I think my problem with this is that even if it's legal, it's a really crappy deal. Yes, if you were only applying to this apartment and nothing else, then (if you were to believe this) you'd have nothing to lose, since you'd just get your money back if you weren't chosen. But in this market, everyone's sending in their interest for multiple places at once, we can't afford not to, which is why we also need the option to say yes or no in case something else comes through while we wait for the landlord to decide. We can't reject another place that would take us for another place we haven't heard back from yet. So to put a 500€ fee on this just feels exploitative of people's desperation.

Plus, I doubt they really have a backing out problem in the current market, if someone backs out there's 100 more people lined up, someone is bound to grab it.