December 6, 1995

Security Deposits

This letter is important to real estate brokers who are involved in residential property management, or in the transfer of ownership of residential rental property.

Residential tenancies in Manitoba are governed by The Residential Tenancies Act, which replaced The Landlord and Tenant Act on September 1, 1992.

The Residential Tenancies Act (the “Act”) defines “landlord” as including “the owner or other person permitting occupancy of the rental unit”. As under the previous legislation, all references in the Act to “landlord” can include anyone who negotiates a tenancy agreement or collects rents on behalf of the owner. Such a person is permitting the occupancy of a rental unit, and is therefore by definition the landlord.

The Manitoba Securities Commission is urging all brokers who manage residential rental property, or who become involved in a change in ownership of such property, to become familiar with the provisions of the Act. The Act is administered by the Residential Tenancies Branch of the Provincial Department of Consumer & Corporate Affairs, which can provide information on the rights and obligations of landlords. The Branch can be contacted at 302 - 254 Edmonton Street, Winnipeg, R3C 3Y4, or by telephone at 945-2476.

Particular attention is drawn to sections 51 and 52 of the Act which deal specifically with the requirements and consequences involved when there is a change of landlord. For example, these sections provide that a new landlord is liable to a tenant to:

• repay rent paid by the tenant exceeding the amount permitted under the Act, in the two years before the change of landlord; and
• pay a security deposit and interest due to a tenant, whether or not the new landlord actually received it.

This liability can extend beyond the owner of property to the property manager.

The Commission, in consultation with the Residential Tenancies Branch, suggests that brokers in the property management business continue to follow these guidelines regarding security deposits:

1. If the broker is holding security deposits, they must be held in the broker’s trust account. If a property owner insists on holding the security deposits, you may wish to contact the Residential Tenancies Branch for guidance. (The Act also provides, as an alternative, that landlords may submit security deposits to be held by the Director of Residential Tenancies.)

2. When taking over management of rental property, ask for the security deposits and interest which the previous landlord holds in relation to all existing tenancies. If you do not receive them, contact the Residential Tenancies Branch for advice.

3. If an owner transfers property that is under your management, ensure that all security deposits and interest you hold, with written records of the tenancies they relate to, are given to the new landlord on the possession date.

4. If you are holding security deposits on behalf of an owner, you must deal with the security deposit in accordance with the Act when a tenancy is terminated.

All security deposits not claimed by tenants must be sent to the Director of The Residential Tenancies Act where they will be held for two years in an account for the benefit of the tenants.

It is important that brokers manage residential properties in accordance with the Act, and that they properly account for security deposits. Any broker who contravenes a provision of The Residential Tenancies Act could face prosecution under that Act as well as disciplinary proceedings by The Manitoba Securities Commission.

J. W. Storsley
Registrar
The Real Estate Brokers Act