The state of Texas is relatively more lenient than some other states when it comes to security deposits. However, there are still rules surrounding when you can keep a security deposit, when you have to return it, and what you need to do if you sell your unit.  

As a Texas landlord, understanding the Texas security deposit law can positively impact your bottom line and your relationship with tenants. Keep reading to learn more about security deposits in Texas. 

Security Deposit Laws in Texas: An Overview

Security Deposit Limit

Texas security deposit law doesn’t limit the amount you can charge a tenant for a security deposit. However, you still need to be reasonable with your request. The general rule of thumb is to ask for a security deposit equal to one or two months’ rent. 

So, for instance, if the monthly rent they pay is $1,500, then charge a maximum deposit of $3,000. This will not only ensure that you’re able to keep your rental unit desirable in the eyes of prospective tenants, but also make sure you have enough to pay for potential damages to the space. 

Storing a Tenant’s Security Deposit 

Some states have requirements on how a Texas landlord needs to store a security deposit. This isn’t the case for Texas landlords. At the state level, there is no rule that you must abide by when storing your tenant’s deposit. 

You do want to make sure you keep a record of the amount paid for the security deposits and the account where they’re stored for your own documentation. 

Security Deposit Receipt 

Just like there is no rule for storing a security deposit, Texas landlords are also not required to provide security deposit receipts to tenants under Texas law. But again, you’ll want to check your local laws and keep records for yourself.  

Security Deposit Deductions 

Under certain circumstances, you may be able to keep part or all of the tenant’s deposit. The following are some common examples. 

• If the tenant moves out without paying due rent. 
• If you incur a charge that results from the tenant’s violation of the lease or rental agreement. 
• If the tenant damages the unit beyond normal wear and tear and moves out without making the repairs. 
• If the tenant attempts to “live out” their security deposit. 

There is no legal limit to how many deductions you can make to a security deposit according to Texas law. The only exception is that the charges must be reasonable. 

The following are examples of deductions you can make on a tenant’s security deposit. 

• Can you charge a tenant and have them pay for carpet replacement? Yes, if the damage exceeds normal wear and tear, you may be able to make appropriate charges to their deposit. Examples of such damage that exceeds normal wear and tear include burns, rips, and visible stains. 
• Can you charge for nail holes and have a renter pay for it? Yes, you may be able to do so if the nail holes damage the unit beyond reasonable use or normal wear and tear. For example, if the tenant drills large holes in the walls. 
• Can you charge a tenant a cleaning fee? Again, renters paying a cleaning fee is permissible under Texas security deposit rules. However, to do so, you must clearly state in the lease or rental agreement that you can penalize a tenant for causing damage beyond normal wear and tear that requires professional cleaning. 

Ending the Lease Term Early

Breaking a lease early is a serious lease violation by a tenant. That said, it isn’t uncommon. 

If the tenant moves out and finds a replacement tenant, landlords must abide by the following two rules. Landlords can only make a deduction to their deposit:

• If the lease agreement mentions a cancellation fee. 
• If you incur actual expenses in securing a replacement tenant. 

The replacement tenant must move in on or before the tenant’s lease expires. And once the lease expires, landlords may be able to make appropriate deductions on their deposit. If the tenant’s deposit doesn’t cover all the deductions, landlords can seek the extra damages from the tenant in small claims court. 

Security Deposit as Last Month’s Rent 

State law prohibits tenants from using their security deposit as last month’s rent. If a tenant owes rent and tries to use their deposit to cover the rent, landlords may be able to pursue the amount in court. If the tenant is found liable, landlords may be able to recoup up to three times the amount, plus reasonable court and attorney fees. 

Returning a Tenant’s Security Deposit 

Under Texas law, landlords must return their tenants’ security deposits within 30 days after they move out. The only exception to this rule in the failure in providing a tenant’s forwarding address before moving out. 

If you’ve made some deductions, you must provide the tenant with a written, itemized list of damages alongside the balance of the security deposit. 

Nonrefundable Security Deposits 

The security deposit the tenant pays as part of the initial move-in costs is refundable at the end of the lease term. And while you can charge non-refundable fees, you must clearly spell them out in the lease. 

Examples of non-refundable fees you can charge in Texas include redecorating fees and pet fees. 

Selling a Tenant’s Rental Property 

If you decide to sell your rental unit, you must transfer the deposits to the incoming landlord. The incoming landlord will then be liable to abide by the security deposit laws, including returning the deposit to the tenant after they move out. 

Conclusion 

Charging tenants a security deposit is a key step in the rental process. It can help cushion you against possible financial damage that may come if a tenant doesn’t take care of the rental unit as they should. 

Abiding by Texas security deposit laws is equally key. All aspects of landlord-tenant law in Texas are important for you to understand as a rental owner. 

For expert help with the management of your Houston rental property, contact Specialized Property Management Houston. We have over 30 years of experience in the industry and look forward to working with you.

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.