What is a security deposit?

The security deposit has attracted a lot of attention lately, and many were confused as to the legality of this practice. We demystify it for you here. A security deposit is the payment of a sum of money by the tenant to the landlord as a precaution against unpaid rent or damage fees. Contrary to what may have been reported in the media, requiring a security deposit is illegal in Quebec.

You’ll find below an excerpt of section 1904 of the Civil Code of Québec:

‘‘The lessor may not exact any instalment in excess of one month’s rent; he may not exact payment of rent in advance for more than the first payment period or, if that period exceeds one month, payment of more than one month’s rent. Nor may he exact any amount of money other than the rent, in the form of a deposit or otherwise, or demand that payment be made by postdated cheque or any other postdated instrument.’’

Therefore, the only amount the landlord can charge the tenant is the first month’s rent, even if possession of the unit is several months away. The landlord can only require one month’s rent in advance. Note that the tenant could voluntarily pay several months’ rent (with post-dated cheques, for example), but this cannot be imposed.

The “voluntary” security deposit

So far, everything seems pretty straightforward. However, following a judgment in 2020 that made some buzz in the media, here’s what to be careful with: the tenant could voluntarily pay a security deposit to the landlord. Beware! For this agreement to be valid, the tenant must not be coherced to make the deposit or be influenced by the fear of not being able to obtain the unit if he does not do so. The deposit must not be a condition for getting the unit. Note that a tenant who pays a security deposit is no longer protected by the law established for this purpose. In other words, if the tenant decides to pay a security deposit on a voluntary basis, they will no longer be able to use the protection of the law to recover the deposit.

If the applicant has not passed the pre-rental survey, the landlord may offer the applicant the option of posting security. The tenant must be free to choose the form that this security will take (e.g., bond, deposit, etc.). Again, the tenant must voluntarily and freely decide if they wish to put up a security deposit.

The case “Immeubles À côté inc. v. Mirzica”

In this popular case involving the famous security deposit, a French woman couldn’t provide a conclusive credit check or bond when she moved to Quebec. She, therefore, paid a security deposit of $2,600 upon signing the lease voluntarily (equivalent to two months’ rent). Then, the tenant failed to pay her rent on several occasions. Two months’ rent accumulated, and the landlord applied to the Tribunal administratif du logement (formerly Régie du logement).

In her defense, the tenant claimed that she should get back her deposit. She argued that the landlord had no right to ask her for this amount. The court denied the claim. As mentioned in section 1904, no deposit was required. The landlord had asked her without a requirement, and the tenant was free to make a deposit or not.

This decision made headlines in the media and the Tribunal set the record straight by clarifying the situation: “The decision in Immeubles À côté inc. v. Mirzica is not distinguishable from other court decisions in this area and does not change the state of the law. A landlord cannot require a security deposit.” (Journal Métro, 2020)

Requiring a security deposit is illegal

The security deposit is not illegal. What is considered illegal is requiring it. If the landlord wishes to apply for a deposit surcharge following an unsatisfactory pre-rental survey, it should be clear that a security deposit is not required.

Sign your leases remotely with Bloc Solutions

Do you have a potential candidate who lives far away? You want to avoid travel? Opt for the Bloc Solutions electronic lease. The platform allows you to generate and sign the lease directly on your account! It is also possible to send renewal notices (with acknowledgment of receipt), certified communications, and keep all your valuable documents in one place. All in compliance with the requirements of the Tribunal administratif du logement! Sign your next lease from the convenience of your living room now.

Sources : Éducaloi