returning deposit to hold question

11 Replies

I am returning a deposit to hold the property because the prospective tenant doesn't meet my qualifications. What should I include as far as a letter goes? Should I give them the reasons for denial? Should I mail it with a certified letter? They paid it with cash and I did give them a receipt. I will be mailing a check, is that the proper way?

I've never returned a holding deposit. We convert them towards the security deposit once the tenant moves in. We only take holding deposits after we made our offer to rent and a move-in date is determined. If the move-in date is soon (in a week or less) we don't take a holding deposit. If more than a week, we take $100 for each week or any portion of such for the holding period.

If the tenant changes their mind and decides not to move in at all, we keep the holding deposit. It's our compensation for taking the unit off the market.

Whatever you are doing, you should follow the landlord tenant laws for your jurisdiction. If we deny housing to an applicant, our law requires us to mail an "Adverse Action Notice", which is essentially a denial letter. It states reasons for denial in general categories and we just check the box of the reason that applies.

If we did a thorough background check already and paid for a credit report and criminal history report with the application fee, we don't give it back. However, if we can see by reviewing the application that they won't meet our minimum criteria to rent, or if we decide to rent to someone else before processing their application, then we return the application fee. We mail a check by regular first class USPS mail and get a "certificate of mailing".

Was this deposit accepted on the pending review or verification of application, documents, credit & background check? If so I would include the specific reasoning for the denial . Keep a copy of the check & letter for your records.

Include an invoice if you are deducting the cost of reviewing/credit check/background check.

Also make sure you are in compliance with your local landlord tenant law on the specific time frame in which the refund should be issued and the form of which the refund should be issued.

I take the deposit to remove it from the market pending approval of the application. In this case the application wasn't approved and I need to return the deposit. The application fee is separate.

We don't stop marketing a unit until we have a signed agreement. Sometimes we start saying "we have a lot of applications, we can put you on a waiting list in case none of them work out.", but do it before you get any specific information about their situation (to protect against discrimination).

If you are turning them down due to issues on the credit report, you likely have some obligation to tell them that. Otherwise, be as non-specific as possible. "Thank you for your interest. You did not meet our criteria, so enclosed is your holding deposit refund." I've been tempted to give more details to help out applicants with their housing situations, but it is always safer to say nothing or as little as possible.

Agree you need to know your tenant-landlord laws, as each area varies on how situations should be handled. If your law is silent on an issue, use common sense.

I've read over the Georgia landlord tenant guides and looked into local laws. I've looked over a lot of the Georgia laws and I feel that I'm ok. I'm actually researching now whether or not I am even required to provide a letter. I have read in states such as WI where they are not required. here is a quick look at my deposit to hold letter.


The undersigned has hereby given a deposit in the amount of Two Hundred Dollars ($200.00) to reserve the dwelling located at the above address for possible owner consideration of acceptance of rental. The amount of deposit will be credited to the final security deposit on the unit.


If prospective tenant is declined residency for any reason whatsoever, deposit is fully refundable.


In the event prospective tenant changes his/her mind about renting, deposit is NON-REFUNDABLE.


Originally posted by @Justen Ashcraft :

I've read over the Georgia landlord tenant guides and looked into local laws. I've looked over a lot of the Georgia laws and I feel that I'm ok. I'm actually researching now whether or not I am even required to provide a letter. I have read in states such as WI where they are not required. here is a quick look at my deposit to hold letter.

The undersigned has hereby given a deposit in the amount of Two Hundred Dollars ($200.00) to reserve the dwelling located at the above address for possible owner consideration of acceptance of rental. The amount of deposit will be credited to the final security deposit on the unit.

If prospective tenant is declined residency for any reason whatsoever, deposit is fully refundable.

In the event prospective tenant changes his/her mind about renting, deposit is NON-REFUNDABLE

I like the wording here and will use something similar with a tenant this week. Thanks

If you're returning it based on a denial, I think you're doing fine.  No need to go into details; just a "We're sorry we are unable to accept you at this time.  Enclosed please find your check."

I'm going to disagree with many of the previous posters. If you are denying based on ANYTHING obtained from a 3rd party information source, you are required by the FCRA (fair credit reporting act) to send a denial letter. This includes background/criminal/eviction ect. Unless you physically go to the courthouse and pull the records yourself you have to send the letter. It also doesn't matter what your state law says on the matter, unless it is more stringent, because the FCRA is a federal requirement so you must abide by it.

I believe there is a copy of a denial letter in the file place that you cold download and use. If not search for some past posts from Steve Babiak, I know he's posted a copy of his here on the forums multiple times for people.

It is not a good practice to accept a deposit from someone not yet approved.

Originally posted by @Richard C. :

It is not a good practice to accept a deposit from someone not yet approved.

I agree with Richard here, and I don't take deposit money until the applicant is approved. But this practice is common with some agents and landlords; their reasoning is to prevent the applicant from continuing to shop around at other places since the application fee is a small amount but a larger deposit is more of a commitment. 

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