A deposit is not money you hold for free. In Ontario, Alberta and British Columbia the tenant is owed interest on it, at a rate fixed by statute. On one unit the number is small. On thirty it is a recurring obligation nobody has been tracking, and in Ontario the tenant can take it out of the rent without asking you. Here are the rates and the order to run them in.
What you owe, by province
The three provinces handle the same obligation three different ways, and the difference is mostly timing.
Ontario. Section 106(6) of the Residential Tenancies Act says a landlord "shall pay interest to the tenant annually on the amount of the rent deposit at a rate equal to the guideline determined under section 120 that is in effect at the time payment becomes due." That guideline is the same number as the rent increase guideline: 2.1 per cent for 2026 and 1.9 per cent for 2027. It was 2.5 per cent in both 2024 and 2025.
Alberta. The rate is prescribed each year under the Security Deposit Interest Rate Regulation and takes effect on January 1. It is 0 per cent for 2026, was 0.5 per cent for 2025 and 1.6 per cent for 2024. Interest accrued in a year with a rate above zero has to be paid to the tenant every year, unless you agreed in writing that it would compound yearly and be paid at the end of the tenancy.
British Columbia. Section 4 of the Residential Tenancy Regulation sets the rate at 4.5 per cent below the prime lending rate of the province's principal banker on the first day of each calendar year, compounded annually. When prime sits below 4.5 per cent the formula produces nothing for that year, so check it rather than assume. BC does not ask you to pay it out annually. The interest goes back with the deposit at the end of the tenancy, within 15 days of receiving the tenant's forwarding address.
Step 1: build the deposit register you are missing
The hard part is not the arithmetic. It is that the deposit amount lives in a lease, the payment date lives in an old bank record, and the current rent lives in your management system. Pull them into one place, one row per tenancy:
- Unit
- Deposit amount held
- Date the deposit was received
- Current lawful rent
- Date interest was last paid or applied
- Rate used that time
If you cannot fill in the fifth column, assume interest has never been paid and work back to the date the deposit was received. That is the honest answer, and the one an adjudicator will reach.
Step 2: pick the anniversary and hold it
Ontario's Act says the payment is annual but does not name a date. The workable choice is the anniversary of the day the deposit was received. Fix it now, because the rate moves: the statute points at the guideline in effect when payment becomes due, so a December anniversary and a January anniversary can sit on different rates in the same calendar year.
British Columbia uses the same convention, compounding on the anniversary of the date the landlord received the deposit. Use it everywhere and your register stays comparable.
Step 3: in Ontario, settle it against the top-up instead of paying it
This is the step most people miss, and it usually means no money moves.
Section 106(2) caps the deposit at one month's rent, or one rent period, whichever is less. Section 106(3) lets you require a top-up to that cap after a lawful rent increase. Section 106(7) then lets you deduct that shortfall from the interest you owe, and says the deducted amount "shall be deemed to form part of the rent deposit paid by the tenant."
Work an example. A tenant paid a $2,000 deposit when the rent was $2,000. You raise the rent by the 2026 guideline of 2.1 per cent, to $2,042. The interest you owe is 2.1 per cent of $2,000, which is $42. The shortfall between the deposit you hold and the new cap is also $42. Set one against the other: the deposit becomes $2,042, the interest is paid, and nothing changes hands.
Those two numbers match only when the deposit equalled the old rent and the increase was exactly the guideline. Break either condition and they diverge. If you did not raise the rent, or the deposit is already at the cap, there is no shortfall to deduct and you owe the tenant cash.
Step 4: treat a zero year as a year you processed
Alberta's rate is zero for 2026, so nothing is payable on that year's accrual. That is not the same as nothing to do. The 2024 and 2025 rates were above zero, and without a written agreement to compound, that interest was payable in each of those years. If it was not paid, it is outstanding now, and a zero-rate year is the cheapest time to clear it.
Record the zero in your register with the year and the rate beside it. A blank row and a zero row look identical two years from now, and only one of them means somebody checked.
Step 5: tell the tenant in writing
Send a short note for each payment: the period it covers, the rate, the amount, and whether it was paid out or applied to the deposit. In Ontario, applying it to a top-up changes the deposit balance on that tenant's file. A tenant who never sees the note has every reason to believe the deposit is still the old figure at move-out, and that is a bad argument to have on the day they hand back the keys.
What skipping it costs
In Ontario the consequence sits in the same section. Under 106(9), where a landlord has failed to make the payment when it came due, the tenant may deduct it from a subsequent rent payment. That deduction is lawful, so the gap it leaves is not arrears. Book it as arrears anyway and your rent roll is wrong, your collections notice is wrong, and any application built on that ledger has a hole the tenant can point at.
The obligation is small. Being caught not knowing about it is the expensive part.
Where to check the numbers
- Ontario: Residential Tenancies Act, 2006, section 106 and the rent increase guideline.
- Alberta: the annual security deposit interest rate.
- British Columbia: Residential Tenancy Regulation, section 4 and the Residential Tenancy Branch deposit interest calculator.