Most landlords in Texas require their tenants to pay a security deposit. The security deposit is intended to ensure the fulfillment of the lease. It helps provide a layer of financial protection in case a tenant fails to abide by the terms of the agreement. A good example of this is when a tenant causes damage exceeding normal wear and tear.
But there are a set of security deposit rules that you, as a Texas landlord, must abide by. These security deposit laws are primarily regulated under TX Prop § 92.102 and the Texas landlord-tenant laws.
But it’s important for all Texas landlords like you, to understand their rights and responsibilities regarding a security deposit. Which is why we at McCourt Real Estate and Property Management have put together this guide.
Texas Security Deposit Limits
There are no limits as to how much you can charge your Texas tenants as security deposit. But you may want to keep the security deposit amount reasonable in order to keep your property competitive in the market. Charging the equivalent of the rent of one month usually suffices.
As a Texas landlord, you have the right to ask for an additional security deposit from prospective tenants who have pets. This usually ranges anywhere between 40% and 85% of the rent amount. You can use the security deposit to cover any damages the pet causes to the property.
But you must exempt tenants with service animals as disability is one of the protected classes under the Texas Fair Housing laws. What’s more, service animals are working animals, and therefore is not subject to the same standards as a normal pet.
Security Deposit Receipt
Some states require that landlords provide their tenants with a receipt when the security deposit is received. But this isn’t the case in Texas. Even as this is the case, we would advise that you do it anyway for purposes of record-keeping.
Allowable Security Deposit Deductions
As a Texas landlord, you cannot play around with the tenant’s deposit for any reason. The security deposit does not belong to you. It legitimately belongs to the tenant, it is held in trust on the tenant’s behalf until the end of the occupancy. In the meantime, it is held on your books as an “Outstanding Liability”. After the tenant moves out, you will reconcile the security deposit and send it back to the tenant, less any rightful deductions.
The following are the allowable reasons for security deposit deductions in the state of Texas:
Unpaid rent. Tenants have a duty to pay rent for the entire term of the lease, or until another tenant moves in, whichever comes first.
Unpaid utility charges. Some utilities will naturally be in the name of the tenant. If they move out without clearing them, you can make appropriate deductions from their deductions.
Illegal property alterations. If a tenant makes an illegal alteration to the unit, such as removing a hardware on a wall, you can hold them liable for the payment of reversing the changes.
Excessive cleaning costs. Tenants must return their rental premises in the same level of cleanliness that existed at the beginning of the tenancy. If they don’t, you can make appropriate deductions to their deposit.
Damage exceeding normal wear and tear. Examples of such damage include a smashed bathroom mirror, missing tiles, a torn carpet, painting the ceiling black, or holes in the wall. If a tenant causes any of these damages, you can use part of their deposit to cover the costs.
Security Deposit in Lieu of Last Month’s Rent
Texas law expressly prohibits tenants from using a security deposit as the last month’s rent. If your tenant does this, you can hold them liable for paying up to 3X the rent they are withholding, plus any attorney fees.
Change in Property Ownership
In case the property’s ownership changes, the outgoing landlord is obligated to send the deposit, or whatever remains of it, to the incoming landlord. The incoming landlord then assumes the responsibility for storing and returning the deposit.
The incoming landlord must also notify the tenant that they have acquired the property and are responsible for their security deposit.
Returning a Tenant’s Security Deposit
As a landlord, you aren’t obligated to return your tenant’s security deposit if they don’t provide you a forwarding address. So, once provided with one, you’ll have 30 days to return it, either completely or partially, after the tenant vacates the unit.
If you’re making deductions to the deposit, you must give the tenant an itemized list of deductions within the 30-day period.
Wrongfully withholding your tenant’s security deposit can have consequences. You may be liable for paying three times the wrongfully withheld amount plus any reasonable attorney fees. Failure to provide your tenant with an itemized list when making deductions may result in you losing any right to keep any portion of the deposit.
Understanding the security deposit law is essential to avoiding potential future disputes with your tenant. You’ll know how much to charge, how to store it, when to return it, and which deductions to make, among other things.
If you have further queries, McCourt Real Estate & Property Management can help. We are experienced property managers that are dedicated to helping property owners in Midland and the Odessa rental market realize their goals.
As a full-service property management company, you can count on our help in all aspects of property management. From marketing your property, to screening tenants, to collecting rent, to maintaining it. Get in touch today to get started!
Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regard to this content, or any other aspect of your property management needs