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LEGAL DICTIONARY

Application Deposit

What Is an Application Deposit?

An application deposit is a sum of money a potential tenant pays when submitting a rental application to a landlord.

The money, also known as a holding deposit, gives the landlord assurance that the applicant is serious about renting the residence. It also serves to hold the rental unit until the application process is complete.

How an Application Deposit Works

An application deposit is not a security deposit since the parties have yet to sign a residential lease agreement. If the landlord accepts an application, the application may be used toward the security deposit. However, landlords vary on this practice.

However, if the landlord rejects the application, they are obligated to refund the application deposit to the prospective tenant. The landlord should provide the following to the individual paying an application deposit:

  • a dated receipt with the amount of the deposit
  • the names of both parties
  • the address of the rental unit
  • a written descript of how and when the deposit will be retained, credited, or refunded
  • the length of time the landlord will hold the rental unit
  • the basic terms that must be met for the applicant to rent the unit

Application Deposit vs. Application Fee

It's important for renters not to confuse the difference between an application deposit and application fee. An application fee is a non-refundable amount of money that a landlord uses to cover the costs associated with background checks and credit checks.

Application fees typically range from $25 to $100, depending on the rental unit and its location. The cost of an application deposit varies more widely. It depends on the rental unit, the neighborhood, and the demand in that area. Be sure to ask how much it is before you complete an application.

Application Deposit vs. Security Deposit

Renters also need to know the difference between an application deposit and a security deposit. Renters pay a security deposit after their rental application form has been approved, and a lease has been drawn up.

A security deposit is a refundable sum of money a tenant pays to cover any potential damage done to the unit throughout their residence.

If the landlord finds no damage at the end of the lease, they return the security deposit. Security deposits range anywhere from $100 to one month's rent or even more, depending on the home and the renter's background check.

Get your Rental Application here

What to Consider Before Paying an Application Deposit

Here are some questions to answer before you pay an application deposit:

  • Are you sure you want to live in this home if your application is accepted?
  • Is the landlord accepting deposits from other applicants?
  • Will you pass the credit and background checks?
  • How long will the landlord keep the home off the market after you pay the deposit?
  • What are the basic terms of the lease agreement?
  • What will happen to your deposit after your application is accepted?
  • What will happen to the deposit if you decide not to lease the unit?

Application Deposit Law

An application or holding deposit typically holds a unit for one to two weeks. However, state laws vary on application deposits and how much of the money a landlord may keep if a prospective tenant backs out after the deadline.

It may depend on any additional costs that the landlord has to pay. For example, a landlord might miss out on rent when the unit was held. Or the landlord may have additional advertising expenses to put the unit back on the market.

Here are two examples of state application deposit laws:

Virginia law states that "if the applicant fails to rent the unit for which application was made, from the application deposit the landlord shall refund to the applicant within 20 days after the applicant's failure to rent the unit or the landlord's rejection of the application all sums in excess of the landlord's actual expenses and damages together with an itemized list of such expenses and damages."

Meanwhile, the law on application deposits in Oregon goes a bit further. "If you move into the unit, the landlord must either apply this deposit to the rent or refund it immediately to you. If you do not move in due to your failure to comply with the written statement, the landlord may keep the money.

If the landlord does not make the rental available due to his or her failure to comply with the written statement, the landlord has four days in which to allow you to collect the deposit or to mail it to you.

A landlord who does not follow the rules for ‘hold’ deposits is liable to the tenant or applicant for $150 plus the deposit charged.”

All landlords and renters should read and understand their state law on application deposits before paying or accepting them to make sure that they do so in a legal manner.

Helpful Resources:

You Check Credit - What is an application deposit?

Apartment Agents - What Happens To Your Application Deposit If You Don't Rent?

Apartments.com - Everything You Need to Know About Application Deposits

Justia - Holding Deposits for Rental Property

What Is an Application Deposit?

An application deposit is a sum of money a potential tenant pays when submitting a rental application to a landlord.

The money, also known as a holding deposit, gives the landlord assurance that the applicant is serious about renting the residence. It also serves to hold the rental unit until the application process is complete.

How an Application Deposit Works

An application deposit is not a security deposit since the parties have yet to sign a residential lease agreement. If the landlord accepts an application, the application may be used toward the security deposit. However, landlords vary on this practice.

However, if the landlord rejects the application, they are obligated to refund the application deposit to the prospective tenant. The landlord should provide the following to the individual paying an application deposit:

  • a dated receipt with the amount of the deposit
  • the names of both parties
  • the address of the rental unit
  • a written descript of how and when the deposit will be retained, credited, or refunded
  • the length of time the landlord will hold the rental unit
  • the basic terms that must be met for the applicant to rent the unit

Application Deposit vs. Application Fee

It's important for renters not to confuse the difference between an application deposit and application fee. An application fee is a non-refundable amount of money that a landlord uses to cover the costs associated with background checks and credit checks.

Application fees typically range from $25 to $100, depending on the rental unit and its location. The cost of an application deposit varies more widely. It depends on the rental unit, the neighborhood, and the demand in that area. Be sure to ask how much it is before you complete an application.

Application Deposit vs. Security Deposit

Renters also need to know the difference between an application deposit and a security deposit. Renters pay a security deposit after their rental application form has been approved, and a lease has been drawn up.

A security deposit is a refundable sum of money a tenant pays to cover any potential damage done to the unit throughout their residence.

If the landlord finds no damage at the end of the lease, they return the security deposit. Security deposits range anywhere from $100 to one month's rent or even more, depending on the home and the renter's background check.

Get your Rental Application here

What to Consider Before Paying an Application Deposit

Here are some questions to answer before you pay an application deposit:

  • Are you sure you want to live in this home if your application is accepted?
  • Is the landlord accepting deposits from other applicants?
  • Will you pass the credit and background checks?
  • How long will the landlord keep the home off the market after you pay the deposit?
  • What are the basic terms of the lease agreement?
  • What will happen to your deposit after your application is accepted?
  • What will happen to the deposit if you decide not to lease the unit?

Application Deposit Law

An application or holding deposit typically holds a unit for one to two weeks. However, state laws vary on application deposits and how much of the money a landlord may keep if a prospective tenant backs out after the deadline.

It may depend on any additional costs that the landlord has to pay. For example, a landlord might miss out on rent when the unit was held. Or the landlord may have additional advertising expenses to put the unit back on the market.

Here are two examples of state application deposit laws:

Virginia law states that "if the applicant fails to rent the unit for which application was made, from the application deposit the landlord shall refund to the applicant within 20 days after the applicant's failure to rent the unit or the landlord's rejection of the application all sums in excess of the landlord's actual expenses and damages together with an itemized list of such expenses and damages."

Meanwhile, the law on application deposits in Oregon goes a bit further. "If you move into the unit, the landlord must either apply this deposit to the rent or refund it immediately to you. If you do not move in due to your failure to comply with the written statement, the landlord may keep the money.

If the landlord does not make the rental available due to his or her failure to comply with the written statement, the landlord has four days in which to allow you to collect the deposit or to mail it to you.

A landlord who does not follow the rules for ‘hold’ deposits is liable to the tenant or applicant for $150 plus the deposit charged.”

All landlords and renters should read and understand their state law on application deposits before paying or accepting them to make sure that they do so in a legal manner.

Helpful Resources:

You Check Credit - What is an application deposit?

Apartment Agents - What Happens To Your Application Deposit If You Don't Rent?

Apartments.com - Everything You Need to Know About Application Deposits

Justia - Holding Deposits for Rental Property