What deposit you can take
In Ontario the only deposit a landlord may take is a rent deposit (s.105, s.106). It must be required on or before entering into the tenancy agreement (s.106(1)) and cannot be more than the lesser of one rent period’s rent and one month’s rent (s.106(2)).
Interest is paid every year
s.106(6): the landlord must pay the tenant interest on the deposit annually, at a rate equal to the rent increase guideline in effect when the payment comes due. For example, on a $2,000 deposit with a 2.1% guideline, the year’s interest is $42.
Not raising the rent does not cancel the interest: s.106(6) says the landlord shall pay it, with no exception for a rent freeze. If the landlord does not pay it when due, the tenant may deduct it from a later rent payment (s.106(9)).
Topping up after an increase, using the interest
After a lawful rent increase, the landlord may require the tenant to top the deposit up to the new maximum (s.106(3)). The landlord may also deduct from the interest owed the amount by which the new maximum exceeds the deposit paid, and that amount then counts as part of the deposit (s.106(7)). Each year, keep four numbers apart: interest owed, top-up needed, cash actually exchanged, and the deposit balance afterwards.
At move-out
s.106(10): the deposit is applied to the rent for the last rent period before the tenancy ends.
s.106 does not spell out how interest works for a final part-year. Answers online contradict each other. Write down the method and dates you used and give them to the tenant; if it is disputed, the LTB decides.
Sources: RTA s.105 and s.106 (e-Laws, current to 2026-10-01). Guideline: 2.1% for 2026, 1.9% for 2027.