We also allow pets, this is how we handle it:
1.) First we charge a non-refundable $200 pet application fee. In Alberta you can not charge an additional pet deposit if you are collecting a full months security deposit.
2.) We also charge additional rent in the amount of $25/pet/month. As a pet owner myself I know that having a pet is a lifestyle choice and I also understand that pets wreck things.
We also use discrection as to the limit of the number of pets per house hold.
3.) We state in our lease that if there are pets found on the property, whether the tenants or "babysitting for a friend..." the lease can immediately be terminated or rent increased by 50% immediately. We stress to our tenants not to lie about having pets, own up and pay the approriate rent.
4.) We also state that if the pets listed in the lease, for whatever reason, moved, sold, died...,leave, then the tenant cannot go out and bring a new pet in without the consent of the landlord. IE. Cat dies so they buy a pitbull...
These are how we have chosen to handle the pet issue as there A LOT of tenants out there who have pets and we don`t what to discriminate for having them, however we also want to protect our investment.
Hope this helps!