As a landlord, you will benefit from learning the security deposit laws in Texas.
You may decide to collect a security deposit from your tenants for a variety of reasons. Some common ones include:
1. Covering a Tenant’s Unpaid Bills
Some tenants leave without paying their utility bills. Collecting a security deposit will help to cover the cost of these expenses.
2. Paying for Cleaning Fees
If a tenant leaves your property in bad shape, you can use the security deposit to pay for cleaning fees. This will help bring your property up to a marketable standard again.
3. Buffering a Loss in Rental Payments
If a tenant is unable to pay the monthly rent, you can deduct the amount from the security deposit.
4. Coverage for Lost Rental Income
If your tenant vacates without notice or breaks the lease agreement early, the deposit can cover income losses.
5. Paying for Property Damage Expenses
Some tenants are careless and don’t replace or repair damaged items or areas of your property. You can deduct for repair expenses that aren’t considered normal wear and tear. This could refer to fixing broken appliances or carpet stains that weren’t there upon a tenant’s move-in.
A Guide to the Texas Security Deposit Law
1. Security Rental Deposit Limit
In Texas, there is no limit on the maximum amount you can collect as a security deposit. However, you should always check your property’s municipal or county laws. They may have different conditions that you need to follow.
2. Non-Refundable Security Deposit
Security deposits are always refundable. However, you can make deductions for various reasons. If you add non-refundable fees to the lease agreement, you must outline them to the tenant.
3. Security Deposit Accounting – Storage
Texas has no requirements pertaining to how a landlord should store a tenant’s security deposit. However, similar to security deposit limits, some municipalities or counties might differ from the state law. You should check the local ordinances of your property to ensure you’re adhering to the law.
4. Written Notice after Security Deposit Receipt
You do not have to provide your tenants with written notice of the security deposit receipt. Again, local ordinances may differ from the state law so you should check with these beforehand.
5. Forfeiture of Security Deposit in Texas
Under Texas law, certain provisions allow you to withhold a portion of your tenant’s security deposit.
For example, you can do this when your tenant has failed to provide advanced notice before leaving the rental unit. Note that this must have been included in the leasing agreement prior to its occurrence.
The exception for this is if the tenant finds a suitable replacement to take their place. In this case, they can still get their security deposit back. The ‘replacement/new tenant’ must move into the rental unit on or before the lease ends. You can still charge the previous tenant with a cancellation fee if it’s stipulated in the lease agreement prior to this taking place.
6. Walk-Through Inspections
In Texas, you are not required to conduct a walk-through inspection.
7. Security Deposit Refund in Texas
Within 30 days of a tenant moving out of your rental, you must refund the security deposit. You must send a full refund if there are no damages to the property. If there are damages, you must send the remaining amount with a list of deductions for repair expenses. You can only deduct for damages resulting from negligence and not from normal wear and tear.
You must provide your tenant with a justified list detailing the repair costs of the incurred damages. However, if the tenant owed rent when their tenancy ended, you are not required to provide this list to the tenant. It’s also applicable only when the tenant agrees with the amount they owe you. Failure for you to make this list could result in forfeiture of the full or partial security deposit claim.
If you are unable to return the security deposit within 30 days, you may face fines. You are liable to pay them $100 plus triple the amount of the security deposit and the tenant’s attorney’s fees incurred if they sue you in court.
8. Change in Property Ownership
If you sell the rental property, it’s your duty to transfer the security deposit to the new owner. The new owner must give a signed notice to the tenants first. It should inform them that the exact amount of the security deposit is now under the new owner’s custody. Otherwise, you will still be responsible for it. Once the tenants receive this notice, the new owner will handle the security deposits that you transfer to them.
If you have questions about security deposit laws that aren’t answered here, you should consult a qualified attorney. Or, you can seek help from a property management company, such as OmniKey Realty.
Please note that this blog should not substitute for legal advice from a licensed attorney in Texas. Please contact us at (833) 666-4539 for any questions you have in regards to this content or anything else property management related.