You have signed the lease and paid first and last month’s rent. Then, before moving day, your plans change. Can you cancel—and get your money back?
We recently helped clients navigate this situation twice: once representing the landlord and once representing the tenant. The outcomes were different, which illustrates why there is no single refund formula.
I’m Fisher Yu, an Oakville real estate broker with The Fisher Group. Here is what these experiences can teach landlords and tenants about ordinary residential rentals covered by Ontario’s Residential Tenancies Act.
Two rental agreements, two different settlements
In the first case, we represented the landlord. After signing the agreement and paying the required funds, the tenant decided not to proceed on the scheduled handover day. Following negotiations, the landlord retained an amount equal to one month’s rent. Both parties signed a Mutual Release documenting their agreement to end the transaction.
In the second case, we represented the tenant. The tenant had also signed and paid two months’ worth of rent, but changed plans before moving in. The parties negotiated a refund equal to one and a half months’ rent, with an amount equal to half a month’s rent retained. They also signed a Mutual Release.
These were negotiated outcomes in two individual cases—not standard cancellation fees set by Ontario law. Neither amount should be treated as a rule for another rental.
First and last month’s rent are not both “deposits”
The first month’s payment is rent. The last month’s rent deposit has a specific legal purpose: paying rent for the final rental period. It is not a general security deposit or an automatic penalty for changing your mind.
A landlord does not automatically get to keep both payments when a tenant backs out. Equally, a tenant is not automatically entitled to a full refund simply because they have not collected the keys or moved in.
Does the lease still apply if you never move in?
Start with the agreement: Is it binding? Have its conditions been met? Can the landlord provide the unit as promised? Does the tenant have a lawful basis to end the agreement?
A change of plans alone generally does not cancel a binding agreement. Under section 13 of Ontario’s Residential Tenancies Act, a tenancy takes effect when the tenant is entitled to occupy the unit, even if they never actually move in.
Landlords must take reasonable steps to limit losses
Section 16 requires a party claiming losses from a breach to take reasonable steps to minimize them. For a landlord, this may include promptly marketing the property again and keeping records of listings, showings and rental applications.
Any claim must account for replacement rent received for the same period; the landlord cannot recover the same rental loss twice. The amount to be refunded, and any remaining liability, depend on the facts.
Put any settlement in writing
If both sides reach an agreement, the paperwork should clearly record the termination date, how the funds will be distributed and whether any further claims remain.
Both of our cases ended with a signed Mutual Release. However, signing a release does not automatically make every deduction lawful or override applicable statutory protections. Have a lawyer or licensed paralegal review disputed amounts, legal obligations and the proposed settlement documents.
A practical lesson for landlords and tenants
Before signing, make sure the property, timing and financial commitment work for you. If something changes afterward, communicate early and document the solution.
When representing landlords, we help them respond promptly and reduce potential losses. When representing tenants, we help them communicate and work toward a reasonable resolution.
Planning to rent out a property or looking for a rental in Oakville or the GTA? Connect with The Fisher Group to discuss your next steps.
This article shares general information and real transaction experiences, not legal advice. The examples do not establish that a similar deduction would be lawful in another case.
