On April 18 I filled out an application for an apartment for June 1 and gave a $649 deposit to be held for last month rent. The next day they called and let me know I got the apartment. Since then I got back together with my girlfrend and moved back with her. I contacted the apartment company on May 3 and told them I don't need the apartment and said they can rent it out. (They have no problem renting this place out since I live in Kitchener Ontario and economy is good here).
The landlord said it is up to the porperty company if they are going to keep the deposit. The property management company called me back and said they are going to keep the deposit and may also charge me for June's rent if they don't rent it out.
Since I haven't even moved in and only signed a Offer to Lease can they do this? Also is there any other options to get out of this? I already offered them $200 for their time.
Any help would be really appreciated.
Thanks.

Depends on what the Offer to Lease said. Your deposit payment may have bound you to moving in just as much as it bound them to provide an apartment for you.

I don't see this specifically addressed in your Tenant Protection Act (http://www.orht.gov.on.ca/userfiles/HTML/nts_3_7968_1.html), however here in Ohio it is legal to keep the deposit if and only if the giver signs a form indicating that it will be retained if the person does not complete the deal. It can be as a separate form or in the Lease itself.

If you signed nothing, then I'd think you may have a good small claims case against them.

I can not speak for your area, but yes, if you promise to rent, give a depoisit,
(and deposit here is normally just that deposit, and then there may be an addiational last month rent, but here depoisit is not last month rent although many try to make it that.

But here if you agree to rent, you are obligated till they find another renter.
For sure the first month rent, and more if the new renter does not move in at the first of the next month.