Alberta’s Residential Tenancies Act governs landlord-tenant relations; new procedural updates for 2025 bring important changes regarding the treatment of security deposits. These revisions require landlords to adjust the interest rates applied to security deposits based on current market conditions.
What’s Changing in 2025?
Effective January 1, 2025, Alberta has implemented new interest rate adjustments for security deposits held throughout the calendar year. This change means that landlords must now calculate and pay interest on security deposits using the updated rates set by the provincial government. The rate of interest that landlords must pay on tenant security deposits effective January 1, 2025, will be 1.0%, compared to 1.6% in 2024. The Government of Alberta has provided a calculator to help landlords.
Background
Security deposits are a protection for landlords against potential losses from unpaid rent or property damage. In return, Alberta requires that these funds earn interest, so tenants are not penalized by having their money held without return.
2024 was the first year since 2009 that landlords were required to pay interest on deposits.
The goal of this is to ensure that tenants are fairly compensated for the funds held as security over the course of their tenancy. In Alberta, the statutory interest rate is determined annually to reflect prevailing economic conditions. Landlords must stay informed of the new rate and integrate it into their rental agreements and bookkeeping practices.
Other Provinces
Ontario
For most residential tenancies, Ontario does not mandate that landlords pay interest on security deposits. Instead, Ontario’s focus is on strict rent increase guidelines and specific notice requirements.
British Columbia
BC started requiring landlords to pay interest on security deposits; the interest payable on deposits for 2025 is 0.95%. BC reinstituted this in 2023, after a similar gap of not mandating interest since 2008.
Manitoba
Manitoba has required an interest rate of 0.5% to be charged since 2002.
What Landlords Need to Do
Update Accounting Practices
Ensure your financial systems are ready to calculate and remit the updated interest on security deposits throughout 2025. This might involve new software settings or consultation with an accountant.
Review Lease Agreements
Check that your rental contracts clearly outline the terms regarding security deposits and interest. Including the updated rate—and the fact that it will be adjusted annually—will help set correct expectations with tenants.
Stay Informed
Regularly review Alberta.ca and other official government channels for any further updates or clarifications regarding rental procedures. This proactive approach helps avoid compliance issues and potential disputes with tenants.
Communicate with Tenants
Consider informing current tenants of the upcoming changes, especially if they are due for a deposit return. Transparency builds trust and minimizes confusion when it’s time to calculate and return deposits with the accrued interest.
For more detailed information and updates, visit Alberta.ca’s Annual Security Deposit Interest Rate page.