An application deposit, also known as a holding deposit, is a sum of money paid by a prospective tenant when submitting a rental application. Its primary purpose is to demonstrate the applicant's serious intent to rent the property and to reserve the rental unit while the application is being processed
. Benefits to the Applicant:
- The deposit holds the property off the market, giving the applicant peace of mind that the rental will not be leased to someone else during the application process
- If the application is rejected, the deposit is typically refunded, providing financial protection to the applicant
- If the application is accepted, the deposit may be applied toward the security deposit or rent, reducing upfront costs when signing the lease
Benefits to the Owner:
- The deposit acts as a guarantee that the applicant is serious, reducing the risk of the property remaining vacant due to applicants backing out late in the process
- It compensates the landlord for lost rental income if the applicant withdraws after the property has been taken off the market
- It helps filter genuine applicants, streamlining the tenant selection process and minimizing vacancies
Overall, the application deposit protects both parties by securing the rental during the application phase, ensuring commitment from the applicant, and providing the landlord with financial assurance against potential losses
