Most landlords would agree that requiring a security deposit is important to protect your rental property, and they are right. It acts as a safety blanket for damages that tenants might cause, and it will keep property owners from having to dip into their own pockets.
However, there are Texas security deposit laws that you need to learn about, regarding several aspects, such as the amount, what you can deduct from it, when it needs to be returned, and so on.
Ignoring these rules can lead to legal action against you, as well as damage to your rental business's reputation. Read ahead to learn about Texas law regarding security deposits.
Key Takeaways
- Texas doesn't set a limit on security deposits, but charging more than one or two months’ rent (depending on furnishings) may deter potential renters.
- Only specific costs—such as unpaid rent, damage beyond normal wear and tear, or cleaning fees—can be deducted. Landlords must give tenants an itemized list of deductions along with evidence, like invoices or payment records.
- After lease termination, landlords have 30 days to return the remaining deposit. Failure to do so can lead to penalties of up to three times the withheld amount, plus legal fees.
- Although Texas doesn't require security deposits to be kept in a separate account, it’s recommended to avoid mixing personal and deposit funds to prevent legal complications.
Security Deposit Amount
There is no limit to how much you can charge for a tenant's security deposit, but that doesn't mean you should exceed a reasonable amount. Landlords usually charge one month's rent for unfurnished properties and two months' rent for furnished units. Anything larger than that may deter tenants from renting your property.
Where You Should Store It
A Texas landlord may store the security deposit funds in any account, but there are no limits to how much they can deposit. It’s recommended for the landlord's personal funds to be in a separate bank account, given that you will be legally liable should you accidentally use the money for personal matters.
You don't need to disclose where the security deposit funds are stored, as per Texas Property Code 92.103, and it is safer to keep this information private. If you have several tenants, you'll have a large amount on your hands. The fewer people who know about it, the safer it will be.
Allowable Deductions
Texas security deposit laws only allow particular deductions you can make. Using the security deposit for anything other than the allowable deductions can lead to lawsuits. You can deduct the following:
- Unpaid rent
- Excessive property damages (beyond normal wear and tear)
- Unpaid utility bills
- Cleaning fees
- Other costs specified in the lease or rental agreement
Although the security deposit serves as a safety net for tenants who fail to pay rent, it cannot be used to cover last month's rent, as per Texas Property Code Section 92.108. If the allowable security deposit deductions are too complex for you, it's best to consult with a professional for legal advice on Texas laws surrounding security deposits.
Before You Make Security Deposit Deductions
There is a proper procedure to follow before using the tenant's security deposit to cover damages. For starters, you should issue the tenant a written notice before making any charges. If an amount is withheld for damages beyond normal wear and tear, you need to provide an itemized list of all the expenses.
For broken windows, for instance, you must include the costs of the replacement materials and the services used to install the new window. This advance notice is both a courtesy and a legal obligation. Even when the tenant owes rent, you must provide records showing their payment history.
Returning Security Deposits
Texas landlords usually return the remaining deposit once the tenant surrenders the rental unit. Security deposit laws state that the full or partial amount must be returned within 30 days after the lease agreement is terminated.
You can either give the security deposit in person, send it to the tenant's forwarding address, or deliver it via postmarked United States mail. If the landlord fails to return the tenant's deposit within the specified timeframe, they are liable to pay $100, three times the portion of the deposit wrongfully withheld, and reasonable attorney's fees. The legal action will be settled in small claims court.
Security Deposit FAQs
When can Texas landlords collect security deposits?
- You can collect security deposits as soon as the tenant signs the lease agreement. Even without a security deposit limit, you still need to outline how much you will charge.
How much should I charge for a Texas security deposit?
- It's usually the same amount as the monthly rent, or twice as much if the rental property is furnished. Since there are no security deposit limits, you are still free to set an amount without worrying about Texas rental laws.
What counts as normal wear and tear?
- Normal wear and tear is the expected deterioration of the rental unit, such as faded paint, scratches on the floor from moving furniture, worn-out carpet, and loose doorknobs.
Are landlords required to provide written notice before making security deposit deductions?
- Yes. You are required to provide proper notice, along with an itemized list, after the deductions have been made.
Should I use a separate bank account for security deposits?
- While it's not required for security deposits in Texas, managing security deposits will be easier if you store it in a separate account.
Can I deduct the attorney fees from the security deposit?
- No, you can't, unless specifically stated on the lease agreement. This goes for yours and your tenant's legal costs.
How Expert Property Management Can Reduce Your Stress
The laws concerning security deposits could already be overwhelming, especially for new landlords. There are many more considerations to take into account if you aim to have a legally compliant rental business.
Many landlords opt to hire property management companies like Precision Realty, as we already possess the necessary knowledge to comply with the rules. Not only that, we know how to maximize your rental income through efficient operations.
Let us help you reach your investment goals. Contact us now to learn more about the services we offer.
