Good Faith Deposit
Also: “Application Deposit” or “Holding Deposit”
A landlord, broker, or sublessor may ask a potential renter to put down a small deposit when they apply, in order to prove that they're serious about the apartment. This payment—typically several hundred dollars, though it can be higher—is often referred to as a “good faith deposit” or a “holding deposit.” It reserves the unit while the landlord processes the rental application. Once the applicant signs the lease, this money should be applied to the security deposit or first month's rent.
If the applicant decides to back out before signing the lease, the landlord is allowed to keep some or all of the good faith deposit to reimburse them for any financial losses. However, if the landlord decides not to rent to the applicant for any reason—for instance, a low credit score or a past eviction—they must refund the entire good faith deposit.
The information provided on this website does not, and is not intended to, constitute legal advice.