As a Texas landlord, you have a right to ask for security deposits from your tenants. Under Texas law, a landlord may use security deposits to cover the following risks:
- Nonpayment of rent. Texas tenants have an obligation to pay rent every month without fail. If the tenant owes rent and they fail to pay it back, the landlord can deduct part or all of the tenant’s security deposit to cover their unpaid rent.
- Excessive cleaning costs. Tenants also have a duty to leave their premises in the same condition they found it in when moving in, with the exception of normal wear and tear.
- Loss in rent payments. A landlord may experience losses in rent payments if a tenant breaks their lease early or abandons the unit. If that happens, the landlord can use part or all of their security deposit to minimize their losses and cover the rent owed.
- Excessive property damage. A landlord can hold the tenant legally liable for all damages exceeding normal wear and tear. Examples of these include broken or chipped tiles, chipped countertops, unauthorized paint colors, and holes in the walls.
A Guide to Texas Security Deposit Law
While the landlord has a right to ask for security deposits, they are responsible for abiding by certain rules under Texas landlord-tenant law. If the landlord fails to observe Texas landlord-tenant law, they risk losing their right to keep any portion of the security deposit, among other things.
The following are the Texas security deposit rules:
Security Deposit Limit
The state of Texas doesn’t impose any limit when it comes to charging tenants a security deposit. However, we recommend you check local ordinances as those may impose certain limits.
But even without a limit, it’s important that the landlord charges a reasonable amount, and states the amount clearly in the lease. Overcharging would only make your rental property less desirable among prospective tenants. This may mean having a hard time filling vacancies.
Undercharging tenants is equally detrimental to your investment’s bottom line as a landlord. The security deposit should be enough to cover any potential financial risks that may occur during the tenancy.
Nonrefundable Fees
The state of Texas doesn’t allow landlords to charge nonrefundable security deposit fees. The landlord must refund the security deposit in full unless they’ve made allowable deductions. The only nonrefundable fees the landlord can keep are those that have been clearly outlined in the lease agreement.
Under Texas law, the landlord is allowed to charge a pet fee. However, it is unlawful for the landlord to charge any fees for a service animal. Tenants who have service animals are protected against discriminatory practices by the Fair Housing Act. That said, you can hold the tenant liable for any damage their animal causes to the rental unit.
Storing a Deposit
Texas law doesn’t require landlords to store security deposits in any particular manner. The landlord can store it in any way they see fit. Whether that means placing it in an interest-bearing account or any other type. Make sure to state in the lease agreement how you will be storing the security deposit.
Written Receipts
The state doesn’t require Texas landlords to provide a written notice or receipt of a tenant’s security deposit. Be that as it may, it’s still advisable to do so for documentation purposes.
In the written notice, you can let the tenant know things like, when you received the security deposit, how much the amount was, and what the tenant must do to get it refunded back to them. This also helps maintain a positive landlord-tenant relationship.
Withholding a Security Deposit
Landlords can keep part or all of a tenant’s security deposit in certain circumstances. The circumstances are as follows.
- Breaching the terms of the lease or rental agreement. For example, abandoning the unit.
- Causing excessive damage to the unit. These are damages that exceed normal wear and tear. Examples include missing fixtures, holes in the wall, broken tiles or windows, and heavily stained, burned, or torn carpets. Landlords may not penalize a tenant for smaller damages, as the security deposit doesn’t cover normal wear and tear, such as stained bath fixtures, loose door handles, lightly scratched glass, and gently worn carpets.
- Using security deposits as month’s rent. In Texas, a landlord can penalize a tenant for using their deposit as last month’s rent. If you’re successful in your lawsuit, the tenant can be made to pay up to 3X the amount, plus reasonable court and attorney fees.
- Failing to provide advance written notice prior to leaving. You must, however, clearly spell out this provision in the lease agreement. It must either be in bold print or underlined.
- Breaking the lease early. If a tenant breaks their lease early, a landlord must still return their security deposit, less any allowable deductions, if they are able to get a replacement tenant. If you’re the one who finds the replacement tenant, you can deduct reasonable costs from their deposit.
Walk-Through Inspections
Tenants in Texas don’t have a right to a walk-through inspection prior to moving out from their rented premises.
Security Deposit Returns
Once the tenant surrenders the property, you must return their deposit, minus any allowable deductions, within 30 days. The only exception to this is if you aren’t provided the tenant’s forwarding address. If the tenant fails to provide their forwarding address, you should reach out to them via phone or email to request it. In the security deposit requirement portion of the lease, you should also include that the forwarding address is required for the security deposit to be returned.
Under Texas security deposit laws, the landlord must send the tenant the remainder of their deposit, plus an itemized statement in the event you’ve made deductions for damage beyond normal wear and tear. Tenants are not allowed to use the security deposit to cover the last month’s rent.
If there is any dispute with the tenant on their security deposit, it will be handled in Small Claims Court.
Change in Property Ownership
You must transfer the remaining deposit, minus any allowable deductions, to the incoming landlord. The new landlord will then be liable for the safekeeping of the deposit. It will also be their responsibility to notify the tenant of the change of ownership.
Get in Touch with a Property Management Company
Do you still have more questions regarding the Texas security deposit laws? As your property management company in Temple TX, we can help. Get in touch to learn more!
Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.
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