What to Do with Security Deposits?

Texas law stipulates many rules for how a tenant’s security deposit is to be handled and returned. A security deposit should not be confused with an application deposit or other fees. Not staying in compliance with these rules can cost any landlord many times more than the deposit. It is important for landlords to be aware of the the laws concerning security deposits, here are a few of the more important.

Landlords are not required to separate received security deposits from other funds in their accounts. Texas does not treat landlords as fiduciaries of security deposits and generally landlords do not separate the security deposits. Typically if landlords go bankrupt or are foreclosed on by a lender, the tenants’ security deposit are almost always gone.

Texas law automatically voids any lease agreement provisions that attempt to limit or subrogate the tenants’ rights to a security deposit. Landlords should be especially weary if they require any type of a “non-refundable” deposit since these could be seen by a Texas court as unenforceable.

Landlords do not have limits on the amount that they can require for security deposits. Generally it is one months rent but it is variable depending on the type of property and lease. Take note that your required security deposit cannot vary based on a protected class: race, color, religion, sex, presence of children, national origin, or disability.

When a tenant moves out there are a couple steps they must take to be entitled to a return of the security deposit. A tenant needs to provide a short written notice of their intent not to renew the lease, typically when this is due is governed by the lease agreement. Along with the notice of non-renewal, the tenant should provide a written forwarding address. There is no time limit on when this is required but a landlord must be given a forwarding address before a tenant is entitled to get back a security deposit.

Within 30 days of a tenant moving out and providing written notice of their forwarding address, a landlord is required to return the security deposit. If there are any deductions, a landlord myst provide an itemized list of deductions from the deposit. Whether the deductions are allowed or not are often a source of contention between landlords and tenants. Landlords can deduct for damage caused by the tenant or their guests beyond normal wear and tear, but not much more. The landlord cannot charge for damage not caused by you, occupants and guests, or damage from normal wear and tear. For example, replacing carpet just because it is worn, repainting cracked or old walls, replacing old appliances or old light fixtures. The landlord also cannot charge for things already present when you moved in.

If a landlord fails to follow these steps and return the security deposit, a tenant may sue under the Texas Property Code. The penalties against a landlord who wrongfully keep a security deposit can be harsh. Texas law allows a tenant to recover the security deposit, $100, three times the amount of the security deposit wrongly withheld, court costs, and attorney’s fees. These can add up very quickly for any landlord.

Be sure to follow the legal requirements proscribed by the Texas Property Code. If you have any questions about what they may entail for your properties give Reidel Law Firm a call at (832)510-3292 or use the email button below.