The one deposit you may take
Section 106(1) lets a landlord require a rent deposit, but only "if the landlord does so on or before entering into the tenancy agreement". You cannot decide six months in that you want one.
Section 106(2): the amount "shall not be more than the lesser of the amount of rent for one rent period and the amount of rent for one month". For a monthly tenancy that is one month's rent. For a weekly tenancy it is one week's.
Section 106(10) settles what it is for: "A landlord shall apply a rent deposit that a tenant has paid to the landlord or to a former landlord in payment of the rent for the last rent period before the tenancy terminates." It is prepaid rent, held for a specific month. It is not security, and it is not yours to offset against anything.
Section 106(4) matters when you buy a building: a new landlord cannot require a rent deposit from a tenant who already paid one to the prior landlord. The deposit follows the tenancy, not the owner.
You owe interest on it every year
Section 106(6): the landlord "shall pay interest to the tenant annually on the amount of the rent deposit at a rate equal to the guideline determined under section 120 that is in effect at the time payment becomes due". That is the same rent increase guideline — 1.9% for 2027, 2.1% for 2026.
Section 106(7) gives you the offset most landlords never use. Where the lawful rent has risen above the deposit you hold, you may deduct the shortfall from the interest owing, and the deducted amount is deemed to form part of the deposit. In practice that is how you keep a deposit topped up to one month's rent without asking for a cheque.
Section 106(9) is the consequence of forgetting: if you do not pay the interest when it comes due, "the tenant may deduct the amount of the payment from a subsequent rent payment". They do not need an order, and they do not need your agreement.
Diarize the anniversary of the tenancy. Annual deposit interest is the single most commonly missed obligation in a small portfolio, and it compounds into an arrears argument you will lose.
What section 134 shuts down
Section 134(1)(a) prohibits a landlord from collecting, requiring, or attempting to collect or require "a fee, premium, commission, bonus, penalty, key deposit or other like amount of money whether or not the money is refundable".
The phrase "whether or not the money is refundable" is the one that catches good-faith landlords. A refundable key deposit is still a key deposit. A refundable damage deposit is still prohibited.
Section 134(1)(b) also stops you requiring a tenant to buy goods or services as a condition of granting or continuing the tenancy, where that is on top of lawful rent — mandatory cleaning contracts, mandatory parking, and similar bundles.
What the Act does not address is recovering the actual cost of replacing a key a tenant has lost, which is not a deposit and so is not obviously caught by section 134. The safe reading is that anything collected in advance, or anything above what the replacement genuinely costs, starts to look like the premium the section prohibits.
Two more things you cannot require
Section 108 prohibits a landlord or a tenancy agreement from requiring a tenant or prospective tenant to provide post-dated cheques, or to permit automatic debiting, credit card charging "or any other form of automatic payment for the payment of rent". A tenant may volunteer pre-authorised debit; you may not make it a condition.
Section 107(1) requires you to repay a rent deposit if vacant possession is never given to the prospective tenant. If the deal falls through, the money goes back.
How to recover for actual damage
Section 34 makes the tenant responsible for undue damage caused wilfully or negligently by the tenant, another occupant, or someone they permitted in the building. That obligation is real — it just is not secured by a deposit.
The route is an application to the Landlord and Tenant Board, and it is decided on evidence. Move-in and move-out photographs with dates, the original report, the invoice for the repair, and a record showing the damage was not there before.
Which means the deposit rules are, in practice, a records problem. A landlord who documents condition properly recovers more than one who held a deposit they were never entitled to keep.