Security Deposits

What You Need To Know

Landlords have 15 days after tenancy ends to return the deposit in full with interest, or apply to keep all or part of it. In cases of disputes, landlords must file a Form 2B – Landlord Application to Determine Dispute with the Rental Office.

Failure to return the security deposit or file an application within 15 days will result in the inability to make a claim against the security deposit, and the landlord will be required to pay the tenant double the amount.

What is a Security Deposit?

A security deposit is a payment made by the tenant to the housing provider as a safeguard against damages or unpaid rent. In Prince Edward Island, the handling of these deposits is governed by specific rules outlined in the Residential Tenancy Act. This payment serves as a financial assurance for the housing provider, covering potential costs associated with property damages or unpaid rent during the tenancy period.

Can a landlord require a security deposit, and are there any restrictions?

Yes, a landlord in Prince Edward Island can ask for a security deposit at the time of entering into a tenancy agreement. However, there are specific restrictions:

The request for a security deposit can only be made when the landlord and tenant are entering into the tenancy agreement. This means that landlords cannot ask for a deposit at a later stage of the tenancy.
A landlord is prohibited from requiring more than one security deposit for a single tenancy agreement.
The tenancy agreement cannot include any terms that automatically entitle the landlord to retain all or part of the security deposit at the end of the tenancy. This ensures that the return of the deposit is based on the condition of the property and adherence to the agreement, rather than being predetermined.

What is the maximum amount a landlord can charge for a security deposit, and what happens if it’s overcharged?

The maximum amount for a security deposit depends on the rent frequency. For tenancies with weekly rent payments, the maximum deposit is equivalent to one week’s rent. For all other tenancies, it’s limited to one month’s rent.

If a landlord charges more than the allowed amount, the tenant has the right to deduct the excess from their rent. Alternatively, tenants can apply to the Director under section 75 for recovery of the overcharged amount.

How are security deposits handled and documented?

Landlords must provide a written receipt for the deposit, including the amount, date, and rental unit details. Excess payments beyond rent due are treated as security deposits, or as partial rent if they exceed the maximum allowed deposit amount.

Security deposits must be deposited into an interest-bearing account at a financial institution within two banking days of receipt.

For landlords with three or more units, this must be a trust account exclusively for security deposits.

Does the security deposit earn interest, and what are the return procedures?

Yes, it earns interest. Landlords have 15 days after tenancy ends to return the deposit in full with interest, or apply to keep all or part of it. In cases of disputes, landlords must file a Form 2B – Landlord Application to Determine Dispute with the Rental Office.

Security Deposits Interest Rates
Interest Rate Calculator for Security Deposits

Under what conditions can a landlord retain the security deposit without filing an application?

A landlord can retain the security deposit in two scenarios:

If there’s a written agreement with the tenant for the landlord to keep all or part of the deposit.
If there’s an existing order from the Director that remains unpaid for rent or damages to the unit.

In situations other than these, landlords are required to file a Form 2B – Landlord Application to Determine Dispute with the Rental Office to retain any part of the security deposit.

Are there consequences for landlords not complying with security deposit rules?

How should a landlord repay the security deposit to the tenant?

Landlords have several options to return a security deposit. They can mail a cheque to the tenant at a provided address, either via ordinary or registered mail. Alternatively, the landlord can hand over the deposit directly to the tenant or opt for an electronic transfer or payment method.

What if a tenant doesn’t provide a forwarding address and the landlord doesn’t have other contact information for the return of the security deposit?

If a tenant fails to provide a forwarding address to the landlord within six months after the end of the tenancy, and the landlord has made reasonable efforts to repay the deposit as per clause 40(5)(a), the landlord is entitled to keep the security deposit. In such cases, the tenant forfeits their right to the deposit.