit shall pay interest to the tenant annually on the amount of the damage deposit at a rate equal to the guideline determined under section 120 that is in effect at the time payment becomes due.

Deduction applied to damage deposit

   (10)  The landlord may deduct from the amount payable under subsection (9) the amount, if any, by which the maximum amount of the damage deposit permitted under subsection (5) exceeds the amount of the damage deposit paid by the tenant and the deducted amount shall be deemed to form part of the damage deposit paid by the tenant.

Deduction of interest from rent

   (11)  Where the landlord has failed to make the payment required by subsection (9) when it comes due, the tenant may deduct the amount of the payment from a subsequent rent payment.

Repayment, prospective tenant

   104.2  (1)  A landlord shall repay the amount received as a damage deposit in respect of a rental unit if vacant possession of the rental unit is not given to the prospective tenant.

Exception

   (2)  Despite subsection (1), if the prospective tenant, before he or she would otherwise obtain vacant possession of the rental unit, agrees to rent a different rental unit from the landlord,

  (a)  the landlord may apply the amount received as a damage deposit in respect of the other rental unit; and

  (b)  the landlord shall repay only the excess, if any, by which the amount received exceeds the amount of the damage deposit the landlord is entitled to receive under section 104.1 in respect of the other rental unit.

Receipt for payment

   104.3  (1)  A landlord shall provide free of charge to a tenant or former tenant, on request, a receipt for the payment of a damage deposit.

Former tenant

   (2)  Subsection (1) applies to a request by a former tenant only if the request is made within 12 months after the tenancy terminated.

Repayment after tenancy

   104.4  (1)  Subject to subsections (2) and (3), a landlord shall repay the amount received as a damage deposit and any interest on the deposit no later than 15 days after a tenancy terminates.

Retention of damage deposit

   (2)  A landlord may retain all or part of the damage deposit that reflects the cost of damage referred to in subsection 104.1 (1).

Set-off under s. 89 (2)

   (3)  A landlord is not required to repay any portion of a damage deposit or any interest that was credited to the tenant in respect of an amount owing under subsection 78 (7) or 87 (3) or that was set off against an amount owing under subsection 89 (1).

Application by tenant

Damage deposit includes interest

   104.5  (1)  For the purposes of this section, a reference to a damage deposit includes any interest on the deposit.

Application

   (2)  If a landlord does not repay a damage deposit or any portion of it in accordance with section 104.4, the tenant may apply to the Board for an order requiring the landlord to repay all or a portion of the deposit.

Order

   (3)  If the Board finds that the amount of the damage deposit retained by the landlord exceeds the amount permitted under subsection 104.4 (2), the Board may order the landlord to repay the amount of the excess.

Onus of proof

   (4)  The onus lies on the landlord to prove that the amount retained by the landlord is in accordance with subsection 104.4 (2).

Information to be filed

   (5)  If an application is made under subsection (2), the landlord shall file with the Board:

    1.  A copy of the written agreement referred to in subsection 104.1 (4) concerning the condition of the rental unit before the tenancy began.

    2.  Any receipts, estimates or any other information describing the costs that the landlord has incurred or will incur for the repair of or, where repairing is not reasonable, the replacement of damaged property.

    3.  Any photos of the damaged property.

    4.  An inspection report, if any, indicating the rental unit's condition before the tenancy began.

    5.  Any other information that is prescribed by the regulations.

No fee

   (6)  Despite any applicable fee set under section 181, there is no fee for making an application under subsection (2).

Time limitation

   (7)  An application under subsection (2) may not be made later than one year after the end of the tenancy.

   6.  Section 105 of the Act is repealed.

   7.  (1)  Section 234 of the Act is amended by adding the following clause:

(0.a) requires or receives a security deposit from a tenant contrary to section 9.1;

   (2)  Section 234 of the Act is amended by adding the following clauses:

(c.1) fails to provide a tenant or former tenant with a receipt in accordance with section 104.3;

(c.2) fails to repay an amount received as a damage deposit as required by subsection 104.4 (1);

   (3)  Clause 234 (d) of the Act is repealed. 

   8.  Subsection 241 (1) of the Act is amended by adding the following paragraphs:

13.1 prescribing indicators of ordinary wear and tear for the purposes of subsection 104.1 (2);

13.2 prescribing information that a landlord must file with the Board under subsection 104.5 (5);

Commencement

   9.  This Act comes into force on the day it receives Royal Assent.

Short title

   10.  The short title of this Act is the Residential Tenancies Amendment Act (Damage Deposits), 2010.

 

EXPLANATORY NOTE

The Bill enacts new Part VI.1 of the Residential Tenancies Act, 2006, which provides rules relating to damage deposits.  Here are some highlights of those rules:

    1.   The purpose of a damage deposit is to compensate landlords for the cost of repair or replacement of property that was wilfully or negligently damaged by a tenant or other specified persons.  The damage deposit may not be used to compensate a landlord for ordinary wear and tear. (see subsections 104.1 (1) and (2) of the Act)

    2.   A landlord may require a tenant to pay a damage deposit that is not more than 25 per cent of one month's rent.  The landlord and tenant must agree in writing as to the condition of the rental unit on the day the tenancy begins. (see subsections 104.1 (3), (4) and (5) of the Act)

    3.   Interest must be paid to the tenant annually on a damage deposit at the same rate as the rent increase guideline in effect at the time the interest is due. (see subsection 104.1 (9) of the Act)

    4.   A landlord is required to repay a damage deposit, including interest, no later than 15 days after a tenancy ends.  The landlord is permitted to retain any portion of the deposit that reflects the cost of damage referred to in subsection 104.1 (1) of the Act. (see section 104.4 of the Act)

    5.   A tenant may apply to the Landlord and Tenant Board for an order requiring the landlord to repay any portion of the damage deposit that the landlord was not entitled to retain.  The landlord bears the onus of proving that he, she or it was entitled to retain the portion of the damage deposit. (see section 104.5 of the Act)

The Act is amended to provide that it is an offence for a landlord to not repay the damage deposit in accordance with section 104.4 or for a landlord to not provide a receipt for a deposit to a tenant or former tenant. (see section 234 of the Act)

Subsection 241 (1) of the Act is amended to provide that the Lieutenant Governor in Council may prescribe,

  (a)   what constitutes ordinary wear and tear for the purposes of subsection 104.1 (2); and

  (b)   the information a landlord must file with the Board in respect of an application under section 104.5.

Consequential amendments are made to various provisions of the Act.