Rental application did not address issue of deposit in satisfactory manner

RESIDENTIAL TENANCIES

Rental application did not address issue of deposit in satisfactory manner

This was appeal from divisional court’s decision refusing to return rental deposit to appellant. Appellant submitted application to rent apartment for one-year period and she provided respondent with deposit equal to one month of rent. Respondent accepted application. Six weeks before appellant was to take possession she told respondent that she would not proceed with rental. Respondent would not return deposit. Appellant unsuccessfully applied for return of deposit pursuant to s. 135(1) of Residential Tenancies Act, 2006 (Ont.), based on s. 107(1) of Act. Appeal allowed. Section 107(1) of Act did not authorize tenant to automatic return of rent deposit where landlord had done everything necessary to give possession and tenant had unilaterally repudiated rental agreement. It was not clear here that agreement formed by respondent’s acceptance of appellant’s rental application authorized respondent to use deposit as security against payment of rent. As appellant breached agreement to rent, parties did not enter into tenancy agreement. Rental application did not address issue of deposit in satisfactory manner, as provision was illegal and confusing. In effect respondent treated deposit as forfeiture penalty, which was not permitted under Act. In circumstances respondent could not retain deposit.

Musilla v. Avcan Management Inc. (July 12, 2011, Ont. C.A., O’Connor A.C.J.O., Cronk and Rouleau JJ.A., File No. C53166) Decision at 196 A.C.W.S. (3d) 554 was reversed. 204 A.C.W.S. (3d) 173 (7 pp.).