In a recent case heard locally at the Landlord Tenant Board, the Board found that the landlord was retaining a rent deposit unlawfully.
The facts are put concisely: The tenants completed a rental application and paid a deposit on January 20. The landlord replied that their references would have to be checked before the landlord would agree to rent to them. A few days later, the landlord said that their references were okay and they could rent the place. The tenants replied that they were no longer interested and wanted their deposit yet. The landlord refused, so the tenants brought this application, and got back the deposit and the application fee.
The facts that *aren't* here include what exactly was on the rental application, or what other conversations might have been had between the parties. However, the Board finds that it was understood that the landlord would require them to sign a written tenancy agreement before giving them the keys to the unit.
So the real question is this: Had a contract formed between the parties? In this case, the Board said no. Had the Board said yes, then it is quite possible that the landlord would have been able to pursue the tenants for additional damages for breaching the contract. I don't know what all the evidence was here, but you sometimes get tricky cases along these lines.
Notwithstanding that the tenant here was successful, the fact that they had to litigate over the deposit carries a lesson: When discussing a prospective rental agreement, be careful. Don't make any firm commitments if you aren't prepared to honour them. I would never recommend providing any sort of deposit until you're actually entering into the binding contract itself. Some landlords may insist on receiving the deposit with the application; the rental housing market around here isn't so difficult that a tenant will necessarily have to accede to such a demand.
I've heard about cases where the tenant thought he was providing the deposit "to hold the place", and ultimately was found to have entered into a contract and had to pay additional damages for having breached the contract.
Also, carefully read the text of anything you're asked to sign. When I first moved to Simcoe, I looked around at a few places. One landlord asked me to fill out an Application. I wasn't sure I wanted to stay there, and still had other places to check out, but I reviewed the Application carefully and determined that the Application only contained basic personal information and consent to check references, and contemplated a written lease which would have to be signed to take possession of the place. I was able to satisfy myself that by filling out the Application I was not going to bind myself into something I wasn't prepared to accept.
Legally, you can't accidentally enter into a contract, but sometimes the evidentiary questions are tricky, and it is far easier to enter into a legally binding contract than many people realize. Oral contracts are legally binding. Contrary to popular belief, a signature is not required, nor even a handshake. The real trouble is that, where there's nothing in writing, the fight becomes over who said what. And, especially if money has changed hands, that will often weigh in favour of finding that a contract has formed.
This Blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.