Workaround For Security Deposit in Ontario

[Al Verwey]

After having too many tenant departures where cleaning was not done satisfactorily or junk was left behind, I have come up with a way to mitigate the potential cost. I am offering a Rent Rewards program to new tenants. I set the rent at $50/month higher than market rent. In the section of the Ontario Standard Lease that deals with rent discounts, I tell the tenant that for each month their rent is paid on time and they are not the subject of any complaints, I will credit them with $50 which I will hold onto. At the end of the first year, if they renew, I will rebate it to the tenant after a successful annual inspection in the form of a rent reduction. If they move out, they have to complete a successful move-out inspection, personally hand over their keys and provide a forwarding address which I will mail a cheque to - no e-transfers. I also include my Clean-Up Checklist as an appendix to the lease and ensure that they sign it when they sign the rest of the lease. This method should leave me with $600 that I can use to deal with any junk removal or cleaning expenses.

Do any of you foresee problems with this approach? This does not replace a last month's rent deposit.

 

[Thomas Beyer]

Good idea. Why $50? Why not $100?

If they don’t balk at that then your rents are too low to start with.

The issue is not new tenants not existing (sloppy, low rent) ones in Ontario !


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[Martin1968]

You would want responses from Landlords in Ontario.
In Alberta we actually are allowed to collect a real security deposit with one months rent. This cannot be used towards last month rent. Significant difference between Ontario and here out west.
If tenants leave junk behind or don’t clean, as a landlord you simply deduct the cost for everything from their security deposit.

As for your policy, if it works for you why not.

 

[Alvaro Sanchez]

I always send a cleaning team on new tenants. - The cost it is already included in the rent. I budget such cost same as repairs and vacancy. - Your approach in theory sounds good but in reality, it's time consuming. You will never be sure if current tenant will do a good job, new tenant may be disappointed and you might be stress out managing whole the process specially when you get a decent number of units.

As investor, I don't speculate....When I sent a cleaning team then 4 people are happy:
- Exiting Tenant. (No need to do anything when going away)
- New Tenant. (No need to do anything when coming in)
- The cleaner (Steady income).
- Me! (I helped 3 people and each of them thank me for my approach.)

 

[Matt Crowley]

A potential problem could be if you have a long term tenant who sees their rent as savings and asks for a payout. Even after 3 years that is a sizeable cheque. Is it held in trust? What interest is it earning? Does that mean I get equity in the house?

It also looks like an excessive deferred penalty charge. If I were a tenant and you charged me, that would be my argument. In Alberta, I bet you I would win!