Security Deposits in Residential Tenancies (19:IV)

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on July 1, 2022.

A. General

A requirement that a tenant pay a security deposit is an express term of the standard 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. 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 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(2)). 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(1)). 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 them (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 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. It is extremely important that tenants take part in inspections for their own protection. It is very useful to take dated photographs during both move-out and move-in inspections.

If a landlord does not conduct any one of the required condition inspections (either for move-in or move-out), doesn’t fill out a Condition Inspection Report as requested, doesn’t give a copy of the filled out report to the tenant, or doesn’t offer the tenant at least two opportunities to attend the inspection on a mutually agreed upon day, then the landlord loses their right to claim against the security deposit or pet damage deposit for damage to the unit. They may still claim against the deposit for other kinds of loss, such as unpaid rent.

If the landlord abides by all the regulations concerning the condition inspections but the tenant did not participate in the condition inspection on both opportunities, then the tenant loses their right to claim their deposit back.

C. Return of Security Deposit and Pet Damage Deposit

When a tenant moves out, they must provide their 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 of the later of the following two: the date at which the tenancy ends, or the date the landlord receives the tenant’s forwarding address, which must be in writing.

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. After this, 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 (s 20 (e)).

According to RTA s 38(8), the landlord can repay security deposits by cheque, personal service methods, or electronic fund transfers.

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. There is an online deposit interest calculator at http://www.housing.gov.bc.ca/rtb/WebTools/InterestOnDepositCalculator.html

NOTE: Prime interest has been below 4.5% since 2008. Therefore, damage deposits paid in or after October 2008 have not accrued any interest (as of June 2022).

NOTE: A tenant has only one year from the time the tenancy ends to supply the landlord with their 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.

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.

2. Change of Landlord

Where a security deposit is paid to a landlord, and the property is then subsequently sold, the security deposit can constitute a covenant that runs with the land. After the building is sold to the second landlord, the security deposit obligations carry over to that second person. So, a tenant who had lived in the building all along would be able to claim the return of their security deposit from a new landlord, even though the tenant had originally paid the security deposit to a different person. See s 93 of the RTA regarding covenants that run with the land.

D. Extra Deposits and Non-Refundable Fees

The RTA allows landlords to charge some non-refundable fees to a to a tenant in accordance with section 7 of the RTA. For example, a landlord may charge for the direct cost of additional building access devices that are requested by the tenant.

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)).

1. Allowable Non-Refundable Fees

• Direct costs of replacement keys;
• Direct costs of any additional keys that a tenant request;
• Bank service fees for NSF cheques plus a maximum late fee of $25; and
• Parking fees.

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