Security Deposits in Residential Tenancies (19:IV)

A. General

A requirement that a tenant pay a security deposit is an express term of the model agreement. Security deposit is defined in s 1 of the RTA very broadly. It can include money or property or almost any other item of value to be held by a landlord for the purpose of securing the performance of a tenant’s obligations under the agreement and the RTA (e.g. the payment of rent and the obligation to leave the rental unit in the same condition they were received). A security deposit is a deposit which may cover a variety of costs to the landlord: see Balfour v. Thomson, Vancouver Registry F771652 (BC Co Ct). A security deposit does not include: a post-dated cheque for rent, a pet damage deposit, or a fee prescribed under RTR ss 6 and 7. See RTB Policy Guideline 29: Security Deposits.

A landlord can only request a security deposit from a tenant as a condition of entering into a tenancy agreement, not after the agreement has been formed. However, pursuant to s 20, if a landlord permits a tenant to keep a pet on the residential property the landlord may require the tenant to pay a pet damage deposit in accordance with s 19 at the time the tenant moves in with a pet, or at the time a tenant acquires a pet.

B. Requirements Under the RTA

1. Amount

A security deposit demanded or received must not exceed one half of the monthly rent (RTA, s 19(1)). Only one security deposit can be required for each rental unit (s 20(b)). A landlord can also ask for an additional ½ month rent as a pet damage deposit (s 19(2)). The tenant may, with the landlord’s written permission, set off all or part of a security deposit against the rent that is due from him or her (s 21). Any excess security deposit paid (more than ½ of the amount payable as rent at the beginning of the tenancy) to the landlord may be set off by the tenant, presumably without the landlord’s permission (s 19(2)). Failure to pay a lawful security deposit is a ground for ending the tenancy (s 47(1)(a)). The landlord may give a one-month end of tenancy notice if the tenant fails to pay the security deposit within 30 days.

2. Inspection Reports

The RTA requires landlords and tenants to do move-in (ss 23 and 24) and move-out (ss 35 and 36) condition inspection reports. The rights to the security deposit of a landlord or tenant who does not participate in the condition inspection process may be extinguished.

C. Return of Security Deposit and Pet Damage Deposit

When a tenant moves out, he or she must provide his or her landlords with a forwarding address in writing. The security deposit must be returned to the tenant, with interest, or the landlord must file for dispute resolution to retain the deposit, within 15 days after the date at which the tenancy ends, or the date the landlord receives the tenant’s forwarding address, which must be in writing, whichever is later.

If a landlord does not comply with s 38(1) of the RTA (fails to return deposits within 15 days, and fails to file for dispute resolution) and the tenant still has a valid right to the deposit, the tenant may apply for dispute resolution, the landlord may not make a claim against the security deposit or any pet damage deposit, and must pay the tenant double the amount of the security deposit, pet damage deposit, or both (s 38(6)). Leases may not include a term providing that the landlord automatically keeps all or part of the deposit at the end of a tenancy.

Changes have been passed, but not yet brought into force as of the time of writing, allowing landlords to repay security deposits by electronic funds transfer, in addition to the former cheque or personal service methods. For more information on whether the changes have been brought into force, consult the RTB.

1. Interest on Security Deposit

Interest on a security deposit is calculated from the date the tenant pays the deposit to the day before the security deposit is paid back to the tenant. If the deposit is disputed at dispute resolution, the interest is calculated from the date the tenant paid the deposit up until the date the Arbitrator orders its return (usually the date of the hearing).

Interest on a security deposit is calculated as follows. For each one-year period beginning on January 1, the rate will be 4.5% below the prime lending rate of the principal banker to the province on January 1st of that year, compounded annually.

NOTE: A tenant has only one year from the time the tenancy ends to supply the landlord with his or her forwarding address. If the tenant fails to forward the address within the one year limit the landlord may retain the security or pet damage deposit or both.

The RTB website provides a Deposit Interest Calculator which calculates the interest payable on a security deposit during any specific time period: www.rto.gov.bc.ca/content/calculator/calculator.aspx.

NOTE: A landlord does not have to return a deposit within 15 days if the tenant’s right to the return of the deposit (pet or security) has been extinguished for failing to participate in the condition inspection procedures.

NOTE: A pet damage deposit may be used only for damage caused by a pet to the residential property, unless the tenant agrees otherwise.

D. Extra Deposits and Non-Refundable Fees

The RTA allows landlords to charge a deposit for additional access devices (a device so long as it is not a tenant’s only means of entry to one’s building).

Administration fees for returned cheques ($25) or moving between rental units on a single property can only be charged if the tenancy agreement specifically allows for it (RTR, s 7(1)(d)).

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