Under the landlord tenant law, landlords have the right to charge new tenants a security deposit. If you collect a security deposit from your Texas tenants, there are certain rules you, as a landlord, must follow, in order to protect both you and your tenants.
Especially when it comes to returning a tenant’s security deposit, as you must do it within a certain time-frame. Failure to do so can lead to certain ramifications, including losing the right to withhold any portion.
The following are key basics of the Texas security deposit laws to keep in mind.
Security Deposit Limits
While Texas law doesn’t cap the amount of security deposit you can charge tenants, when you rent out your house, you need to keep the amount reasonable to keep tenant interest. Charging tenants a reasonable amount will ensure the unit remains attractive in the eyes of prospective tenants.
‘Reasonable’ here would mean any amount not exceeding 2X the monthly rent.
If you’re charging tenants a monthly rent amount of $1,500, this would mean not asking for more than $3,000.
Keep in mind that the amount should be enough to cover any potential financial liabilities that can arise during a tenancy.
Handling a Tenant’s Security Deposit
Some states impose certain requirements when it comes to how landlords must store their tenants’ security deposits. You may be required to do any of the following:
- Store the deposit in a separate account.
- Store it in an interest-bearing account.
- Post it as a surety bond.
- Store it in a financial or banking institution licensed to operate within the state.
That said, none of these requirements apply to landlords in Texas.
Requirement for Written Notices
As a landlord, you don’t have to provide tenants with written notice after receiving their security deposit. Nonetheless, consider doing it for the sake of record-keeping. Let the tenant know about the amount received, when you received it, and what they must do to get a refund.
Withholding a Tenant’s Security Deposit
You can keep part or all of a tenant’s security deposit for any of the following reasons:
- Unpaid rent: Once a tenant enters a lease with their landlord, they are contractually liable to pay all rent due under the lease. And this is regardless of whether the tenant lives there or not, except in legally justified cases.
- Lease violations: Certain lease violations can make the landlord incur some costs as a result. For instance, if the tenant makes unauthorized property modifications.
- Damage Exceeding Normal Wear and Tear: These are the kinds of property damage that arise from a tenant’s negligent actions.
Normal Wear and Tear Vs. Property Damage
You must ensure you are able to distinguish between normal wear and tear and property damage As illegal security deposit deductions can lead to certain financial and/or legal implications for you.
Normal Wear and Tear Includes:
- Minor chipping or fading of paint.
- Minor Scuffing on Flooring.
- Minor scratches, dents, or worn buttons on appliances.
- Slow drains or minor leaks in plumbing.
- Worn upholstery or minor scratches on furniture.
- Faded paint or minor scratches on windows and doors.
Property Damage Includes:
- Large gouges or peeling due to improper application.
- Burns, deep gouges, or water damage.
- Severe water damage, broken glass or appliance malfunctioning due to abuse or misuse.
- Major water damage or burst pipes.
- Broken legs, tears in upholstery, or structural damage.
- Damaged frames, broken glass, or malfunctioning locks on windows and doors.
- Damaged landscaping, broken fences, or severe deck deterioration.
Returning a Tenant’s Security Deposit
Once a tenant moves out, a landlord has up to 30 days to return their deposit. This is, of course, unless you don’t have the tenant’s forwarding address. In this case, you won’t have to make any effort to return the deposit until the address is provided to you.
If you have made some deductions, you must provide the tenant with an itemized statement as well. The statement must list the damages and their approximate maintenance and repair costs.
Wrongful withholding can have certain repercussions for landlords in Texas. Specifically, you could be held liable to paying the tenant up to 3X the wrongfully withheld amount, plus reasonable attorney fees. Additionally you could lose any right to make any deductions.
Non-Refundable Security Deposit
Landlords in Texas can charge a non-refundable security deposit for things like cleaning, pets, and redecorating.
However, for such deposits to be legally binding, you must make sure that you clearly spell them out in the lease agreement. Please note, however, that the security deposit itself is refundable after the tenant moves out, less any allowable deductions.
Sale of Rental Property
If you sell the rental property, you’d need to transfer the security deposits to the incoming landlord. The new landlord would then assume the responsibility of keeping the tenants’ deposits in accordance with state and local laws.
Other Important Security Deposit Rules
- It’s unlawful for tenants to “live out” their security deposit, using it as their last month’s rent. If the tenant does this, they could be liable to paying you up to 3X the amount, plus your attorney fees.
- A landlord may be able to keep the tenant’s entire deposit if they don’t give an advance notice before moving out. You must, however, make sure to clearly spell this out in the lease agreement in bold or underlined print.
- No walk-through inspection is required before a tenant can move out.
Now you know what you must and mustn’t do when it comes to the handling of a tenant’s security deposit in Texas. Failure to keep any of them can result in serious financial and/or legal repercussions.
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