Last Month's Rent (LMR) deposit can be required only "on or before entering into the tenancy agreement" (RTA subsection 106(1)), as agreements cannot be changed unilaterally later by demanding something new, and LMR deposit can be applied only to the last month of the tenancy (RTA subsection 106(10)). Additionally, RTA subsection 234(f) makes it an "offence" under the Act to fail to apply LMR deposit to the last month of the tenancy in contravention of RTA subsection 106(10).
With that in mind, if a landlord applied Last Month's Rent (LMR) deposit prematurely to any month OTHER than the last month of the tenancy, does this mean that:
A) This tenancy is now continuing without LMR deposit? (E.g. CEL-06197-10 (Re), 2011 CanLII 5921 (ON LTB), <http://canlii.ca/t/2fnws>)
OR
B) This move constitutes signing away landlord's statutory rights and is therefore void (under RTA section 4, see also 1086891 Ontario Inc. v. Barber, 2007 CanLII 18734 (ON SCDC), <https://canlii.ca/t/1rldv>) and as if it never happened, because such application of the LMR deposit is not permitted under RTA section 106? (E.g. TEL-77930-17 (Re), 2017 CanLII 49113 (ON LTB), <http://canlii.ca/t/h538q>, TNL-97819-17 (Re), 2017 CanLII 142652 (ON LTB), <https://canlii.ca/t/hrx5d>) (So would an N4 / L1 eviction for non-payment of rent still be possible for the LMR deposit that the landlord applied prematurely?)
A)
CEL-06197-10 (Re), 2011 CanLII 5921 (ON LTB), <https://canlii.ca/t/2fnws>
" 5. Application of Subsections 106(1) and 106(10) of the Residential Tenancies Act, 2006 (the Act’)
1. Section 106(1) of the Act states: “A landlord may require a tenant to pay a rent deposit with respect to a tenancy if the landlord does so on or before entering into the tenancy agreement. (Emphasis added.) In other words a landlord cannot require a tenant to pay a rent deposit after the tenancy commences.
2. Section 106 (10) is also specific that last month’s rent can only be used in the last month of a tenancy. Section 106(10) states: , “A landlord shall apply a rent deposit that a tenant has paid to the landlord or a former landlord in payment for the last period before the tenancy terminated.”
3. Given the specific prohibitions in section 106, the Landlord is not entitled to unilaterally change her mind about the treatment of the last month’s rent deposit and thereafter seek to recover a deposit by way of considering that there was a month’s rent in arrears ( March 2010 ) and serving an N4 for non-payment of rent, after the fact.
4. With respect to a premature use of a last month’s rent deposit for payment of rent by a landlord’s explicit or implicit action, the legislation prohibits the landlord from requiring its replacement at a later point in the tenancy without the Tenant’s consent.
5. Finally I note in support of my conclusion that the rent for March 2010 was paid the Landlord’s counsel wrote in his closing submission on page 2, paragraph 2 as follows:,”the tenant continued to rely on the rent receipts as her proof of payment but the landlord countered that she accommodated the tenants request for receipts, as the tenant had used the last month’s rent deposit for March 2010 rent and that she was not intuitive enough to discover that the tenant had an ulterior motive.”"
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B)
TEL-77930-17 (Re), 2017 CanLII 49113 (ON LTB), <https://canlii.ca/t/h538q>
"3. The parties agree that the Tenant paid to the Landlords a last month’s rent deposit of $595.00 that now totals $620.00. This deposit does not appear on the Landlords’ application.
4. In response to my questions, the Landlord stated that she used up the deposit by applying it to the rent due for the month of June, 2016.
5. As I explained at the hearing, landlords are not permitted to apply a last month rent deposit to rent due for any month other than the last month of the tenancy. This is because s. 106(10) of the Act says:
A landlord shall apply a rent deposit that a tenant has paid to the landlord or to a former landlord in payment of the rent for the last rent period before the tenancy terminates.
7. This is true even where a landlord and tenant agree. This is because subsection 3(1) of the Act says the Act applies with respect to rental units despite any agreement or waiver to the contrary. In other words, parties are not permitted to contract out of the Act. Subsection 106(10) applies whether or not the Tenant and the Landlords agreed otherwise or not.
8. Given the above, I am satisfied that the Tenant is in arrears of rent and the arrears include $620.00 that is due for the month of June, 2016."
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TNL-97819-17 (Re), 2017 CanLII 142652 (ON LTB), <https://canlii.ca/t/hrx5d>
"2. At the hearing, the Landlord indicated that the Tenant also did not pay rent for January, 2017. Apparently, the parties agreed that the Tenant’s rent deposit would be applied to the rent for that month. Pursuant to the agreement, the Landlord did not include a claim for January’s rent on the N4.
3. As I explained at the hearing, the parties’ agreement did not actually have any legal effect. Subsection 106(10) of the Residential Tenancies Act, 2006 (the ‘RTA’) provides that a rent deposit must be applied to the last period at the end of a tenancy. Subsection 3(1) provides that the RTA applies despite any agreement or waiver to the contrary.
4. This means that even if the parties agreed to apply the deposit to January’s rent, they were not permitted to do so. The Tenant still has a rent deposit, and has not paid the rent for January, 2017.
5. It follows that the N4 the Landlord served in September was not accurate. Pursuant to subsection 59(2) of the RTA, the N4 must set out the amount of rent that is due at the time it is served. The N4 set out that three months of rent were due, when in fact, four months of rent were due.
6. When I pointed this out at the hearing, the Landlord opted to waive the rent for January so that the N4 would be valid.
7. The Tenant accepted the Landlord’s waiver, and accordingly, I find that the Tenant owed arrears of $2,640.00 on September 6, 2017. The Landlord has waived her claim to any additional amounts that may have been owing. The Tenant still has a rent deposit of $880.00."
"2. At the hearing, the Landlord indicated that the Tenant also did not pay rent for January, 2017. Apparently, the parties agreed that the Tenant’s rent deposit would be applied to the rent for that month. Pursuant to the agreement, the Landlord did not include a claim for January’s rent on the N4.
3. As I explained at the hearing, the parties’ agreement did not actually have any legal effect. Subsection 106(10) of the Residential Tenancies Act, 2006 (the ‘RTA’) provides that a rent deposit must be applied to the last period at the end of a tenancy. Subsection 3(1) provides that the RTA applies despite any agreement or waiver to the contrary.
4. This means that even if the parties agreed to apply the deposit to January’s rent, they were not permitted to do so. The Tenant still has a rent deposit, and has not paid the rent for January, 2017.
5. It follows that the N4 the Landlord served in September was not accurate. Pursuant to subsection 59(2) of the RTA, the N4 must set out the amount of rent that is due at the time it is served. The N4 set out that three months of rent were due, when in fact, four months of rent were due.
6. When I pointed this out at the hearing, the Landlord opted to waive the rent for January so that the N4 would be valid.
7. The Tenant accepted the Landlord’s waiver, and accordingly, I find that the Tenant owed arrears of $2,640.00 on September 6, 2017. The Landlord has waived her claim to any additional amounts that may have been owing. The Tenant still has a rent deposit of $880.00."
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1086891 Ontario Inc. v. Barber, 2007 CanLII 18734 (ON SCDC), <https://canlii.ca/t/1rldv>
"[17] In the present case, the effect of the so-called agreement on which the tenant seeks to rely would be to forever prohibit the landlord from exercising his right to a rent increase as long as the tenant remained in possession. Because the so-called agreement would amount to a contracting out of the landlord’s right to increase rent in accordance with the TPA, it runs afoul of ss. 2(1) of the statute. While there is provision in the TPA permitting landlords and tenants to negotiate increases and decreases in specific circumstances, none of those circumstances apply here and indeed no provision of the TPA permits a “rent free” agreement.
[18] The policy rationale behind ss. 2(1) is to treat tenants and landlords equally. The subsection is designed to prevent parties from bargaining away or waiving their statutory rights no matter what the circumstances. Both Crown Trust Co. v. Rosenberg and Pinheiro v. Bowes found that the provision was meant to operate as a blanket prohibition. To permit a departure would create a significant loophole which could dramatically impair the entire scheme of the Act.
[19] The appellant submitted the landlord was estopped from resiling from its bargain. Estoppel cannot override statute (see Harzuz Holdings Ltd. v. Peel (Regional Municipality), [2006] O.J. No. 1830). There is no need for the subsection to make specific reference to the doctrine of estoppel. In any event, it would be illogical to conclude that, although the TPA prohibits in very clear terms any agreement to the contrary or waiver of rights, it leaves open to the parties to accomplish the same thing through the doctrine of estoppel. In any event, the Tribunal does not have the jurisdiction to apply the principle of estoppel in the absence of specific statutory authority (see Klymko v. Lem, [2001] O.J. No. 156)."
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"My tenant is short on money and says use the last month’s rent, should I?
- Never apply the deposit held for last week/month’s rent as it is the only security you have. If the tenant is unable to pay the current rent, issue a notice of early termination for non-payment. The rent deposit is to be applied to the last rent period before the tenancy terminates."
"We have not collected last month’s rent (LMR) from some of the tenants that have been living in our units, and we would like to ask for it now. Are you aware of anything that may prevent us from requesting and insisting last month’s rent?
- The Residential Tenancies Act does not permit the charging or collection of a last month’s rent deposit after the commencement of the tenancy. Section 106(1) of the Act states that, “a landlord may require a tenant to pay a rent deposit with respect to a tenancy if the landlord does so on or before entering into the tenancy agreement.” Even if an existing tenant were to “agree” to pay a LMR deposit, the Act does not allow contracting away one’s rights, so both the Landlord and Tenant Board and the Rental Housing Enforcement Unit would consider the payment to be in contravention of the Act under S. 234(d): 234. A person is guilty of an offence if the person, (d) requires or receives a security deposit from a tenant contrary to section 105. It is likely that charging LMR mid-agreement will result in the landlord being fined."
What do you think is the correct treatment of cases when Last Month's Rent deposit was improperly applied to rent prematurely?
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