A little history ... it is illegal for Ontario landlords to request or accept anything more than first and last month's rent upfront from a new tenant. If brought before the LTB (Landlord and Tenant Board), the landlord would in all likelihood be ordered to pay back the tenant anything over and above the first and last month's rent.
Covers v. Bumbia changes the rules. Without getting into the facts of the case itself, the salient points of the decision are as follows:
- Landlords can now legally accept more than first and last month's rent AS LONG AS the tenant OFFERS it
- Landlords can now legally accept a security deposit AS LONG AS the tenant OFFERS it
- Landlords still CANNOT advertise or request more than first or last month's rent or a security deposit
Practically speaking, this ruling is very positive for all Ontario Landlords as it will allow them to expand their rental pool demographic. For instance, in my personal experience, I have had prospective tenants who were in special situations such as being new to the area or to the Country (with no employment) or being relatively well off (with no employment). One of my screening rules has always been that a tenant has to be employed. This new ruling could change that as now a prospective tenant can offer first and last upfront, along with a few more months as a show of good faith, which would likely get them an approval, assuming all the other requirements are met.
Other jurisdictions have long held that Landlords could legally ask for security deposits to cover any potential damage repairs and cleaning costs once the tenant moves out (which I think just makes sense). For landlords, this may be the first step towards introduction of the security deposit and it becoming the norm in Ontario.
This could also have drastic implications for those who are reluctant to rent to students for fear of a damaged apartment. Now, students can alleviate that fear by offering to provide a security deposit upfront.
On a side note, I have no doubt that we will be seeing a lot of cases before the LTB which will hinge on whether the tenant OFFERED to pay the extra months rent / security deposit v. whether the landlord REQUESTED it.
If you are a landlord, my advice to you would be if you do accept more than first / last month's rent or a security deposit from a tenant going forward, make sure that the tenant explicitly puts it in writing that they are OFFERING it to you, and it is NOT being requested of them.
Paul Kondakos, BA, LL.B, MBA