Calgary Security Deposits, Fees and Interest: Key Questions

Most landlords sort charges into "deposit" and "fee" based on what they call them on the lease. Alberta's framework sorts them differently: what matters is whether a charge is refundable, not what label it's given. Any refundable charge, called a deposit, a damage charge, a key deposit, or anything else, gets folded into the security deposit for legal purposes and counts toward the one-month-rent cap. A non-refundable fee is treated as an ordinary contractual charge instead, outside the deposit rules entirely, provided it's written into the tenancy agreement in advance.

This is why the pet deposit example at the top of this article is such a common trap. A landlord who charges one month's rent as a security deposit and then a separate refundable $300 pet deposit hasn't created two smaller, individually reasonable charges. They've created one deposit that exceeds the statutory cap, because the pet charge is refundable and therefore legally part of the same pool.

The security deposit cap is set at the equivalent of one month's rent, full stop, and it's fixed at whatever the rent was when the tenancy started. If rent increases later in the tenancy, the deposit doesn't automatically rise with it, and a landlord can't demand a top-up to match. A clause in a lease requiring a deposit above this cap simply isn't enforceable, regardless of whether the tenant agreed to it in writing.

This single-figure cap is also where non-refundable fees create real flexibility for a landlord, provided they're structured correctly. An application fee is generally permissible, since a prospective tenant can decline to apply rather than pay it. A non-refundable pet fee is allowed too, as long as it's genuinely non-refundable and agreed to in writing, and it doesn't count against the deposit cap the way a refundable version would.

A collected deposit isn't simply added to a landlord's general operating funds. It has to be placed into an interest-bearing trust account at a bank, credit union, treasury branch, or trust corporation within two banking days of receipt, and the account name must include the words "in trust." The account can only hold security deposit money, not mixed with other business funds.

There's an additional notification requirement for landlords or property managers pooling multiple tenants' deposits into a single account at a bank or trust company. If that pooled account exceeds $100,000, the institution has to be notified annually, by April 30, identifying which tenants and deposit amounts make up the balance, so CDIC deposit insurance protection of up to $100,000 per tenant actually applies.

Alberta requires interest on security deposits, calculated at a rate set annually by regulation. The formula ties the rate to the interest ATB Financial is charging on a cashable one-year GIC as of November 1 of the prior year, minus 3 percentage points. When that underlying GIC rate sits at 3% or lower, the resulting deposit interest rate works out to 0%, which is exactly the rate that applies for all of 2026.

A 0% rate doesn't remove the underlying obligation; it just means no actual interest payment is currently owed. Landlords still need to track this annually rather than assuming the rate is permanently zero, since it resets each year based on the prior November's GIC rate. When the rate is above 0%, interest is generally paid annually, unless the landlord and tenant agree in writing to let it compound until the tenancy ends instead.

A landlord who wants to deduct cleaning or repair costs from a deposit needs a proper move-in inspection report and a proper move-out inspection report, each completed within one week before or after the relevant date. Skipping this step doesn't just weaken a landlord's position in a dispute; it eliminates the right to make those deductions entirely, regardless of how much genuine damage exists.

Both parties are supposed to participate in the inspection, but the process doesn't stall indefinitely if a tenant won't cooperate. A landlord can complete the report unilaterally if the tenant is offered two separate proposed times, on different non-holiday days between 8 a.m. and 8 p.m., and doesn't show up for either. The report itself has to contain the specific statements required by the Ministerial Regulation; a generic checklist a landlord improvises isn't necessarily sufficient.

Once a tenant vacates, the deposit and a statement of account have to be delivered or postmarked within 10 days. For a joint tenancy, the cheque has to be made payable to all named tenants together, not split individually unless they've separately arranged that. A full accounting of how the deposit was applied has to follow within 30 days.

Permitted deductions cover physical damage repair or replacement, cleaning beyond normal wear and tear, unpaid rent arrears, and other costs the tenancy agreement specifically identifies. Normal wear and tear can never be deducted, however tempting it is to fold a worn carpet or faded paint into a damage claim. If actual costs exceed the deposit amount, a landlord's remedy is to pursue the tenant separately for the difference, not to hold funds beyond what the deposit covers.

A landlord who misses the 10-day window, makes an improper deduction, or skipped the inspection report step leaves a tenant with a real path to recovery through the Residential Tenancy Dispute Resolution Service or the courts. Landlords are also required to keep deposit records, receipt date, financial institution, interest paid, and how the funds were ultimately disposed of, for three years, producible to the Director on request.