BC landlords: stay penalty-free and avoid problems with damage claims.
BC’s Residential Tenancy Act (RTA) sets strict guidelines on rental deposits to protect the interests of both landlords and tenants.
Read on to learn:
- What landlords need to know about BC’s damage deposit rules
- Pet deposit guidelines
- What to do at the end of a tenancy
- What to do if you sell your house with tenants
- 3 damage deposit mistakes you should avoid
Damage Deposit Rules in BC
A damage deposit is a refundable sum paid by a tenant at the start of a tenancy to cover potential property damage beyond “normal wear and tear.”
Here are the damage deposit rules that BC landlords should to know:
One Half-Month’s Rent
In BC, landlords can charge a maximum of a half month’s rent as a damage deposit for residential properties.
The damage deposit, also known as a security deposit or tenancy deposit, is not meant to be paid as a final month’s rent or used to cover expenses related to regular wear and tear.
Normal wear and tear refers to the natural aging and minor deterioration that occurs from everyday use, like faded paint, minor scuffs, or carpet wear in high-traffic areas. You can’t charge tenants for these types of issues, as they’re expected over time and are part of your regular property upkeep.
Tenants have to pay the damage deposit within 30 days of signing the lease.
If you haven’t received their damage deposit within 30 days of entering the rental agreement, you can issue a One-month Notice to End Tenancy For Cause (RTB-33).
Pet Deposit Rules in BC
If you own a pet-friendly rental, you can collect a pet deposit up to a half month’s rent to cover potential damage caused by your tenant’s pet.
Pet-related damage can cost you in the form of scratched floors, chewed fixtures, or lingering odors.
Just like the regular damage deposit, the pet deposit must be refundable if there’s no damage caused by the pet.
You can collect a combined damage deposit and pet deposit worth one full month’s rent.
Collecting the Damage Deposit
Landlords in BC have to collect the damage deposit at the beginning of the tenancy, then provide tenants with a receipt.
You can’t request a higher deposit amount in the future — even if the rent amount increases.
Keep the damage deposit funds separate from your rent payments. If any disputes arise over damage deposit deductions or your tenant suddenly moves out, the funds should be available immediately with clear records to show that you correctly handled the deposit.
Handling Deposits at the End of Tenancy
Here are your responsibilities with your tenant’s damage deposit at the end of their tenancy:
1. Conduct a Final Inspection
Within 48 hours of the end of tenancy, you have to conduct a move-out inspection with the tenant.
You’ll document the property’s condition, compare it with the move-in inspection, then make sure both parties agree to the damages.
If your tenant fails to attend the scheduled inspection, you can complete it by yourself. Thoroughly document the process with photographs, videos, notes, and any other evidence you need as proof.
2. Return the Deposit
Within 15 days of the tenancy ending — or the date the landlord receives the tenant’s forwarding address in writing — you have to return both the damage deposit and pet deposit.
You can only make deductions from the deposit if:
- the tenant agrees to the documented damages, or
- you obtain an order from the Residential Tenancy Branch (RTB) to retain part or all of the deposit
3. Document the Deductions
If you plan to retain any part of the deposit to cover damages beyond normal wear and tear, you’ll need to provide your tenant with a written breakdown of the expenses.
Detail each item and cost to be deducted, then send your tenant a complete statement of deductions.
Make sure you get your tenant to agree to your deductions in writing — whether it means using some of their deposit, the entire thing, or if you require funds in addition to the deposit.
What Happens if the Damages Are More Than the Deposit?
If the cost of fixing your tenant’s damages exceeds the damage deposit amount, contact the tenant to request payment of the remaining balance.
If your tenant disputes the charges, you apply to the Residential Tenancy Branch (RTB) for a dispute resolution process. This process can validate the damages and potentially help recover the costs.
If the tenant fails to pay and the amount is significant, landlords can consider pursuing the remaining balance in small claims court.
Keep in mind that legal action can be costly and time-consuming, so you should weigh this option against the likelihood of successful collection.
Learn more: What To Do if a Tenant Damages Your Property & Damages Exceed the Security Deposit
What Happens if the Tenant Never Pays?
If you’re unable to recover the extra costs, you may be able to claim this as a loss (tax shield) on your income taxes.
1. Repair Costs as Tax-Deductible Expenses
Generally, repair expenses for damages caused by tenants are tax-deductible as rental expenses in the tax year you incurred them, which offsets your overall rental income. This deduction directly offsets rental income, effectively reducing your taxable rental income.
2. Capital Cost Distinction
If the damages required significant replacements or improvements that extend the life or value of your property (like a complete remodel or structural changes), those costs might be classified as capital expenses rather than repairs.
You can deduct capital expenses over time through a capital cost allowance (CCA), rather than as an immediate deduction.
Handling Damage Deposits When Selling a Rental Property
If you sell a property with a tenant, the fate of the damage deposit is either transferred to the new owner or returned to the tenant.
… If the Tenant Stays On With the New Owner
You transfer the damage deposit (and pet deposit) to the new owner. It’s your responsibility as the selling landlord to provide the new owner with the deposit amount and all property management records related to it.
The new owner then assumes responsibility for managing the deposit per BC’s Residential Tenancy Act.
… If the Tenant Moves Out
If the tenant vacates the property before the sale closes, then you have to return the damage deposit to them—less any deductions—within 15 days after the tenant moves out.
In this case, the new owner has no obligation regarding the deposit, as the tenancy ends prior to transfer.
Learn more: Selling a House With a Tenant in BC, Canada
3 Damage Deposit Mistakes to Avoid
Missed Deadlines
If you miss the 48-hour window to complete the move-out inspection or the 15-day deadline to return the deposit, you could face penalties.
If you delay too long, your tenant might even be entitled to double their original deposit.
Unjustified Deductions
If you charge tenants for regular wear and tear — such as faded paint, minor scuffs, or carpet wear in high-traffic areas — they may challenge your claims via the Residential Tenancy Branch (RTB).
When you charge a tenant for damages or repairs, you must prove that the deduction was justified.
If your claims are not justified, you may have to reimburse the tenant — which could also harm your local reputation as a landlord.
Learn more: What is Considered Normal Wear and Tear in BC, Canada?
Poor Documentation During Claims Disputes
Keep a detailed record of the property’s condition — at both move-in and move-out.
With clear records — including photos, inspection reports, and signed agreements — it’s easier to justify your deduction claims in the event of disputes.
Learn more: Essential Property Management Record Keeping in Canada
Final Tips for Landlords in BC
As a landlord, you should always be proactive with your record keeping, maintenance routines, and repair schedules.
Adhering to BC’s Residential Tenancy Act can save you from losing money or entering into a wasteful dispute.
You can avoid most problems with damage deposits by thoroughly screening your tenants, watching out for red flags, and maintaining a good relationship with your tenant.
For complete information, consult the Residential Tenancy Act of BC: https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/02078_01