Rental application "cancelation fee" on a new apartment lease

Unless there is a reference to this extra amount, I see no reason for you to accept this unilateral change in the agreement.

Unless the terms in the agreement clearly spell out that the deposit is nonrefundable, I don't think the landlord should be able to keep the deposit unless they had changed their position by taking the apartment off the market.  I did not find any legal precedent dealing with nonrefunable deposits in landlord tenant law which is generally in favor of landlords.  I would consider making a demand for relief under the consumer protection law and filing small claims. 

Check the paperwork, including the fine print, again. You are bound by what it says and by what type of deposit it was. It is legal to charge nonrefundable deposits, though generally a "security" deposit does not fall under that heading (it's to provide security against damages or nonpayment of rent if you get the apartment, not as a "fee" for the application). You need to make sure that the deposit was not in fact stated to be nonrefundable. If it was nonrefundable, they can probably keep it (you could try to challenge, but it would be uphill); if nothing indicates  that it was nonrefundable, you should be entitled to get it back.