Tenants get nearly zero returns due to current policies
For over a decade, tenants in the Northwest Territories have lost out on potentially hundreds of thousands of dollars in interest owed to them on security deposits. The culprit: an obscure amendment to the Residential Tenancies Act passed in 2010.
The law mandates landlords to pay simple interest on security deposits, including pet deposits. However, since the 2010 amendment, interest rates have been exceptionally low.
The current rate is just 0.01%. This means a tenant paying the average Yellowknife rent of $1,840 earns just 18 cents annually in interest.
By comparison, tenants in other provinces like Yukon, Alberta, Prince Edward Island, British Columbia, and Newfoundland would make significantly more with the same deposit.
Lisa Thurber, founder of the NWT Tenants' Association, called for a change to the laws:
"This is the only area where this interest rate is so low. It makes no sense,” Thurber said in an interview with CBC News. “Some of these tenants have been in their units for 10 years, 15 years… that's just money that a tenant needs nowadays to put food on the table, to keep the lights on."
Thurber noted many landlords fail to credit tenants with their annual interest as required. The current low rates discourage tenants from pursuing action since the $20 filing fee with the rental officer would often exceed any interest earned.
Before 2010, NWT security deposit interest rates followed a Bank of Canada rate, roughly aligned with the Bank of Canada's key interest rates. However, the Residential Tenancies Act update shifted the calculation to a much lower Bank of Canada interest rate, resulting in a drastic drop.
Yellowknife councillor and landlord Rob Warburton describes holding security deposits in interest-gathering accounts as financially "a wash" for him due to banking fees.
However, he acknowledged that larger landlords stand to earn substantially more. A landlord with 1,000 similar-rent properties could see annual interest earnings exceeding $55,000, even at a modest 3% rate.
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Warburton said the 0.01% rate "should be indexed to something more reflective of what a person would expect from, say, a bank account."
Members of the current Northwest Territories legislature have pledged to review the Residential Tenancies Act. However, the Department of Justice holds the power to make changes independently.
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