Landlords will soon have to pay tenants

Starting in the new year, landlords will be expected to pay out a small fee to their tenants.

For the first time since 2008, interest rates have exceeded a legislative threshold, causing landlords to pay out interest on security deposits.

"The rules for this are not new. They've been around for a long time, but it's due to higher interest rates, landlords in Alberta are going to be required, on January 1st, to pay 1.6 per cent interest on security deposits held in trusts for tenants," explains Andrew Hanon, Communications Director for Service Alberta and Red Tape Reduction. "Like I said, this is not a new rule. It's a long-standing requirement under the Residential Tenancies Act. But it only takes affect when interest rates cross a certain threshold."

That threshold was crossed on November 1st.

What is the threshold?

"The benchmark is ATB Financials Cashable one-year GIC rate on the previous November 1st of any year. Anything above 3 per cent becomes interest payable to the tenant," Hanon says. "So, right now, the interest rate on that GIC is 4.6 per cent, therefore tenants are entitled to 1.6 per cent interest on their security deposits."

Interest payments will be paid out annually on the anniversary date of the tenancy.

According to the Residential Tenancies Act, though, landlords and tenants are able to agree, in writing, to not pay out interest rates yearly. In these situations, the interest will be compounded annually and then paid out in full at the expiration of tenancy.

The Residential Tenancies Act also states that landlords are able to keep any interest and profit from the invested security deposit that exceeds the amount of interest payable to the tenant.

This regulation first came into place in 2004, but for most of its existence, interest rates were below the 3 per cent threshold.

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