Yeah I always cash in the DD cheques immediately. With my first tenants, some poor judgements and inexplicable judgement on my part had me return half their DD to them, which left me in the hole for that amount. Suffice it to say, I will never prematurely return a DD ever again lol.
At the worst, you could probably sue for the DD amount and 60 days of rent (minimum notice according to the tenancy act), but not sure if it's worth it. Can a collection agency be hired? I'd like to know how this pans out in case I run across this situation as well.
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