Key Takeaways
- Texas landlords generally have flexibility when setting security deposit amounts, but the lease should clearly establish the deposit terms and any related fees.
- Keep detailed records of deposits, property condition, and deductions so you can support your accounting if questions arise.
- Plan the move-out process around Texas requirements, including the 30-day deadline for returning or accounting for a security deposit after surrender.
- If you offer a fee in lieu of a security deposit, make sure the required options, disclosures, and written agreement are handled properly.
- A property manager can help organize deposit records, move-in and move-out documentation, and compliance tasks as part of the rental management process.
Ensure compliance and protect your investment. Learn how Keyrenter North Dallas helps you navigate Texas security deposit laws for worry-free property management.
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Texas Security Deposit Laws
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 laws, specifically Chapter 92 of the texas property code. 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! Most landlords charge about one month’s rent as a deposit. Some charge up to 1.5 times the monthly rent, and Texas law does not impose a statutory cap.
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 pet deposits or similar extra animal-related deposits.
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 for handling security deposits that became effective beginning September 1, 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:
- 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.
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Allowable Deductions on Security Deposits
The following are the common reasons for security deposit deductions in Texas, and any deductions must be reasonable and made in good faith under Texas law.
- Unpaid rent. This can come about in two ways: if the tenant stops paying it or chooses to leave the property lease early, and a landlord may use the deposit to cover unpaid rent still owed under the lease or rental agreement.
- 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 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 or withheld in bad faith.
If the tenant owes rent at move-out, Texas law does not require an itemized list of deductions.
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, dirty grout and mold that occurs naturally, and carpet showing standard wear after three years, including minor carpet wear.
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, and landlords cannot deduct for it, only for 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 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, such as application fees. Administrative fees may also be charged, but they must be kept separate from and not confused with the refundable security deposit. An example is a redecorating fee. 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.
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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.
If there are deductions, then the landlord must give their tenant an itemized list of deductions within the 30-day period, including detailed descriptions of the damages or charges being deducted. 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 when the deposit return is wrongfully withheld:
- $100
- Three times the wrongfully withheld deposit
- Reasonable attorney’s fees
Tenants may bring these disputes in justice court, with small claims court commonly used for amounts up to $20,000.
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.
Bottom Line
If you own a rental property in Texas, you should know the laws regarding a tenant’s security deposit, as understanding these legal obligations supports legal compliance and helps with avoiding costly disputes. 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, many landlords use professional support to stay compliant.
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.
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Frequently Asked Questions
Does Texas Require Landlords To Keep Security Deposits In A Separate Account?
Texas law does not establish a general requirement that residential security deposits be held in a separate interest-bearing account.
However, landlords are required to keep accurate records of security deposits. Good recordkeeping should include the amount collected, the property and lease associated with the deposit, and any deductions or refund accounting.
Keeping deposit information organized can make the move-out process easier and provide useful documentation if a dispute arises. Individual lease terms or other legal requirements may create additional obligations, so landlords should review their circumstances carefully.
What Records Should Landlords Keep For Security Deposits?
Landlords should maintain accurate records showing the amount of each security deposit and how it is handled throughout the tenancy, as these records also support lease enforcement throughout the lease term.
It is also practical to retain supporting documentation for deductions, such as invoices, receipts, photographs, inspection reports, and records of unpaid amounts.
Texas law specifically requires landlords to keep accurate security deposit records. Strong documentation can help demonstrate how a deposit was accounted for and may be especially useful when property condition or deductions are questioned after move-out, helping avoid costly disputes.
Can A Texas Landlord Offer A Fee Instead Of A Security Deposit?
Yes, Texas law allows a landlord to offer a tenant the option of paying a fee in lieu of a security deposit under specific conditions.
The landlord must also offer the security deposit option and provide required written disclosures about both choices. If the tenant selects the fee, the agreement must be in writing and signed by the landlord or legal representative and tenant.
The rules can be detailed, particularly when insurance is involved, so landlords should ensure their process and documents comply with current Texas requirements.
What Should Landlords Document Before A Tenant Moves Out?
A strong move-out record should connect the property’s condition to the original move-in documentation. A walk through inspection before move-out is finalized is a smart best practice.
Landlords can compare photographs, written inspection notes, repair records, and other relevant documentation to distinguish ordinary deterioration from conditions that may support a lawful charge. A walk through can improve communication with the tenant and help document the condition of the unit.
It is also helpful to retain invoices or other evidence supporting the amount of any deduction. Texas law places the burden on a landlord to establish that retained portions of a security deposit were reasonable if the matter becomes a legal dispute, and this documentation helps the property owner support deductions if challenged.
What Happens To A Security Deposit When A Texas Rental Property Is Sold?
A property sale can affect responsibility for the tenant’s security deposit. Under Texas law, when ownership changes, the new owner generally becomes responsible for returning the deposit according to the security deposit provisions.
The new owner must also provide written notice acknowledging the change in ownership and identifying the amount of the security deposit. The former owner can remain liable until the deposit has been transferred or the new owner has assumed responsibility, subject to applicable agreements.