The client
A buyer is purchasing a $342,000 owner-occupied duplex in Saint-Hyacinthe, Quebec, with $34,200 (10%) down, planning to live in one unit and rent the other to a sitting tenant at $1,190/month.
Purchase price
$342,000
Saint-Hyacinthe duplex
Down payment
$34,200 (10%)
Insured purchase
Tenant's rent, second unit
$1,190/month
Statement of adjustments (first draft)
Credited a last month's rent deposit
Assumed transferable from the seller
Buyer's own income
$7,300/month
The problem
The listing brokerage's template for the statement of adjustments -- borrowed from a common-law-province closing kit -- credited the buyer with a last month's rent deposit the seller was assumed to be holding, to be transferred at closing along with the tenancy itself. That is a routine adjustment in Ontario and most other provinces. It is not a routine adjustment in Quebec, because no such deposit is ever legally allowed to exist there in the first place.
What Quebec's Civil Code actually bars a landlord from doing
- ▸A landlord may not require a security deposit, a damage deposit, or any advance rent of any kind as a condition of leasing a dwelling
- ▸A landlord also can't require post-dated cheques covering the whole term of the lease -- rent is collected month by month
- ▸Because no deposit is ever legally collected, there is nothing for an outgoing landlord to hold, and nothing for a statement of adjustments to credit at closing
Confirming this with the notary meant the adjustment sheet's credit had to come out entirely -- not renegotiated to a smaller figure, removed, because the fund the credit assumed existed had never legally existed at all.
The numbers
Because this is an owner-occupied purchase with a rental unit, CMHC's standard homeowner schedule and rental-offset convention both apply as usual -- the deposit question never touched the ratios, only the cash actually needed at closing, a detail the broader rental vacancy data for Quebec doesn't track at all.
| Sizing the mortgage, then correcting the cash-to-close | Amount |
|---|---|
| Base mortgage (price less down payment) | $307,800 |
| CMHC premium (3.10% at 85.01-90% LTV) | +$9,542 |
| Total insured mortgage | $317,342 |
| Quebec welcome tax (droits de mutation) on $342,000 | $3,240 |
| Cash-to-close correction once the phantom deposit credit is removed | +$1,190 |
| Housing cost basis | Figure |
|---|---|
| Qualifying payment at 7.05% (MQR on 5.05%) | $2,233 |
| Property tax, heat and the car loan | $665 |
| Rental offset (50% of $1,190) | -$595 |
| TDS ÷ $7,300 income | 31.5% |
31.5% TDS confirms the ratios were never the issue on this file -- the entire correction was to the cash-to-close figure, once Quebec's no-deposit rule replaced an assumption borrowed from another province's closing practice, leaving the rental offset itself untouched.
The solution
A courtier hypothécaire (mortgage broker) licensed under Quebec’s Act respecting the distribution of financial products and services treated the deposit credit as a fact to verify against Quebec law, not a routine line item to accept from the listing's own paperwork.
First, had the notary confirm directly against the seller's own tenancy records that no security deposit or advance rent had ever been collected from the tenant -- consistent with Quebec's Civil Code, not an oversight by the seller or the outgoing landlord.
Second, corrected the statement of adjustments to remove the phantom credit entirely, rather than negotiate it down, since the fund the credit assumed existed had never legally existed in Quebec at all.
Third, confirmed the buyer's own cash-to-close with the corrected figure well before closing, so the extra $1,190 came as a documented correction rather than a surprise at the notary's office.
The outcome
The purchase funded at $317,342 insured, 31.5% TDS with the rental offset applied, and the buyer's actual cash-to-close came in $1,190 higher than the first adjustment sheet showed -- fully explained once Quebec's no-deposit rule was applied correctly instead of an assumption borrowed from another province's practice.
31.5% TDS sits comfortably inside CMHC's 44% maximum on this insured purchase -- the deposit correction never touched the ratios at all.
What to take from this file
- 01Quebec's Civil Code bars a landlord from ever collecting a security deposit or advance rent for a dwelling. Most other provinces allow some version of a last-month's-rent deposit; Quebec does not.
- 02A last month's rent credit on a statement of adjustments is a routine assumption borrowed from common-law practice. Confirm it actually applies before relying on it in Quebec.
- 03When the fund a credit assumes doesn't legally exist, remove the credit entirely. Don't renegotiate it to a smaller figure -- there is nothing there to split.
- 04Confirm cash-to-close corrections with the buyer well before closing. A documented correction lands very differently than a surprise at the notary's office.
- 05A deposit-credit correction and the mortgage ratios are two separate questions. This file's TDS was never affected by either version of the adjustment sheet.
Sources
Every regulatory figure in this file traces to one of these primary sources. Client details and anything that varies by lender are illustrative, as flagged below.
- ▸CMHC — Purchase (Mortgage Loan Insurance) — default-insurance premium schedule by LTV band (25-year amortization).
- ▸CMHC — CMHC Home Start — minimum down payment tiers (5%/10%) and the $1.5M insured price cap.
- ▸OSFI — Minimum qualifying rate for uninsured mortgages — the minimum qualifying rate — greater of contract rate + 2% or 5.25%.
- ▸CMHC — CMHC Reviews Underwriting Criteria — GDS 39% / TDS 44% maximums and the 600 credit-score floor for insured files.
- ▸Gouvernement du Québec — Droits sur les mutations immobilières — Quebec's transfer duties ('welcome tax') — 2026 indexed brackets.
- ▸Provincial/territorial mortgage-broker legislation fetched directly (bclaws.gov.bc.ca, legisquebec.gouv.qc.ca, fcaa.gov.sk.ca, web2.gov.mb.ca, nslegislature.ca, assembly.nl.ca) plus FCNB's own site for NB and CanLII's index for PE — see notes for per-province method — provincial mortgage regulators and licence titles.
Illustrative in this file — lender-specific, not rules:
- ▸5.05% contract rate — rates move daily; not a quote.
- ▸the 50% rental-income offset — each lender publishes its own rental-income offset convention; 50% is illustrative of one common practice.
Authority & provenance
How this case file was built
We publish the origin, the verification method and the reviewer for every case file, so you can judge how far to trust it before you rely on it with a client.
Where it comes from
Derived from files handled by Treadstone’s fulfillment desk and from scenarios contributed by partner brokerages. Names, employers, exact amounts and dates are changed so no client or file is identifiable.
Provenance: Composite — a pattern seen repeatedly on fulfilled files, not a single transaction.
What is verified
Every regulatory figure traces to a primary source listed above and was checked against it on the date shown. The arithmetic is recomputed by machine on every rebuild.
Anything that varies by lender is labelled illustrative rather than stated as a rule.
Who reviewed it
Reviewed for Canadian regulatory accuracy before publication, and re-checked whenever a cited rule changes.
Reviewed by: Nicholas Parson, Treadstone Associates — reviews every case file before publication.
This case file is professional reference material for licensed mortgage professionals. It is not advice to a borrower, and it is not a lender commitment. Insurer rules, qualifying rates and provincial taxes change — confirm the current position with the insurer, regulator or lender before you rely on any figure here in a live file.