Application Fees and Deposits

Proper preparation and planning is important before applying for a rental unit. Because application fees and deposits are often not refundable, tenants should be certain that they want to live in a unit before applying for it or putting any money down. The laws regarding applications can be found in Chapter 92, Subchapter I of the Texas Property Code.

Application Fees and Procedures
When filling out an application for a rental unit, be sure that the following information is included on the application form:

Landlords usually request an application fee to compensate the landlord for checking credit reports and processing the application. Typically, application fees are $25 to $35 per person, but there is no limit on what a landlord can charge for an application fee. Application fees are usually nonrefundable (except as noted below).

Tenant Selection Criteria and Acknowledgment
At the time a prospective tenant is given a rental application, the landlord must also provide written notice of the tenant selection criteria and the grounds for which a rental application may be denied, including an applicant’s:

The landlord should ask the applicant to sign an acknowledgment indicating that notice of the tenant selection criteria was provided. The acknowledgment must include a statement such as “Signing this acknowledgment indicates that you have had the opportunity to review the landlord’s tenant selection criteria. The tenant selection criteria may include factors such as criminal history, credit history, current income, and rental history. If you do not meet the selection criteria, or if you provide inaccurate or incomplete information, your application may be rejected and your application fee will not be refunded.”

The acknowledgment may be part of the rental application if the notice is underlined or in bold print. Any provision in the rental application that purports to waive a right or exempt a party from liability or duty of this notice is void.

What Remedies Does the Applicant Have?
If the landlord rejects an applicant without providing the tenant selection criteria, the landlord must return the application fee and any application deposit. The applicant should send the landlord a demand letter by certified mail. The letter should include an address of where to send the application fee and any application deposit and a statement that if the money is not returned within 10 days from the date the landlord receives the letter, the tenant will pursue legal remedies. If an applicant can show the landlord acted in bad faith, the landlord can be held liable for $100, three times the amount wrongfully retained, and reasonable attorney’s fees. See ATC’s brochure Filing Suit in Small Claims Court for more information.

Application Deposits
An application deposit is often required, in addition to the application fee, at the time the application is processed. The deposit is paid by the prospective tenant as assurance to the landlord that the applicant will move into the unit if approved as a tenant.

Many application forms state that if a prospective tenant turns down the rental unit after submitting an application, the deposit will be forfeited. Typically, there is no grace period to back out of the application once it is signed. If the landlord states that a tenant can cancel the application and get the deposit back, it should be included in WRITING in the application agreement. Never pay an application deposit and sign an application unless you are absolutely sure that, if approved, you will move into the unit.

Security Deposits and Rent Prepayment
Even if an application agreement is not signed, the landlord may have grounds to keep some or all of a deposit based on losses the landlord suffered. If a tenant has entered into a lease with a landlord and paid a security deposit or prepaid rent and does not move into the unit, the tenant is entitled to a full refund only if the tenant finds a replacement tenant satisfactory to the landlord who moves in by the date the lease was to begin. However, if the landlord secures the replacement tenant, the landlord may deduct from the security deposit or rent prepayment, any amount agreed to in the lease as a lease cancellation fee. If there is no lease cancellation fee, then the landlord can deduct actual expenses incurred including an amount for the landlord’s time in finding a replacement tenant. Therefore, money should never be paid on a rental unit unless the tenant is certain that it is acceptable.

Time Period in Which Landlord Must Act on Applications
An applicant is deemed to have been rejected by the landlord if the landlord does not give notice of acceptance within seven days of receiving the application or application deposit if the landlord does not give the applicant an application form. A landlord may consider many criteria in determining an applicant’s eligibility. For example a landlord may look at a tenant’s credit record, rental history, and/or criminal record.

Rejection of Applicants
If two or more persons apply and the landlord rejects one of the co-applicants, then all co-applicants are considered rejected.

After an application is approved, the landlord is not required to refund the application deposit if the applicant decides not to move into the prospective rental unit.

A landlord is presumed to have given notice of acceptance or rejection of an applicant if the notice is by:

Note: The landlord may also give notice in person.

If the landlord rejects an application, any application deposit should be refunded promptly. However, some application forms, such as the Texas Apartment Association (TAA) application form, state that the landlord must refund the application deposit by the date stated in the application or WITHIN 30 DAYS if the date is left blank. DO NOT leave this date blank.

What Remedies Does the Applicant Have?
If an application deposit is not refunded after the application is rejected, a written demand for the refund of the deposit should be sent to the landlord. This letter should be sent by certified mail. If the landlord does not respond within 10 days after receiving the demand for reimbursement, a tenant can sue the landlord, including filing suit in small claims court. If a landlord in bad faith fails to refund an application deposit, the applicant can hold the landlord liable for the sum of $100, three times the amount of the application deposit, and the applicant’s reasonable attorney’s fees in a suit to recover the deposit.

The information in this brochure is a summary of the subject and other pertinent matters. It should not be considered conclusive or a substitute for legal advice. Unique facts can render broad statements inapplicable. Anyone needing legal assistance should contact an attorney.

Austin Tenants’ Council • 1640-B East 2nd Street • Austin, TX 78702 • 512.474.7006