Finding rental housing in Ontario has become increasingly competitive, with prospective tenants often facing pressure to pay various fees and charges just for the opportunity to apply for a unit. However, many of these charges are illegal under Ontario's Residential Tenancies Act (RTA), and landlords who collect them face significant financial penalties. Recent Landlord and Tenant Board (LTB) decisions reveal a troubling pattern of landlords exploiting desperate tenants through prohibited application fees, screening charges, and other illegal practices.
Understanding Ontario's Strict Fee Restrictions
Ontario's Residential Tenancies Act is clear about what landlords can and cannot charge prospective and current tenants. Under section 134, landlords are prohibited from collecting most fees beyond:
- First month's rent
- Last month's rent deposit
- Key deposits (refundable)
- Pet deposits (where allowed)
Any other charges—including application fees, screening fees, processing fees, or administrative charges—are generally illegal and must be refunded to tenants.
The Reality of Illegal Application Fees
Failed Rental Applications and Fee Recovery
In heron-v-thangalingam-20240912, a prospective tenant paid $6,171.86 as part of the application and leasing process, but when their application was declined, the amount was not returned. The LTB ordered the landlords to refund $6,219.86, demonstrating that even when rental applications fail, illegal fees must still be returned.
Common Types of Illegal Charges
Processing and Administrative Fees
Landlords frequently attempt to justify illegal charges by calling them "processing fees" or "administrative costs." However, the RTA does not permit these charges regardless of their label. Common illegal fees include:
- Application processing fees
- Credit check fees
- Reference verification charges
- Document preparation fees
- Administrative handling charges
Lease Guarantee and Termination Fees
In S.W.-v-J.Z.-20181130, a landlord collected a $400 "one year lease guarantee" fee in addition to standard deposits. When the tenant moved out early, the landlord refused to refund this fee. The LTB found this charge illegal and ordered its return, noting that "Landlord cannot collect fees beyond rent deposit and key deposit."
Similarly, in SR-v-AK-20200508, a landlord charged a $300 administrative fee for allowing a tenant to terminate their lease early. The Board ruled this violated section 134 of the RTA and ordered the fee refunded, emphasizing that "this fee is not permitted under the Act."
Rental Commission Charges
In ruban-v-dulos-group-property-management-20240903, a landlord attempted to charge a $2,655 rental commission fee when a tenant terminated their lease early. The LTB found this was "an illegal charge under Section 134(1) of the Residential Tenancies Act, 2006, and not recoverable by the Landlord," ordering the full amount refunded.
Service Fees and Maintenance Charges
Unlocking and Service Charges
Even seemingly minor service charges can violate the RTA. In nagra-v-mansour-20240305, a property manager charged a tenant $50 to unlock her bedroom door after she accidentally locked herself out. The LTB found this charge illegal, noting that "The Residential Tenancies Act prohibits landlords from collecting such service fees from tenants."
Late Payment Fees
In RT-v-WM-20200731, a landlord continued charging illegal late fees even after being informed they were prohibited. The tenant had texted the landlord stating the late fee was illegal, but the landlord continued demanding it. The Board found this behavior harassing and awarded $300 in rent abatement.
Community and Reserve Fund Charges
Illegal Community Fees
In mcmaster-v-sifton-properties-limited-20241003, tenants successfully challenged various community-related charges including:
- Reserve funds for clubhouse maintenance
- Common area fees
- Community service charges
The LTB found these charges contravened the Act and ordered $1,083.79 refunded to the tenants, ruling that "Landlord's collection of reserve funds and community fees contravenes the Act."
The Discrimination Connection
Screening as a Tool for Discrimination
While not always explicit, illegal application fees and screening practices can serve as tools for discrimination. The rental application process provides numerous opportunities for landlords to make decisions based on prohibited grounds under the Ontario Human Rights Code.
In salim-v-singh-20240503, the Divisional Court found that the LTB had failed to properly consider human rights implications when evaluating a landlord's refusal to assign a lease based on family size concerns. The court emphasized that "Discrimination based on family size can be a form of family status discrimination" and that decision-makers must consider potential discrimination when assessing landlord conduct.
Income and Employment Verification Abuses
The rental application process often involves extensive income and employment verification that can become discriminatory. Cases show landlords sometimes use verification requirements to exclude tenants receiving social assistance or those with non-traditional employment.
In DRLHC-v-DK-and-MH-20170907, tenants "failed to provide required income verification information" as part of a mediated agreement, leading to eviction proceedings. While income verification can be legitimate, it must be applied fairly and not used to discriminate against protected groups.
Enforcement and Penalties
Substantial Financial Consequences
Landlords who collect illegal fees face significant financial penalties:
- Full refund of all illegal charges
- Interest on unpaid amounts
- Application filing fee reimbursement for tenants
- Administrative penalties up to $25,000
- Legal costs in some cases
Pattern of Non-Compliance
Some landlords show patterns of illegal fee collection. In Teixeira-Marques-v-Sociable-Living-20211105, landlords collected illegal "membership fees" and engaged in harassment, leading to a $16,936.14 award to tenants plus a $3,000 administrative fine to the LTB.
Red Flags for Prospective Tenants
Warning Signs of Illegal Practices
Prospective tenants should be alert to these red flags:
- Application fees of any amount
- Credit check fees or screening charges
- Processing fees for paperwork
- Administrative charges for lease preparation
- Guarantee fees or insurance requirements
- Service charges for basic landlord duties
- Community fees or reserve fund contributions
Legitimate vs. Illegal Charges
Legitimate charges include:
- First month's rent
- Last month's rent deposit
- Refundable key deposits
- Pet deposits (where permitted)
Illegal charges include:
- Application or screening fees
- Credit check charges
- Processing or administrative fees
- Lease guarantee fees
- Service charges for landlord duties
Protecting Yourself as a Prospective Tenant
Documentation and Evidence
If charged illegal fees:
- Keep all receipts and payment records
- Document all communications with landlords
- Take screenshots of rental advertisements
- Save email exchanges about fees
- Record payment methods and amounts
Challenging Illegal Charges
Tenants can file T1 applications with the LTB to recover illegal charges. The process involves:
- Filing within one year of the illegal charge
- Providing evidence of the payment
- Demonstrating the charge violates the RTA
- Seeking refund plus filing fees
Prevention Strategies
- Research landlords and property management companies
- Ask for fee breakdowns in writing
- Question any charges beyond basic deposits
- Refuse to pay obviously illegal fees
- Report violations to relevant authorities
Recent Trends and Enforcement
Increasing LTB Scrutiny
Recent LTB decisions show increased scrutiny of landlord fee practices:
- Higher monetary awards for illegal charges
- Administrative penalties for serious violations
- Detailed analysis of fee justifications
- Broader interpretation of prohibited charges
Technology and New Fee Types
As rental applications move online, new types of illegal fees emerge:
- Platform processing fees
- Digital application charges
- Online screening fees
- Technology service charges
All remain illegal under the RTA regardless of their digital nature.
Best Practices for Landlords
Compliance Strategies
Legitimate landlords should:
- Review all charges for RTA compliance
- Train staff on prohibited fees
- Update lease agreements to remove illegal clauses
- Implement clear policies on permitted charges
- Seek legal advice when uncertain
Risk Management
- Audit current practices for illegal charges
- Refund questionable fees proactively
- Document legitimate expenses carefully
- Maintain transparent fee structures
- Avoid discriminatory application processes
Looking Forward: Policy Implications
Strengthening Enforcement
Potential improvements to address illegal fee practices:
- Increased penalties for repeat offenders
- Proactive enforcement by regulatory bodies
- Public education campaigns for tenants
- Landlord licensing requirements
- Standardized application processes
Market Solutions
- Transparent fee disclosure requirements
- Standardized rental application forms
- Public databases of compliant landlords
- Tenant advocacy support services
- Legal aid for fee recovery cases
Key Takeaways
The analysis of LTB decisions reveals that illegal rental application fees and screening charges are widespread problems in Ontario's rental market. Key findings include:
- Substantial penalties await landlords who collect illegal fees, with awards regularly exceeding $5,000
- No exceptions exist for processing, administrative, or service fees beyond those explicitly permitted
- Prospective tenants have strong legal protections even when applications fail
- Discrimination concerns often underlie illegal fee practices
- Documentation is crucial for successful fee recovery applications
For prospective tenants, understanding these protections is essential in navigating Ontario's competitive rental market. For landlords, compliance with fee restrictions is not optional—the financial and legal consequences of violations can be severe.
The message from recent LTB decisions is clear: Ontario's rental market must operate within the law, and those who exploit tenants through illegal fees will face significant consequences. As enforcement continues to strengthen, both tenants and landlords must understand their rights and obligations under the Residential Tenancies Act.
Whether you're searching for housing or providing it, knowledge of these rules protects everyone and helps ensure Ontario's rental market operates fairly for all participants.
