As a landlord in Texas, you need to understand the law regarding security deposit. The security deposit law is important to ensure that all parties involved understand their responsibilities when it comes to security deposits. By clearly outlining the rights and responsibilities associated with security deposits, this Texas law aims to minimize disputes and protect the financial interests of all parties involved.

The team at Azure Sky Realty has put together this post to provide landlords with a general overview of the Texas security deposit laws!

Benefits of Collecting a Security Deposit

For a landlord, collecting a security deposit provides several benefits, including:

Covering Unpaid Utilities

Tenants usually put utility bills in their names. If they don't pay these bills, Texas laws allow landlords to take money from the security deposit to pay for these unpaid utilities.

Helping with High Cleaning Costs

Leases often say tenants should leave the place as they found it, except for deterioration caused by normal use. If the place is left excessively messy, landlords in Texas can use the security deposit to pay for extra cleaning.

Helping with Missed Rent Payments

When tenants don't pay rent, it breaks the rental agreement and can result in the commencement of the eviction process. In Texas, landlords can use the security deposit to cover any missed rent.

Helping with Lost Rent

Sometimes, tenants leave before their lease ends without notice. Landlords can use the security deposit to make up for the lost rent during these times.

Covering Serious Property Damage

Serious damage to a rental unit includes painting without permission, large holes in the walls, broken countertops and broken tiles, and large stains in carpets. Texas landlords can use the security deposit to fix these kinds of damages.

Texas Security Deposit Law Overview

Here’s more information on what landlords need to know about Texas’s security deposit law:

Texas Security Deposit Limit

Unlike some states that impose a maximum limit on security deposits, Texas law does not specify a statewide cap on the amount a landlord can charge. This gives landlords the flexibility to determine the security deposit amount based on their assessment of risk, the property's value, and market conditions. However, landlords are encouraged to set reasonable amounts to remain competitive and fair in the rental market.

Nonrefundable Fees

In Texas, landlords can charge nonrefundable fees for specific purposes, separate from the security deposit. These fees might cover expenses like pet deposits or administrative costs, which are not intended to be returned to the tenant. That said, the distinction between refundable security deposits and nonrefundable fees must be clearly outlined in the lease agreement to avoid confusion and potential disputes.

Storing a Tenant's Deposit in Texas

Texas does not impose strict regulations on how landlords must store a tenant’s security deposit during the tenancy. There are no requirements for the deposit to be kept in a separate account or for it to accrue interest in favor of the tenant.

This offers landlords in Texas considerable discretion in managing security deposits, provided they comply with the laws governing the return or retention of the deposits at the end of the lease.

Proper Notice Following the Receipt of a Security Deposit

Texas law does not mandate landlords to provide a written notice to tenants after receiving a security deposit. However, best practices suggest that providing such a notice or receipt can enhance transparency and reduce the likelihood of misunderstandings regarding the terms and conditions associated with the security deposit.

Reasons to Withhold a Tenant's Security Deposit in Texas

Landlords in Texas are entitled to withhold portions of a security deposit for various reasons, such as covering unpaid rent, repairing damages beyond normal wear and tear, and cleaning the unit to restore it to the condition it was in at the beginning of the tenancy.

A Walk-Through Inspection

While Texas law does not explicitly require a walk-through inspection before a tenant moves out, conducting one is a best practice that benefits both landlords and tenants. It provides an opportunity to identify potential issues that could impact the security deposit and allow tenants the chance to address these concerns before the final assessment and deductions are made.

Security Deposit Refund in Texas

Under Texas landlord-tenant laws, landlords have 30 days after a tenant moves out to return the security deposit or provide a written description of any deductions made. This timeframe is intended to ensure a prompt resolution and return of funds, fostering a fair and efficient process for addressing any damages or unpaid dues that might be deducted from the deposit.

Change in Property Ownership

In the event of a change in the ownership of a rental property in Texas, the new owner inherits the obligations related to the security deposits of existing tenants. This includes the duty to return the deposits, minus any lawful deductions. This continuity ensures that tenants' security interests are safeguarded.

Bottom Line

Understanding Texas security deposit laws is essential for both landlords and tenants, as it ensures a transparent and fair leasing process. These laws provide a framework for handling security deposits, from collection and storage to the conditions under which deductions can be made and the process for returning the deposits at the end of a tenancy.

If you have more questions, it’s best to consult a legal professional in Texas. You may also seek the services of a professional property management company that is well-versed in the Texas landlord-tenant law. If you need help, turn to our team at Azure Sky Realty. Contact us today to learn more!

Disclaimer: Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.

Texas Security Deposit Laws