Quick Answer
Renting out a modular home or ADU in Ontario means following the Residential Tenancies Act: use the mandatory Ontario standard lease, collect only a last-month-rent deposit, raise rent once every 12 months with 90 days' written notice, and evict only through the Landlord and Tenant Board.
Before You Become a Landlord
A modular home or backyard ADU can be one of the most reliable rental assets in Ontario — but the day a tenant moves in, you take on a set of legal obligations that have nothing to do with how the home was built. Most residential rentals in Ontario are governed by the Residential Tenancies Act, 2006 (RTA) and overseen by the Landlord and Tenant Board (LTB). The rules below apply whether your unit is a factory-built home, a garden suite, or a basement apartment.
This guide is a plain-language orientation, not legal advice. The single best starting point is the Government of Ontario's own guide, which covers both sides of the relationship and is kept current as the rules change:
Read: Renting in Ontario — your rights (ontario.ca)
Is Your Unit Even Covered by the RTA?
This matters more for ADUs than for any other rental, so check it first:
- A self-contained ADU — a garden suite or laneway home with its own kitchen and bathroom — is a separate rental unit and is covered by the RTA. Full landlord and tenant rules apply.
- A room or suite where the tenant shares a kitchen or bathroom with you (the owner) or your immediate family living in the same building is generally exempt from the RTA (s.5(i)). Different rules — and far fewer LTB protections — apply.
If you're building a detached garden suite to rent out, assume the RTA applies and plan around it.
The Mandatory Standard Lease
For almost every private residential tenancy in Ontario, the landlord must use the Ontario Standard Form of Lease (the "standard lease"). It's a government form — you can't substitute your own contract for the core terms, though you can attach reasonable additional terms.
- If you don't provide a standard lease, the tenant can demand one in writing, and if you still don't provide it within 21 days, they may be entitled to withhold one month's rent.
- Any additional terms that conflict with the RTA (for example, a "no guests" or "no pets" clause that the Act overrides) are simply void.
Deposits: Last Month's Rent Only
Ontario does not allow damage deposits, security deposits, key deposits beyond actual cost, or pet deposits. The only deposit you may collect is a rent deposit, and:
- It can be at most one month's rent (or one rental period).
- It must be applied to the last month of the tenancy — never to damage.
- You must pay the tenant interest on it every year, at the provincial rent-increase guideline rate.
Rent Increases
Once a tenant is in place, rent is not a number you can change at will:
- You may raise rent once every 12 months, and only with 90 days' written notice on the LTB's Form N1.
- For most units the increase is capped by the annual rent-increase guideline set by the province each year (check ontario.ca for the current year's figure before issuing a notice).
- Key exemption for new builds: units first occupied for residential purposes after November 15, 2018 are exempt from the guideline cap. A brand-new modular ADU usually falls into this category — you still owe 12-month spacing and 90 days' notice, but the dollar amount isn't capped by the guideline. This is a genuine advantage of a newly built rental, and it's worth confirming for your specific unit.
Ending a Tenancy
You cannot "self-evict" in Ontario. Changing the locks, shutting off utilities, or removing a tenant's belongings is illegal. To end a tenancy you serve the correct LTB notice and, if the tenant doesn't leave, apply to the Landlord and Tenant Board for an order:
- N4 — non-payment of rent
- N5 — interference, damage, or overcrowding
- N12 — landlord (or a close family member) wants to move in (compensation and good-faith rules apply)
- N13 — major repairs/demolition or conversion
The LTB process takes time, so screening tenants well and using a proper standard lease up front is your best protection.
Your Ongoing Obligations
As the landlord you're responsible for keeping the unit in a good state of repair, fit for habitation, and compliant with health, safety, and maintenance standards — even if the lease tries to push that onto the tenant. You must also maintain vital services (heat, water, electricity) where you've agreed to supply them. A well-built modular home makes this easier, not optional.
Where the Numbers Come In
The rules above shape your real return — vacancy between tenancies, the 12-month rent-increase rhythm, and your maintenance obligations all feed the cash-flow math. Model your specific scenario in the Rental Income Calculator, and if you're weighing whether to buy at all, start with Should You Buy a Modular Home as a Rental in Ontario?. For the build side of a backyard rental, see Modular Home Garden Suites in Ontario.
When you're ready to put a tenant in place, read the province's full guide — Renting in Ontario: your rights — and consider a one-time consult with a licensed paralegal or lawyer to review your first lease.
Frequently Asked Questions
Do Ontario landlord rules apply to a modular home or ADU rental?
Yes. The Residential Tenancies Act applies to the rental relationship regardless of how the home was built. A self-contained modular home or garden suite with its own kitchen and bathroom is a covered rental unit. A room where the tenant shares a kitchen or bathroom with the resident owner is generally exempt from the RTA.
Can I charge a damage deposit when I rent out my ADU in Ontario?
No. Ontario does not permit damage, security, or pet deposits. The only deposit allowed is a rent deposit of at most one month, which must be applied to the last month of the tenancy, and on which you must pay the tenant interest each year at the provincial guideline rate.
How much can I raise the rent on an Ontario rental each year?
You can raise rent once every 12 months with 90 days written notice on Form N1, capped by the annual provincial guideline. Units first occupied after November 15, 2018 — which includes most newly built modular ADUs — are exempt from the guideline cap, though the 12-month and 90-day rules still apply.
Do I have to use the Ontario standard lease for my rental?
Yes, for almost all private residential tenancies. The Ontario Standard Form of Lease is mandatory. If you fail to provide it after the tenant requests one in writing, the tenant may be entitled to withhold up to one month of rent, and lease terms that conflict with the Residential Tenancies Act are void.
How do I evict a tenant from my Ontario rental property?
Only through the Landlord and Tenant Board. You serve the correct notice (such as N4 for non-payment or N12 for landlord-own-use) and, if the tenant does not leave, apply to the LTB for an order. Self-help eviction — changing locks or cutting utilities — is illegal in Ontario.