Renting out a property carries several risks. For whatever reason, your Texas tenant could stop paying rent, cause negligent property damage, or simply choose to abandon the unit without your knowledge.

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.

Although you have a right to ask your tenant for a security deposit, there are some rules you must abide by as outlined by the Texas landlord-tenant law. The following are the highlights of the Texas security deposit laws.

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.

Additional Pet Deposit

The Texas security deposit law allows landlords to charge an extra deposit for tenants with pets. This allows landlords to further shield themselves financially from the damage a tenant’s pet can cause during the leasing period.

Though, people with disabilities who use service animals are exempt. Disability is a protected class, and the Fair Housing Act requires that landlords provide them full and equal access to housing.

woman sleeping with dog

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.

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. Now, as a landlord in Texas, there is an alternative option 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.

If you choose this route rather than the conventional one, you must notify your tenant of the following things.

  • 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.

Allowable Deductions on Security Deposits

The following are the common reasons for security deposit deductions in Texas.

handing over pen

  • Unpaid rent. This can come about in two ways: if the tenant stops paying it or chooses to abandon the property.
  • Unpaid utility bills. Before moving out, a tenant has the responsibility of clearing their utility bills.
  • Cleaning fees. A tenant must also ensure they have left the unit in the same way they found it when moving in. If they leave it in a dire state of uncleanliness, you can deduct the cost of hiring a professional cleaner from their deposit.
  • Breach of the lease. If you incur any costs resulting from the tenant’s breach of contract, you 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.

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 Deposit as Last Month’s Rent

Tenants in Texas are prohibited from using the security deposit as last month’s rent. If they do so, they may be held liable for paying the landlord up to triple the rent withheld, plus reasonable attorney fees.

Nonrefundable Security Deposit

The security deposit itself is always refundable after allowable deductions have been made. However, you have a right to add other nonrefundable fees as well. An example is a redecorating fee.

redecorating

But for such a fee to be nonrefundable, you 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 do you have to return their deposit? First and foremost, your tenant has an obligation to provide you a forwarding address, even if you evict them. Once you have it, you must return the deposit (or whatever is left of it) 30 days after the tenant leaves the unit.

If there are deductions, then you must give your tenant an itemized list of deductions within the 30-day period. If you fail to do this, you may lose the right to hold or charge the tenant any amount. In addition, you may also be required to pay them reasonable court and attorney fees should the tenant win a lawsuit against you.

There are also consequences of failing to return any portion of the tenant’s deposit when you should. Without having any reasonable grounds, you may have to pay the following:

  • $100
  • Triple the security deposit amount
  • Reasonable attorney’s fees

Sale of Rental Property

In the event you sell the property, or if it otherwise changes hands, you’ll have one option to pursue. You’ll be required to transfer the deposit (or whatever remains of it) to the incoming landlord.

couple getting keys

The incoming landlord will then need to issue a signed, written notice to the tenants informing them of the change of property ownership. It’s only after this is done that you (the outgoing landlord) will be free from safekeeping your tenant’s deposit.

Bottom Line

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 law? Get in touch with Keyrenter North Dallas today and let us help your rental property become as successful as possible!

Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney. 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.