This month, I’ve had several landlords reach out with the same concern: they believe their tenants have missed a month’s rent. At the same time, the tenants are equally confident that they’ve already paid.
So what’s causing the confusion? In most cases, it comes down to a common misunderstanding of “last month’s rent.”
Where the Misunderstanding Begins
In one case, the tenants had signed a one-year lease and paid both first and last month’s rent upfront. They assumed that the “last month” referred to the final month of that initial lease term.
Based on that understanding, they believed that if they chose not to renew, the final month would be covered—which is correct—but if they decided to stay, they wondered whether they could also skip a month’s rent during the renewal period.
The Key Question: Are You Moving Out?
The core issue comes down to one simple question: are you moving out, or continuing your tenancy?
For example, if you moved in on May 1, 2026, your lease would run until April 30, 2027. If you decide not to continue and provide at least 60 days’ written notice, then April 2027 would be covered by your last month’s rent deposit. In that case, no additional rent is required for that final month.
What Happens If You Stay
If you decide to stay, the situation changes.
In Ontario, most fixed-term leases automatically convert to a month-to-month tenancy if no new agreement is signed. If the tenant remains in the unit, April 2027 is not the “last month” of the tenancy—it is simply the end of the initial lease term.
As a result, rent for April must still be paid as usual. The last month’s rent deposit will only be applied to the actual final month—whenever the tenant eventually moves out.
Why It Feels Like “Overpaying”
This is where confusion often arises.
Some tenants feel like they’ve “overpaid” a month of rent. In reality, the deposit is simply being held and carried forward. It is not tied to a specific date—it’s reserved for the final month of the tenancy, whenever that occurs.
Key Rules About Last Month’s Rent in Ontario
It’s important to understand a few fundamental rules:
- A landlord can only collect a deposit equal to one month’s rent
- The deposit can only be applied to the last month’s rent
- It cannot be used for damages, cleaning, or repairs
Additionally, landlords are required to pay interest on the deposit annually, based on the provincial guideline rate. In practice, this is often offset against rent increases.
What Happens If the Property Is Sold
If the property is sold during the tenancy, the last month’s rent deposit does not disappear.
It must be transferred to the new owner, who then becomes responsible for holding the deposit and applying it when the tenancy eventually ends.
Final Thoughts
The concept of last month’s rent is actually straightforward, but it’s rarely explained clearly. That’s why misunderstandings often arise—especially during lease renewals or transitions to month-to-month tenancy.
If you’re a landlord or tenant and want to better understand your rights and responsibilities, feel free to call The Fisher Group at 647.598.8488.
