Security Deposits – A Primer

Most landlords in Alberta are aware of the basic rules relating to security deposits. They appear in Part 4 of the Residential Tenancies Act (RTA), sections 43 to 47. Generally speaking, the rules relating to security deposits in Alberta are that a landlord may only request a security deposit which matches one month’s rent and must maintain the security deposit in an interest-bearing trust account as well as records of the deposit for each tenant. There are specific rules relating to how security deposits are returned but those are not addressed in this article. Instead, we will review some questions which have been posed to ARLA of late and offer a high-level response to those. Please note that the details matter and you should confirm with your legal counsel if there are questions or concerns about unique situations.

If I collect a full month’s rent but also want to collect a pet deposit, is the pet deposit included in the full month’s rent?

This is a really good question and the answer is that it depends on how you structure the pet deposit. One approach to this is to term the pet deposit as a one-time non-refundable pet fee rather than a deposit. Deposit connotes some possibility of return of the funds in the future. If you label this as a fee then what you are saying is that this is money which you are paying for the privilege of having a pet in the leased premises.

I would recommend having separate documentation for a pet fee and that documentation should be clear that none of the money will be returned in the future. Further, none of the money is relating to damage such that there will be any expectation on the part of the tenant that if the pet does damage, those funds will be used to address that damage – the security deposit will be used for that purpose. Instead, the pet fee is exactly what the name suggests: a fee for having a pet.

Can I charge a monthly pet fee and a pet deposit?

There is no barrier to charging a monthly pet fee as well as a deposit. However, it is likely better to roll any extra fee for a pet into the rent. This is because the remedies under the RTA may not extend to the pet fee. So, if a tenant pays rent but not the pet fee, I do not think RTDRS, Provincial Court or Court of King’s Bench would be willing to evict on the basis of nonpayment of pet fee.

This means you can either roll the pent fee into the rent at the beginning of the tenancy or make approval of a pet contingent on executing a new lease for the higher amount of rent.

What if I lower the rent, do I have to return some of the deposit?

Section 43(2) prohibits a landlord from requiring a tenant to pay an increase in a security deposit. There is no language which mandates that a landlord refund any part of the security deposit in the event of a decrease in rent. Following the general rules of statutory interpretation, I would conclude that it is not necessary to return any portion of the deposit if rent is decreased.

What if there are two tenants but one moves out, how will I need to deal with the security deposit?

The RTA states that the landlord is the trustee of the money held for the tenant who paid it (s 44(2)). However, it also states that if there is an assignment of the lease under section 22 then the landlord holds it for the assignee. This means that if one tenant is leaving, and you are apprised of that situation, it would be best practice to have the tenant leaving the premises to either assign the lease to the remaining tenant only or to a replacement tenant. In that case, the records should look the same as they would have without a change except that you will want to note the change in tenants and the timing of that change.

You should be aware that if you have two tenants on a lease you have the ability to seek the full amount of any judgment against either of them as you choose (so if you are owed $1000 you can collect it all from Tenant A or all from Tenant B or some combination of the two). If one tenant leaves and you allow the lease to be assigned to one tenant only then you are taking on some risk in that it might have been easier to collect from two people than just one.