A holding deposit is money to reserve an apartment while the paperwork is done. It is not a rent deposit (last month’s rent) or a security deposit. It is paid to the owner to take the apartment off the market while it is unavailable to other potential renters. In Canadian law, the term “holding deposit” is not defined, so in different provinces it is interpreted in different ways. There are three main approaches: one for Quebec, one for Ontario, and one for the other provinces and Territories.
In Quebec, deposits are not allowed. It is usually not allowed to collect any deposit other than the first month’s rent. This applies to a holding deposit, a security deposit, or any other deposit.
In Ontario, holding deposits and security deposits are also illegal. Instead, a holding deposit may be used as a rent deposit (last month’s rent). It’s illegal to use it for damage repairs.
In BC, AB, SK, MB, NS, NB, NL, PEI, and the Territories, it is legally allowed to have a security deposit to cover unpaid rent or damages.
If the owner rejects the tenant, the holding deposit must be returned in full. If the tenant changes their mind, in provinces where security deposits are allowed, part of the holding deposit can be taken by the owner as coverage for ‘loss of rent’.
It is important to distinguish a holding deposit from an application fee. If the owner is asking a small fee just to view the apartment, it is probably a scam. Holding deposits are not for looking at the apartment, they are for securing the unit.
To fully understand different deposits, check out provincial codes and specific documents like the Residential Tenancies Act.