Collecting security deposits offer financial security against potential damages or unpaid rent. If, for instance, a tenant leaves the property in poor condition or fails to pay rent, the landlord can use the deposit to cover the costs. That said, landlords must adhere to federal and state landlord-tenant laws when collecting, storing and using a tenant’s security deposit.

The team at Abilene Leasing & Property Management has put together this guide on the Texas security deposit laws to help landlords understand their legal responsibilities.

Benefits of Collecting a Tenant’s Security Deposit

The following are some benefits that are commonly associated with collecting security deposits:

  • Incentive for Tenant Care: Tenants are more likely to take care of the property if they want to receive their security deposit back in full.
  • Coverage for Unpaid Utilities: In cases where tenants leave without paying utility bills, landlords can use the security deposit to cover these costs.
  • Legal Recourse: Texas law allows landlords to make reasonable deductions from the security deposit to cover costs for damages beyond normal wear and tear and excessive cleaning.
  • Encourages Lease Compliance: A security deposit can encourage tenants to comply with lease terms, such as giving proper notice before moving out.
  • Streamlined Eviction Process: If a tenant defaults on rent or violates lease terms, a landlord can apply the deposit toward unpaid rent or legal fees associated with the eviction process.
  • Professionalism: Requiring a security deposit sets a standard for the tenant-landlord relationship from the beginning.

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Texas Security Deposit Limit

There is no state law that specifies a limits what a landlord can charge as a security deposit. This allows Texas landlords to determine a reasonable amount based on factors such as the property’s value and the tenant’s rental history.

For instance, a landlord might charge a higher security deposit for a luxury apartment in a prime location compared to a standard rental unit. This flexibility helps landlords safeguard their investments appropriately.

Charging Nonrefundable Fees

Texas law allows landlords to charge nonrefundable fees, provided these fees are clearly stated in the lease agreement and don’t violate Fair Housing Laws. These fees are separate from the security deposit and are often used to cover specific costs such as cleaning or pet-related expenses.

For example, a landlord may charge a nonrefundable pet fee to address the additional cleaning required when a tenant has a pet. Transparency in these charges helps avoid disputes and ensures tenants are aware of their financial obligations from the outset. Note that pet fees can’t be charged if a tenant has a service animal.

Providing a Written Notice After Security Deposit Receipt

Although Texas law does not mandate landlords to provide written notice to tenants after receiving their security deposit, issuing a receipt or confirmation is a good practice. This helps maintain transparency and clear records between landlords and tenants.

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Upon receiving the security deposit, a landlord might send an email or letter to the tenant acknowledging the amount received and outlining the terms of its use, fostering trust and clarity in the landlord-tenant relationship.

Storing a Tenant’s Deposit in Texas

While Texas does not require landlords to keep security deposits in a separate account or to pay interest on them, it’s good practice to do so. Keeping these funds separate from personal accounts can help landlords avoid legal complications and maintain clear records. You might want to use a dedicated business account exclusively for security deposits and related expenses, ensuring proper management of these funds.

Reasons to Withhold a Tenant’s Security Deposit in Texas

Landlords in Texas can withhold all or part of a security deposit to cover unpaid rent, damages beyond normal wear and tear, and any breaches of the lease agreement. Texas law requires landlords to provide an itemized list of deductions if any amount is withheld from the deposit.

Conducting a Walk-Through Inspection

Texas law does not require a move-out inspection, but conducting a walk-through inspection with the tenant can help document the property’s condition and avoid disputes. This practice provides clarity regarding potential deductions from the security deposit.

As such, before a tenant moves out, the landlord could schedule a walk-through to identify any damages or cleaning issues, documenting the findings with photos or a checklist. This helps ensure both parties agree on the property's condition at the end of the tenancy.

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Security Deposit Refunds in Texas

Texas law mandates that landlords return the security deposit within 30 days after the tenant moves out. If deductions are made, an itemised list of damages and charges must accompany the remaining amount returned to the tenant. This timely and transparent process helps maintain fairness and trust between landlords and tenants.

Change of Property Ownership Protocol

In Texas, if property ownership changes, the original landlord is responsible for transferring the security deposit to the new owner or returning it to the tenant. The new owner or residential landlord then assumes responsibility for the deposit.

Bottom Line

Understand the state’s security deposit laws helps protect your real estate investment and rental business. It also helps landlords foster better relationships with their tenants. If you have specific questions, it’s recommended to talk to a reliable Texas real estate attorney. Alternatively, you may seek help from a knowledgeable property management company like Abilene Leasing & Property Management. Contact us today and we’ll be happy to serve 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.