State Specific Question About: TEXAS (TX)

I don't know anything about TX law. Missouri has no law addressing this, so you'd have to fight it out in court here if it ever came down to it.

I use a holding FEE, not a deposit. The word "deposit" implies the money is refundable (even if you call it a non-refundable deposit). Unless you can PROVE a loss. In other words, you have to prove that someone else definitely would have rented from you on such-n-such date and you turned them away, thereby losing your x-days rent.

HARD to prove that in a court of law.

A FEE is just that...a FEE. You don't give refunds for fees. But you can apply a fee to a security deposit at move in.

I only hold a property with all monies paid by certified funds. No checks! I spell out that the "holding deposit" shall be considered "liquidated damages" in the event applicant should change their mind for other than landlord's inability to delivery the property when promised and in habitable condition.

You can always say "Well, if it's still available by April 1st, we'd love to have you..." when your finances and their finances don't match, or your schedule and their schedule doesn't match.

If I really like someone, but their schedule just isn't aligning with my calendar, I can say, "I'll hold it for $x fee until [date]. The fee is what it takes to remove the house from the market until your budget catches up." Usually, in that case, I'll charge them 1/2 rent as a holding fee, but they wouldn't get possession until they had their move-in funds paid up. When I make that offer, they either (a) pay it, because they're awesome people, giving their current ll a proper 30-day notice the way polite and desirable tenants do, or they (b) say, "Um, I think I can actually find the money for the SD + rent right now..." because they don't want to waste $x for something that guarantees them a house, but doesn't actually give them possession of it.

This is the time of year where if we had 100 houses, we'd be able to fill every one of them. :) But I don't ever do "deposits", I do "fees". Because I don't want to waste my time... and then have them back out three weeks later and ask for a refund.

If it's a shorter period of time, and you want them to have some skin in the game, you can always say, "I'll take [the amount of the security deposit] as a holding fee. If you finish paying your funds and signing paperwork by [date], it will transform into the security deposit. If you do not finish paying your funds and signing paperwork by [date], it is forfeited."

Whatever you do, get it in writing, and get both people to sign off. Make sure you specify the amount, what the amount covers, what happens to it if they default, what happens to it if they're successful, the timeline, and so on, and give them a copy, and make sure everyone's all on the same page.

I do it a little differently. We require a $500 holding fee along with an app fee when they submit their application. That $500 is applied to their first months rent. However, our application clearly states that if they are approved and fail to sign an annual contract within 2 days of acceptance then the holding deposit will become liquidated damages.

I didn't want to use the term deposit but my attorney told me I had to since if the applicant was not approved that refunding a fee could be problematic in that if I refund one type of fee then why not all fees.

Steve: The term "option" has other legal ramifications.

Consideration for the option contract is required to make the offer/contract binding. The consideration is always non-refundable. And option contracts generally bestow certain rights to the offeree in exchange for the consideration.

My landlord friends tried to rent out an apartment. They didn't get the unit in top condition. Weren't going to ask market rates, much less. Weren't going to advertise the unit to get the best exposure. They were going to give out applications on the weekend and then run the credit report sometimes in the coming week. This gave the applicant time to find another place in the mean time. Also they were going to ask for a Holding Deposit -- the keep the place for the applicant for a month or two until they were ready.

I stepped in. I raised the rent from $895 per month to $1250, the current market rate.

When someone was interested in getting an application and apply, I asked them when they were able to take the apartment -- meaning come up with all of the money and sign a lease. When the first person said, "I am willing to take the place now". I asked her to fill out the application right then and there. Then I asked her to go home and get her pay stubs, bank statements, etc and return. I used another tenants computer, ran the credit, called her previous landlords. All checked out okay. I wrote up a lease and the applicant when to her bank and got cash. We closed the deal all within 2 hours.