Landlords have a right to collect a security deposit at the beginning of a tenancy. These security deposits are the money paid by a tenant in addition to the rent that is due. The landlord holds the deposit as security for damages, cleaning costs, unpaid rent, or other obligations that tenant may have to the landlord. The security deposit cannot amount to more than one month rent and cannot be increased during the tenancy period. A receipt should be provided to the tenant, which will be evidence of payment if a dispute arises later.
The landlord must deposit the security deposit into an interest-bearing trust account at a bank, treasury branch, credit union or trust company in Alberta. The security deposits must be deposited into the bank within 2 banking days of receiving the deposit from the tenant.
The landlord must also pay interest on the security deposit that is returned to the tenant. The interest must be paid each year unless the landlord and tenant agree that the interest will be paid at the end of the rental period. The agreement must be in writing and signed by both the landlord and the tenant. If interest payments are not paid each year, the interest must compound over the entire rental period. The rate of interest is set by the government each year. The Landlord Tenancy Advisory Board can advise you of the rate or it can be calculated on The Service Alberta website.
To assist in determining whether there is damage at the end of the rental period, an inspection report must be done by both the landlord and the tenant before the tenant moves into the rented premises and when the tenant moves out. The report should list the conditions and cleanliness of the appliances, doors, walls, rugs, etc. and be signed by both the landlord and tenant. This report must be completed no more than 1 week before or after the tenant takes possession of the rental premises and the landlord must provide the report to the tenant with a copy. The 1-week limitation also applies when the tenant moves out. The inspection report must be completed and signed by both landlord and tenant and a copy of the inspection report must be provided to the tenant after the tenant moves out.
The landlord must advise the tenant when the inspection is to occur and provide 2 alternative days which are not holidays. The hours of inspection must be between 8:00 a.m. and 8:00 p.m. If the tenant refuses to take part in either inspection date, the landlord can conduct the inspection without the tenant. If the inspections are not carried out, or the required reports are not provided to the tenant, the landlord must return the full security deposit to the tenant within 10 days of the end of the rental period.
If the inspections indicate that there was some damage that occurred, the landlord may deduct the cost of repairs from the security deposit. The tenant must be advised in writing within 10 days of the actual cost of damages if they are known, or an estimate if repairs are not complete. An itemized list of the costs must be provided, or if an estimate, repairs must be completed and the deposit returned to the tenant within 30 days. Both time periods begin to run the day after the tenant vacates the premises.
Disputes over the damage deposits can be dealt with in 3 ways: