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As a matter of practicality and with the concurrence of the lender, it is good practice for the Receiver to honor the deposits for a variety of reasons:

1. If you don’t honor the deposit and you tell the tenant, they will withhold at least half a month’s rent when they vacate the property. This will leave you with no recourse against the tenant for any damage they do to the property and it could be very costly.

2. Tenants who subsequently vacate will also hold back at least one half months rent creating a ripple effect.

3. Future tenants will be reluctant to rent in the building if they think they will not receive their damage deposit back.

4. A prudent purchaser of the property will insist on an adjustment being made to the purchase price to account for the future liability.

Considerations in dealing with the Security deposits are:

1. Determine what the extent of the liability is and advise the lender.

2. Obtain their concurrence on paying out the deposit in accordance with the RTA.

3. Advise the Tenants in writing that all security deposits will be honored and paid out in accordance with the sections of the RTA.

4. Contact the former owner and request an accounting of the deposits and the funds.

5. Keep future security deposits in a separate trust account.

For more information contact the trustees from Boale Wood and Co.

Whether a particular item is a chattel or fixture is often the subject of disputes between landlords and Trustees. A Trustee or Receiver will consider an item to be a chattel and include it in the list of items to be sold. The landlord, who believes it is a fixture, will challenge its removal. Whether an item is a chattel or fixture is a question of fact, and is usually easy to determine, when examined objectively. However, disagreements do arise. To assist in resolving the disagreements, several factors must be considered.

The degree of annexation and whether an item is attached for the betterment of the chattel or improvement of the building are primary factors when considering the issue. Other factors the Courts have considered include:

• Any item which is unattached to the property, except by its own weight, and can be removed without damage is a chattel;
• Any item that is plugged in and can be removed without damage is a chattel;
• Any item that is a fixture, but is a tenant fixture, can be removed if the property is left in the same condition it was when the tenant received it;
• If an item is attached to the property; however, part of the item can be removed from the property, and it still retains its essential character it is considered to be a fixture.