A prospective tenant’s decision not to move in does not automatically resolve what happens to a rent deposit. In Musilla, the Court of Appeal examined both the binding rental agreement and the statutory restrictions on using deposits.

The tenant paid a deposit equal to one month’s rent. Six weeks before taking possession, she advised the landlord that she would not proceed and requested repayment.

The court rejected the argument that a tenant automatically receives the deposit back simply because they never take possession, where the landlord was ready to provide the unit.

However, it ordered repayment on the facts. The application contained an unlawful forfeiture provision, its permitted use of the deposit was unclear, and the landlord treated the money as a penalty before knowing whether it would lose rent.

The court emphasized that a rent deposit cannot be used as security for any obligation the landlord chooses. It also explained that a landlord cannot use it to obtain double payment where the unit is re-rented without a rental loss.

What this could look like in practice

Imagine signing a rental agreement, paying a deposit, and then accepting a job in another city before moving in.

A useful review would include the signed application, lease, payment receipt, cancellation correspondence, and information about when the unit was re-rented. Those documents would help explain both the agreement and what happened after the change of plans.

For the landlord, recording efforts to find a replacement tenant would provide a clearer account than simply declaring the deposit forfeited.

The takeaway

Separate the question of responsibility for breaking the rental agreement from the permitted treatment of the deposit. Neither “the tenant cancelled” nor “the tenant never moved in” provides a complete answer on its own.

Contact JY Law to discuss your circumstances and how we may assist you.

The information above is provided for general educational purposes only and does not constitute legal advice. These summaries highlight selected principles and do not address every issue or subsequent legal development. Examples are hypothetical and do not predict outcomes. Your rights depend on the agreement, applicable law, and particular circumstances. Reading this page or contacting our firm does not, by itself, create a lawyer-client relationship. If you have further questions or require advice about your situation, please contact us.