Security deposits are meant to protect Texas landlords against liabilities and recover costs that arise from a tenant’s use (or misuse) of their rented premises. An example of some of these liabilities include if tenant owes rent, caused property damage, or if a tenant abandoned the property.
Texas, just like other states, has a statewide security deposit law. Security deposit laws are part of the Texas landlord-tenant laws and contains rules that every landlord must adhere to concerning a tenant and their deposit.
As a landlord, failure to follow these Texas security deposit laws can result in some penalties. For instance, you may lose your right to make any deductions from your tenant’s deposit.
The following is a basic overview of the deposit laws in the state of Texas.
1. Texas Security Deposit Limit
In some states, landlords are limited by security deposit laws to how much they can charge their tenant as security deposit. However, in the state of Texas, this is not the case. Under Texas law, landlords can charge whatever amount of security deposit they deem right for their properties.
That said, most landlords have their tenants pay the equivalent of two month's rent as a security deposit.
As a landlord, charging a reasonable security deposit is key to your property’s long-term success. Balance is important because overcharging makes your unit undesirable, while undercharging means you’re taking on additional risk.
2. Storing a Tenant’s Security Deposit
Per Texas law, there is no requirement as to how a landlord must store security deposit from a tenant. That said, while there aren’t any deposit laws that cover this at the statewide level, there may be local laws to follow. So, make sure to check your municipality or county’s laws regarding storing a tenant’s deposit.
3. Written Notice Requirement
As a landlord, you don’t have to offer your Texas tenants a written notice when they pay their security deposit. However, again, make sure to check the requirements at the local level.
4. Security Deposit Deductions
So, can an owner make deductions to a tenant’s security deposit? Yes, as a Texas landlord, you have the grounds to keep part or all of a tenant’s security deposit if the tenant breaches terms of the lease, have rent owed, cause damage exceeding normal wear and tear, or violate the lease agreement per state security deposit laws.
The following are common reasons for security deposit deductions.
By far, the most common reason for security deposit deductions is excessive damage by a tenant. Excessive property damage is any damage that exceeds normal wear and tear.
Common examples that exceed normal wear and tear include:
- Holes, burns, pet stains or a tear in the carpet.
- Disabled locks or broken doors.
- Excessive dirtiness in kitchen or bathroom.
- Unapproved paint on the walls.
- Broken appliances due to misuse.
- Sizeable or numerous holes in the wall.
- Missing or damaged door locks/handles.
- A broken or missing toilet seat.
- A smashed bathroom mirror.
If your tenant does any of these, you may have a reasonable claim to deduct part or all of their deposit. However, a security deposit doesn't cover normal wear and tear on the premises. That’s because normal wear and tear, which necessitates repairs and maintenance, occur due to normal ageing of the home.
Common examples of normal wear and tear include:
- Normal dirt and wear in carpets.
- Broken light bulbs.
- Fading in curtains, paint, or wallpaper due to age or sun exposure.
- Worn out batteries in carbon monoxide or smoke detectors.
- Silver finish in bathroom fixtures starting to wear out.
- Color of hardwood or carpet fading as a result of sun exposure.
Besides excessive damage to the rental unit, which enables you to deduct all actual expenses incurred, you may also be entitled to keep the entire tenant’s deposit if the tenant fails to provide advance notice when moving out or if they break their lease early. You must, however, spell out this provision in your lease agreement.
5. Security Deposit as Last Month’s Rent
According to Texas law, a tenant cannot use the security deposit as their last month’s rent for the rental unit. If a tenant does use it for the last month's rent, they may become legally liable for paying the landlord up to 3X the amount plus an attorney fee. However, if the tenant owes rent, the landlord can use the security deposit to cover unpaid rent.
6. Walk-Through Inspections
A walk-through inspection is a visual inspection to document the property’s condition. Landlords use this opportunity to check whether a tenant has any excessive property damage that will require you to deduct an amount from their deposit or not.
While some states make it a mandatory law, Texas does not.
7. Security Deposit Refund
As a Texas landlord, you have exactly 30 days after the end date of the lease to return tenants' security deposits to their forwarding address. The only exception to this law is if you don’t have the tenant’s forwarding address. In that case, the landlord retains the deposit until the tenant provides their new forwarding address.
If you’ve made deductions to cover a cost, you must also accompany the remaining deposit with an itemized list of damages and a receipt detailing their approximate cost of repair that the amount you deduct will cover.
8. Nonrefundable Deposits
Texas allows landlords to charge both refundable and non-refundable security deposits. A refundable deposit is naturally refundable, less any deductions, at the end of the lease term.
Non-refundable deposits, on the other hand, are just that – non-refundable. As a landlord, you must, however, make sure to provide advance notice and clearly spell this out in the lease or rental agreement.
9. Wrongful Withholding
If a landlord fails to return or attempts to wrongly withhold a tenant’s deposit, they may be subject to some penalties in small claims court. For instance, you may be responsible for paying the tenant up to 3X the amount wrongfully withheld.
Also, you give up the right to withhold any portion of a deposit and might also be liable for paying the tenant’s attorney fees.
10. Sale of the Property
If the rental property changes hands during the tenancy, you are required to transfer the money from your tenant’s deposit to the new landlord. The incoming landlord then becomes responsible for safekeeping the tenant’s deposit.
Need Help?
Do you still need more help? If so, SGI Property Management Dallas can help. We are a full-service property management company that can help manage all aspects of your Dallas home.
