A security deposit is meant to cushion a landlord against liabilities arising from a tenant’s use (or disuse) of their rented premises. Some of the liabilities include nonpayment of rent, property damage, and property abandonment.
Texas, just like other states, has a statewide security deposit law. This law is part of the Texas landlord-tenant laws and contains rules that every Texas landlord must adhere to concerning a tenant’s security deposit. As a landlord, failure to follow these rules can result in some penalties. For instance, you may lose your right to make any deductions from your tenant’s security deposit.
The following is a basic overview of the security deposit laws in the state of Texas.
1. Security Deposit Limit
In some states, landlords are limited to how much they can charge their tenant as security deposit. However, in the state of Texas, this is not the case. In Texas, landlords can charge whatever amount of security deposit they deem right for their properties.
That said, most landlords charge their tenants the equivalent of two months’ worth of rent.
As a landlord, charging a reasonable security deposit is key to your property’s long-term success. Overcharging makes your unit undesirable, while undercharging means you’re taking additional risk.
2. Storing a Tenant’s Security Deposit
In Texas, there is no requirement as to how a landlord must store a tenant’s security deposit. That said, while there aren’t any rules 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 security deposit.
3. Written Notice Requirement
In a state like New York, a landlord is required to notify their tenant (in writing) upon receipt of their deposit. In the notice, the landlord must state three crucial things. That is, the amount withheld, as well as the name and address of the financial institution holding the deposit.
That said, this is not the case in the state of Texas. As a landlord, you don’t have to offer your tenants a written notice upon receiving their security deposit. However, again, make sure to check the requirements at the local level.
4. Security Deposit Deductions
So, can you make deductions to a tenant’s security deposit? Yes, as a Texas landlord, you can keep part or all of a tenant’s security deposit if they breach terms of the lease or rental agreement.
The following are common reasons for security deposit deductions.
By far, the most common reason for security deposit deductions is excessive property damage by tenants. Excessive property damage is any damage that exceeds normal wear and tear.
Common examples include:
- Holes, burns, or pet stains in 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 be entitled to part or all of their deposit. You cannot, however, charge a tenant for normal wear and tear. That’s because normal wear and tear occurs due to normal ageing of the property.
Common examples 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 property damage, you may also be entitled to keep the entire tenant’s deposit if the tenant fails to notify you when moving out or if they break their lease early. You must, however, spell out this provision in your lease.
5. Security Deposit as Last Month’s Rent
In Texas, a tenant cannot use the security deposit as their last month’s rent. If a tenant does so, they may become liable for paying the landlord up to 3X the amount plus attorney fees.
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 or not.
While some states make it mandatory, Texas does not.
7. Security Deposit Return
As a Texas landlord, you have exactly 30 days to return a tenant’s security deposit. The only exception to this rule is if you don’t have the tenant’s forwarding address. In that case, you won’t need to make any effort in returning the deposit until the tenant provides it.
If you’ve made deductions, you must also accompany the remaining deposit with an itemized list of damages and their approximate cost of repair.
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. You must, however, make sure to clearly spell them out in the lease agreement.
9. Wrongful Withholding
If you attempt to wrongly withhold a tenant’s deposit, you may be subject to some penalties. 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 the deposit and might also be liable for paying the tenant’s attorney fees.
10. Sale of the Property
If the property changes hands during the tenancy, you are required to transfer the tenant’s deposit to the new owner. The incoming owner then becomes responsible for safekeeping the tenant’s deposit.
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.