Many Landlord's faced with unpaid rent look to assist their tenants, and themselves, by applying the last month's rent deposit to the unpaid month on the condition that the tenant replenishes the rent deposit within a set period of time.
If the Tenant's financial issues are resolved and the deposit is replenished, then all is well.
But what if the rent is never brought back to a zero balance or the deposit is not replenished? In such a situation the Landlord may look to make an application to the Landlord and Tenant Board to either recover the rent or to evict.
In this type of scenario the prior agreement to apply the rent deposit poses a problem. The Residential Tenancies Act requires that a rent deposit be applied to the last month of the tenancy and this cannot be changed by an agreement between the parties. What this means is that the Landlord and Tenant Board will not recognize the agreement or the application of the rent deposit as agreed to by the parties. This may lead to problems in the Landlord's application and may even result in dismissal of the application and waiting an even longer time for a hearing on a new application.
It is important that Landlords understand the risks involved before entering into such payment agreements. Ideally, landlord's should consult with a legal professional before entering into such agreements.
It is just as important that legal representatives know when such agreements have been made in order to proceed with properly completed notices and applications and not be caught off guard when it comes up at the hearing.
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