If the board decide not approve an application after meeting with the individual, does the individual get his deposit back from the seller? Does the refund of the deposit need to be stated on the contract if the board rejects the individual?

Yes, you get your deposit back

It depends, actually. If the reason the board rejects the buyer arises from the buyer's false representations on the contract, it isn't so certain. For instance, if the buyer warrants that all she has is a toy poodle in the contract and in fact it is revealed she'll be moving in with two great danes, she has made fraudulent representations to get the seller to even enter into the contract; so when the board sticks with building policy and rejects the buyer because the building doesn't allow such pets, the seller may get to keep the deposit. Similar outcomes may result from fraudulent, material misrepresentions of any other nature that the buyer makes in the contract and which ultimately result in the board rejecting the buyer. The trick here is, in part, finding out why the board rejected the buyer since boards do not typically give reasons. But if the seller can link the rejection to misrepresentions of the buyer or perhaps malfeasance by the buyer, the seller may end up with the deposit. Similarly, if the buyer signs a financing waiver, cannot obtain financing, and then announces to the board she will never be able to afford the apartment and is then rejected, the buyer can have a problem. These types of things may well go into litigation and even if the buyer "wins," it will be after a long period of legal wrangling during which the buyer is out of the use of the money.

Who holds the deposit? I thought the lawyer hold it which would not allow the seller to have the option.

Seller's attorney holds it.

It is held in escrow by seller. If buyer wants it and there is a dispute, the attorney may just give the money to the court for the parties to fight over.

misc this is a question you should run by your lawyer to make sure. Typically you would receive your deposit back, but based on what kylewest noted above, there are exceptions.