Texas Security Deposit Laws

Landlords can require their tenants to pay a security deposit before lease signing. A security deposit acts as a safety net against a tenant’s negligent action. For example, failing to pay rent or causing excessive property damage.

Now, various states have different rules in regards to how landlords must handle their tenants’ security deposits. If you are a landlord in Texas, the following is everything you need to know about the state’s security deposit laws.

Security Deposit Limit

Some states limit how much landlords can charge as a security deposit while others don’t. Texas belongs to the latter group. As a Texas landlord, you are free to charge whatever amount of security deposit you like.

That being said, most landlords in Texas understand the value of not overcharging their tenants. Overcharging tenants can mean longer vacancy periods and/or high tenancy turnover rates, among other things.

As such, to ensure that their properties still remain competitive most landlords charge their tenants a security deposit of no more than 2X the monthly rental amount.

Pet Deposit

Besides the base security deposit, landlords in Texas are also permitted under the statewide law to charge their tenants an additional pet deposit. According to a study from PetFinder, the average pet deposit in Texas ranges anywhere from 40 to 85 percent of the monthly rent.

So, let’s suppose you charge tenants a monthly rent of $2,000. In such a case, the pet deposit would range anywhere from $800 to $1,700.

security deposit laws in Texas

However, note that you cannot levy such a deposit on a tenant with a disability who has a service animal. Under Texas law and the Fair Housing Act, disabled people who use service animals are entitled to full and equal access to housing. As such, requiring a disabled tenant to pay extra for their service animal would be considered discrimination.

Non-Refundable Fees

The security deposit itself is refundable at the end of the lease, minus any allowable deductions. You can, however, add some nonrefundable fees as well. A good example is redecorating fees.

All non-refundable fees must be clearly indicated in the lease or rental agreement and tagged as nonrefundable.

Monthly Fee in Lieu of Security Deposit

Texas law now permits landlords to provide tenants with an option to pay a monthly fee instead of paying the security deposit. The new law came into effect on September 1st of 2021.

If you choose to provide your tenant with this option, you are obligated by law to notify your tenant of the following:

  • Their right to pay the deposit in full rather than as a monthly fee.
  • Their right to stop further monthly fee payments at any point and instead pay the deposit in full.
  • The amount of each option (full security deposit and monthly fee).

What’s more, the decision by both parties to have the deposit paid as a monthly fee must be done in writing.

Texas security deposit amounts

Security Deposit Receipt

Texas landlords aren’t required to provide their tenants with a receipt upon receiving the security deposit. The law, however, requires that you keep accurate records of the security deposits you receive.

Security Deposit Deductions

Texas landlords have a right to make deductions to a tenant’s security deposit under certain situations. They are as follows:

Unpaid Rent

Tenants in Texas have an obligation to pay all rent due under the lease, whether or not they live in the unit or not. The only exception to this is if both parties choose to terminate the lease at any point during the tenancy or the tenant leaves due to a legally justified reason.

Unpaid Utility Charges

When a bill is registered in the tenant’s name, they become responsible for paying them. Common utilities include electricity, water, gas, garbage, and sewage. If a tenant moves out before clearing these bills, you can make appropriate deductions from their deposit.

Cleaning Fees

Tenants have an obligation to return their rental premises in the same level of cleanliness that they came in at the start of the tenancy. If they don’t, you may have a right to make appropriate deductions from their deposit.

Property Alterations

Your tenant is also responsible for returning the property back to its original condition. For example, if the tenant repainted the property, they must repaint the property back to its original paint palette. If they don’t, you can use part of their deposit to fix that.

allowable deductions from security deposits

Damages

Your tenant is liable for all damage exceeding normal wear and tear. Examples of such damage include large holes in walls, missing or broken bathroom mirrors, and a broken door handle.

Last Month’s Rent

Can your tenant use the deposit as last month’s rent? No! Texas law expressly prohibits this.

Returning a Tenant’s Deposit

First and foremost, you aren’t obligated to return a tenant’s deposit until your tenant has provided you with a forwarding address. Once you have it, you must return part or all of the tenant’s security deposit within 30 days after the tenant moves out.

If you’ve made deductions, then you must give your tenant an itemized list of deductions within the 30 day period. The only exception to doing this is if the tenant owes you rent.

Wrongful Withholding

Wrongfully withholding a tenant’s deposit in Texas has repercussions. You’d be assumed to have acted in bad faith and may be required to pay your tenant:

  • $100
  • 3X the amount of the security deposit
  • Court and attorney fees
  • Sale of Rental Property

So, what must happen if the property changes hands? You must transfer your tenants’ deposits to the new owner. The new owner will then take over responsibility after they issue a signed, written notice to their tenants informing them of the change of ownership.

In the notice, the new owner must state the exact amount of security deposit they received.

Summary

As a Texas landlord, it’s important that you familiarize yourself with security deposit laws and other landlord-tenant regulations like the legal eviction process and rent increase rules. What’s more, because these laws are subject to change it’s important that you remain up-to-date on them.

If you would like help managing your rentals or staying on top of any changes to the state or federal rental laws contact the experts at Rollingwood Management Inc. today!

Disclaimer: This blog is only meant to be informational and not a substitute for professional legal advice. Also, laws change frequently and they might not be up to date. For expert legal advice, kindly get in touch with a qualified attorney or an experienced property management company.

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