The Ministry of Service Alberta and Red Tape Reduction says landlords are to pay tenants 1.6 per cent annual interest on security deposits effective Jan. 1, 2024.
For the first time in more than a decade, tenants in Alberta are set to receive annual interest payments on the security deposits they pay to landlords as rising provincial interest rates have triggered a legislative threshold.
In a letter dated Nov. 20, the Ministry of Service Alberta and Red Tape Reduction said landlords are to pay tenants 1.6 per cent annual interest on security deposits effective Jan. 1, 2024.
The ministry explained that the interest rate is calculated by subtracting three percentage points from ATB Financial's interest rate for its cashable one-year GICs from Nov. 1 of the previous year.
In this case, that figure was 4.60 per cent on Nov. 1, 2023.
"Landlords must pay any interest owing to their tenants annually at the end of each tenancy year, unless both parties agree in writing that the interest will not be paid annually, in which case the interest must be compounded annually," said the ministry.
It's the first time landlords will have to pay tenants interest on security deposits in 14 years, according to the ministry's letter.
"Interest rates have been so low for a number of years that if you minus three per cent, its zero per cent interest," said Anna Lund, an associate law professor at the University of Alberta.
"As interest rates have started to creep up, landlords are now going to have to be paying out some of that interest."
The province noted in its letter that landlords are allowed to keep any extra interest earned on security deposits past 1.6 per cent.
Lund said that security deposits are meant to provide a safety net for landlords if tenants damage property, or if they fall behind on rent, and that the amount cannot exceed one-month's rent.
But the policy can at times put tenants in a tricky place, said Lund.
"If you're struggling to make ends meet and you can't get your security deposit back from your existing landlord, it can be difficult to save up enough money to put a security deposit down somewhere else. So that's an unfortunate reality that a lot of people in Alberta are facing."
Lund said tenants are often reluctant to raise issues like security deposits with their landlords because they are worried about landlords potentially retaliating, through rent increases, for example.
She added that the security deposit interest tenants are due to get back at the end of the year won't be a large sum of money — if the deposit is $2,000, that's $32 back.
Still, Lund said it's important that clients know their rights, and how to assert them.
"It's an area of law that so many people have to deal with who have zero legal training. Often in situations where you're having a dispute with your landlord, like there's a lot of other things going on in your life that makes navigating this kind of stuff really difficult."
The Centre for Public Legal Educational Alberta is a good resource for tenants, Lund said.
With files from Helen Pike