Prepaid Rent: An Option to Consider When Applying for a Rental
If you are having trouble getting approved for a rental, offering prepaid rent can sometimes make the difference. When your application is weaker on paper and you have the resources, offering a few additional months of rent applied to the final months of the lease term can provide a landlord with added confidence that the rent will be covered through to the end of the agreement.
When Prepaying Rent Might Help
Prepaid rent can be especially useful in certain situations. For example, if you are self-employed and cannot provide a traditional job letter, prepaid rent can help reassure a landlord that your income is sufficient even if it does not appear in the usual format. It can also help if you are new to Canada and do not yet have a credit history here, giving the landlord confidence in your ability to meet your obligations.
Another common scenario is when you have had recent credit struggles but are actively working to pay them down. In that case, prepaid rent can demonstrate responsibility and a commitment to catching up. Similarly, if your income is variable or harder to verify, paying a few months in advance can show that you have the means to keep up with rent despite fluctuations.
In each of these situations, prepaid rent helps position you as serious and financially capable.
Why the Final Months Matter
This gives the landlord peace of mind that rent will be covered through to the end of the lease, and it ensures your prepaid rent is applied to actual rent payments rather than being mistakenly treated as an extra deposit, since under Ontario law a landlord can only legally hold one month’s rent as a deposit.
When you apply for a rental, we’ll use Form 400 – Agreement to Lease. to negotiate the terms of the lease. The legally binding agreement is the Ontario Standard Lease Form (OSL), which is the lease the Landlord and Tenant Board will enforce and anything agreed to elsewhere that contravenes the OSL is null and void. The OSL makes it clear that landlords are only allowed to hold one month’s rent as a deposit. Any other rent you pay in advance must be applied to specific months in the lease.
Protecting Yourself with the Right Clause
If we decide offering prepaid rent is right for you, I’ll make sure the lease spells out exactly how it will be applied. For example:
Prepaid Rent Clause
”The Tenant shall pay to the Landlord, upon signing this Lease, an amount equal to four (4) months’ rent. The first month’s rent will be applied to the first rental period. One (1) month’s rent will be applied as the last month’s rent deposit, in accordance with the Residential Tenancies Act. The remaining two (2) months of prepaid rent are not deposits and must be applied by the Landlord to the rent due for months ten (10) and eleven (11) of the initial twelve (12) month term of this Lease. These two months cannot be carried over beyond the first term into any renewal or month-to-month tenancy.”
This way, the landlord knows exactly when the rent will be applied, and you know your money is protected.
Final Thoughts
Prepaid rent is not necessary for most tenants, and in some cases, offering it without explanation can actually harm your application. A landlord might see it as a red flag if it looks like you are simply throwing extra money at them without a clear reason.
Where it can help is in specific situations, such as if you are self-employed, new to Canada, or working to rebuild your credit. In these cases, prepaid rent can provide reassurance, but only when it is framed properly and structured in the lease.
The key is to explain why you are offering it and to make sure the lease clearly states how the money will be applied. I’ll guide you through that process so you can use prepaid rent effectively when it is needed, while still protecting your rights under Ontario law.