The legality of the security deposit in residential leasing

When a lease is signed between a lessor and a lessee, various terms and conditions can be negotiated between the parties.

The legality of the security deposit, which represents a sum of money paid by the lessee to guarantee the lessor’s potential claims, has been the subject of debate in Québec courts for several years.

The practice of requiring a security deposit

The basic rule regarding the payment of sums other than rent is set out in article 1904 of the Civil Code of Québec, which states that:

“1904. 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.”

The lessor cannot therefore require a security deposit at the signing of the lease, or make it a prerequisite. Note that the courts have determined that the expression “to exact” is to be understood in the common sense of “to ask”, “to solicit”, “to require” or “to claim.”¹

Requesting a security deposit is illegal even it is part of several options presented to the lessee, since the conclusion of the lease remains conditional upon obtaining this security. The Court of Québec has ruled that it is illegal for a lessor to present to prospective lessees whose application for leasing has been refused, a form setting out various security options, one of which is a security deposit.²

Voluntary deposit

Despite the prohibition on the lessor from exacting a security deposit, in certain circumstances a lessee may waive the protection offered under the Civil Code of Québec for his or her own reasons (e.g., priority in obtaining the dwelling, lack of credit history, etc.).

The lessee must freely and voluntarily propose the payment of a security deposit to the lessor at the signing of the lease. Before accepting such a proposal, the lessor must ensure that he can demonstrate that the waiver is clear and unequivocal, that the circumstances surrounding the negotiation of the lease do not suggest that it is a requirement on his part, or that the lessee cannot lease the dwelling without paying such a deposit.

Thus a deposit will be valid or legal if it is not suggested, requested or exacted by the lessor.³ In the event of a dispute, the Administrative Housing Tribunal (TAL) will have to determine whether the lessee offered a deposit voluntarily or was forced to do so by the situation.⁴

Finally, it is important to note that a lessor must return the deposit to the lessee at the end of the lease if the rent has been paid in full. The lessor cannot, under any circumstances, take the law into his own hands by appropriating the deposit upon the lessee’s departure to compensate for any prejudice incurred. In the event of loss or damage following the leasing of the dwelling, the lessor will have to apply to the TAL and obtain a judgment in order to retain the deposit.⁵

In conclusion, several court decisions have determined that, although the lessor may request payment of the first month’s rent in advance, he may not make the conclusion of the lease conditional upon the payment of an additional security deposit. However, if a lessee voluntarily and freely offers a sum of money to guarantee the payment of his rent due to his particular circumstances, the lessor may accept it, but he may not unilaterally appropriate it in the event of damage to the leased dwelling.

¹ See decision Tatkeu Njike c. 9198-0110 Québec inc., 2019 QCRDL 31120
² See decisions 9198-0110 Québec inc. c. Simindokht, 2023 QCCQ 6792 and Poliquin c. Gareau, 2022 QCTAL 3401
³ See decisions St-Jean c. Villemaire, 2024 QCTAL 7578 and Les immeubles à côté inc. c. Tiffany mirzica, 2020 QCRDL 4495
⁴ See decision Graham c. 10643688 Canada inc., 2022 QCTAL 18295
⁵ See decisions Kouadja c. Larochelle, 2024 QCTAL 5052, Hérard c. Bruzzese, 2021 QCTAL 31553 and Groupe Lacoste inc. c. Nadeau, 2024 QCTAL 6582