Renting out a property carries several risks, which is why the security deposit law exists. For whatever reason, your Texas tenant could stop paying rent, cause negligent property damage in violation of the lease or rental agreement, or simply choose to abandon the unit without your knowledge. This is not a case of normal wear and tear.
It’s in such instances where a security deposit becomes useful, albeit to some extent. It acts as a safety net, ensuring you’re compensated for any loss your tenant might cause you including when a tenant owes rent and won’t pay. When a tenant owes rent they don’t want to pay, security deposits can also come in handy.
Although a landlord has a right to ask their tenant for a security deposit, there are some rules they are responsible for abiding by as outlined by the Texas landlord-tenant law. The following are the highlights of the Texas security deposit laws and Texas property code.
Maximum Security Deposit
Is there a limit on how much security deposit landlords in Texas can ask as security deposit from their tenants? No! As a landlord, there is no maximum on how much security deposit you can charge in Texas. If a tenant fails to pay a security deposit, the landlord has a right not to rent to them.
Additional Pet Deposit
The Texas security deposit law allows landlords to charge an extra deposit for tenants with pets. This allows Texas landlords to further shield themselves financially from the damage a tenant’s pet can cause during the leasing period by having security deposits.
Though, people with disabilities who use service animals are exempt. Disability is a protected class, and the Fair Housing Act requires that Texas landlords provide them full and equal access to housing.
Thus, requiring a tenant to pay extra to have a service animal would be tantamount to discrimination. The tenant with a service animal, however, will be liable for any damage caused by their animal but does not have to pay multiple security deposits or anything like that.
Monthly Fee in Lieu of Security Deposit
Normally, landlords require their tenants to pay the security deposit in a lump sum, and prior to lease signing and often has a limit from two to three times the portion of rent paid per month. Now, as a landlord in Texas, there is an alternative option for handling security deposits that became effective beginning September 1st, 2021. Texas law allows landlords to give tenants the option to pay a monthly fee with their rent instead of a lump sum deposit as their security deposits.
If a landlord chooses this route rather than the conventional one, they must notify your tenant of the following things via written notice under the Texas property code:
- Their right to pay a security deposit rather than a monthly fee
- Their right to stop the monthly fee payments and instead pay the remaining balance in a lump sum
- The amount of each option. That is, the security deposit and the monthly fee.
Also, the decision for monthly fee payments rather than a security deposit must be recorded in writing and given advance notice.
Allowable Deductions on Security Deposits
The following are the common reasons for security deposit deductions in Texas after a lease agreement has ended.
- Unpaid rent. This can come about in two ways: if the tenant stops paying it or chooses to abandon the property and therefore the tenant surrenders their right to any money from the security deposit that goes towards damages and rent owed.
- Unpaid utility bills. Before moving out, a tenant has the responsibility of clearing their utility bills and give advance notice of any issues.
- Cleaning fees. A tenant must also ensure they have left the rental unit in the same way they found it when moving in minus normal wear and tear. If the tenant leaves it in a dire state of uncleanliness, a landlord can deduct the cost of hiring a professional cleaner from their deposit.
- Breach of the lease. If a landlord incurs any costs resulting from the tenant’s breach of contract, they are allowed to make appropriate deductions on their deposit.
- Excessive Property Damage. A tenant is liable for any damage that isn’t from normal wear and tear and can even be sued in small claims court.
Normal Wear and Tear vs. Damage
Normal wear and tear is the deterioration of the property that occurs naturally through aging. They are minor issues such as lightly scratched glass, stained bath fixtures, and fading wall paint. Others include loose door handles, gently worn carpets, and dirty grout and mold that occurs naturally.
Damage, on the other hand, occurs as a result of negligence, carelessness, abuse, misuse, and accident by a tenant. Security deposits don’t cover normal wear and tear, only damage.
Security Deposit as Last Month’s Rent
Tenants in Texas are prohibited from using the security deposit as last month’s rent under Texas law. If the tenant does try to use it as last month’s rent, they may be held liable for paying the Texas landlord up to triple the rent withheld, plus a tenant’s reasonable attorney’s fees and any actual expenses incurred during this time.
Nonrefundable Security Deposit
The tenant’s security deposit itself is always refundable after allowable deductions have been made. However, as the Texas landlord, you have a right to add other nonrefundable fees as well. An example is a redecorating fee.
But for such a fee to be nonrefundable, the landlord must clearly spell it out in the lease and tag it as such.
Returning Security Deposits in Texas
So, how long after the tenant has moved out does the landlord have to return their security deposit? First and foremost, the tenant’s forwarding address must be provided to the landlord, even if they evict them. Once the landlord has it, they must return the security deposit (or whatever is left of it) 30 days after the tenant leaves the unit and must have a forwarding address for the tenant.
If there are deductions, then the landlord must give their tenant an itemized list of deductions within the 30-day period. If the landlord fails to do this, they may lose the right to hold or charge the tenant any amount. In addition, the landlord may also be required to pay the tenant court and attorney fees should the tenant win a lawsuit.
There are also consequences of failing to return any portion of the tenant’s deposit. Without having any reasonable grounds, a landlord may have to pay the following for a deposit wrongfully withheld:
- Triple the tenant’s security deposit amount
- Reasonable attorney’s fees
Sale of Property
In the event that a landlord sells the property, or if it otherwise changes hands, they’ll have one option to pursue. The landlord will be required to transfer the deposit (or whatever remains of it) to the incoming landlord and is legally liable for any loss to the security deposit during this.
The incoming landlord will then need to issue the tenant written notice informing them of the change of property ownership. It’s only after this is done that you as the outgoing landlord will be free from safekeeping your tenant’s deposit.
If you own a rental property in Texas, you should know the laws regarding a tenant’s security deposit. Still unsure of how to navigate the Texas law? Get in touch with Keyrenter North Dallas today and let us help your rental unit become as successful as possible!
Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney. Security deposit laws frequently 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.