Clarifying Security Deposit Regulations in Texas

Texas & Security Deposits Explained

Security deposits are something that you will hear a lot about if you are a landlord, property owner, or even someone renting an apartment. In this Overview of Texas Security Deposits, I have set out the general scope of Texas Landlord Tenant Laws and how they apply to security deposits.
A security deposit is an amount of money that is paid by a tenant to the landlord at the time a lease is signed. A security deposit, largely, is intended to protect the landlord from any loss that may be incurred if the tenant failed to make a payment under the lease or if they broke the lease early. In Texas, security deposits have very specific regulations under the Texas Property Code, specifically, Chapter 92. Specifics about what must be done with security deposits can vary from state to state . So, if you have any questions about security deposits, you should first find out what the law is in your jurisdiction.
In Texas, there are three (3) main points under the Texas Property Code that are addressed when dealing with security deposits at the end of a tenancy. First, this section of the law provides an overview of the purpose of security deposits and the obligations on a landlord when it comes to returning such a deposit. Second, the Texas Property Code sets specific timeframes on when a landlord must return the security deposit or give the tenant a written notice of how the deposit is to be applied. Finally, the law even provides a timeframe in which a tenant must make a claim with the landlord if they believe that they have not received everything they are entitled to in their security deposit. I will address all three of these points in more detail in the following sections.

Limitations on Security Deposits

In Texas, there is no statute that limits the maximum amount that a landlord may collect as a security deposit from the tenant. Some apartment complexes may claim that within the lease agreement, that the security deposit amount may not exceed a certain amount, however this is only intended to provide sales and customer service staff guidelines in presenting properties and pricing models to customers. Remember that the advertised base rate of rent is just that. The apartments are allowed to charge any additional amount they want as a non-refundable administration fee, deposit and/or premium. If you find yourself faced with such admin fees, be sure to ask is if the amount charged will be credited back to you after the apartment lease is fulfilled. This is in hopes that you have not been charged a deposit in addition to first month’s rent, but only being informed of the security deposit required once it is time to sign the lease agreement.

Return of Security Deposits

Texas law mandates that landlords return the tenant’s security deposit by the 30th day after a tenant vacates and surrenders the keys. If the tenant must give you a forwarding address, the timeline is extended to 60 days.
The Texas Property Code, Section 92.103(a), requires a landlord to return a tenant’s security deposit not later than the 30th day after the date on which the tenant surrenders possession of the premises and returns all keys to the property. Surrendering possession means turning over everything that was given to the tenant when they received possession. This includes not only keys, but other things as well such as garage openers, remote controls (all of which are considered KEYS), building access cards, fobs and codes, key pads, and most importantly, that pesky garage door clicker (which all too often ends up in the tenant’s car). Sure, it’s something you usually get back, but if not, it is not hard to imagine the potential liability you could face should the tenant be harmed after your car door clicker ended up near their front door. Unfortunately, these days it is no longer "just a junk drawer" item. It’s something that needs to be included in the itemized list of items returned.
In addition, the tenant’s forwarding address information may extend the timeline for returning the deposit. Section 92.103(b) states the time is extended to 60 days after the date the tenant surrenders possession of the premises and notifies the landlord of the tenant’s mailing address.
The lack of notice to the tenant of the forwarding address makes it even more important for you to have an accurate forwarding address in the first place.
If the escrow account with the security deposit in it is not returned within these timeframes, you owe the occupant a statutory return penalty in an amount equal to the sum of the deposit plus one month’s rent. It also doesn’t help that the statute imposes a 6 percent interest penalty as well from the date it was due. In other words, if you fail to provide the deposit back within the time limits, then you owe the occupant the deposit you should have returned, PLUS one month’s rent and 6 percent interest on that total amount—whether you like it or not.
The timeline starts on the date the lease terminates—when the landlord/agent accepts surrender—without regard to the date the lease is terminated in the rental agreement, if that date is prior to the actual termination date.
Timely return is required. The deadline cannot be waived—even if the surrender occurs after the lease termination date.

Security Deposits & Failure to Meet Conditions

There are a number of conditions under which a landlord may legally withhold some or all of the tenant’s security deposit. When a prospective tenant applies for a lease, the landlord often requires that he or she submit a monetary deposit in order to hold that lease until the rental office can determine the potential tenant’s eligibility. Once the eligibility is determined, and the lease is executed, Texas requires the landlord to return that deposit to the tenant if the tenant is approved for the lease. The landlord may not, however, keep the deposit if the prospective tenant is denied eligibility.
If the landlord approves the prospective tenant for the lease, but the lease is never signed and the prospective tenant moves in, the landlord may choose to keep the deposit. According to Texas law, if a landlord fails to provide the tenant with the deposit after the lease has been consummated, the landlord forfeits that right to collect deposits on the property.
The Texas Property Code provides a non-exhaustive list of conditions under which a landlord may lawfully withhold all or part of the tenant’s security deposit. These conditions include damages to the apartment beyond normal wear and tear, unpaid rents, or damages to the apartment by the tenant’s guests. Normal wear and tear is left intentionally ambiguous by the Texas Property Code, in order to give the courts flexibility in determining what this means. As a general rule, damage to the apartment over the course of the lease term is acceptable, as long as this damage is normal wear and tear on the property. An example of this would be a scratch stain on carpet or cracks in the tile of the bathroom floor. Abnormal wear and tear, on the other hand, would cover damages such as a broken window, missing tiles, or damage to walls.
The landlord has a right to claim damages that are reasonably attributable to the tenants. The property will be taken as a whole, and the landlord will not be required to uniquely identify every piece of property that was damaged. However, the condition of the property will be compared to its condition when the prospective tenant moved in, and will be allowed a reasonable amount of depreciation during the course of the lease. For example, if thirty percent of the carpet was yellow when the tenant moved in, and the carpet sustained no damage during the term of the lease, then the landlord will be allowed to deduct from the deposit thirty percent of the amount it would take to replace the carpet. This is known as actual cash value.
Does this set off a lawsuit for the tenant? Not necessarily, although a judge may make the tenant pay for more than just the actual cash value of the damages if the tenant is found to have acted in bad faith. However, this is unlikely and is expressly prohibited under the Texas Deceptive Trade Practices Act. Unless the tenant deliberately caused the damage, the judge will not force the tenant to pay more for the damages than the actual cash value.
The tenant has the right to require written proof of the damage by the landlord, under Section 92.102 of the Texas Property Code. The Code requires such evidence as photographs or an inventory of the items at issue, so as to show the pre-existing condition of the leased property the moment the tenant took occupancy, with appropriate depreciation applied.

Required Notice of Deductions

A security deposit may not be deducted for any amount other than for a "property or service" required to be performed by the tenant. Tex. Prop. Code § 92.109(a) and (b). The termination of the rental agreement terminates the security deposit, which means the landlord must account for how the security deposit was used by the landlord. In order for the landlord to withhold a portion of the security deposit, the landlord must send a notice to the tenant telling the tenant either that the security deposit will not be refunded (because the landlord has withheld a portion of it) or, as an alternative, that the amount of the security deposit is being refunded but cannot be refunded to the tenant because it is being used for one of the five exceptions in subsections (c)(1)-(5) of Tex. Prop. Code section 92.109 (i.e. delinquent rent, repair of damages above ordinary wear and tear, returned checks or insurance for late rent, unpaid utility bills, or other breach of the lease agreement). Id. § 92.109(a) and (c). If the security deposit is being withheld for property or services performed by the tenant, the landlord must provide a written, itemized list detailing the cause , original charge that was assessed, and the amount actually deducted by the landlord. Id. § 92.109(b). The itemized list is used by the tenant so he or she has an understanding of exactly what property or service was performed and the associated charges. If the landlord fails to provide the required notice then the amount of any withheld portion of the security deposit may be doubly forfeited (i.e. it is no longer enforceable against the tenant and the tenant may be awarded a civil penalty equal to an amount equal to the amount wrongfully withheld). Id. § 92.109(d).
Example of Notice of Deductions
Tenant’s full name
Tenant’s full name
Property code name and address
Date
We must notify you we are withholding your security deposit. Enclosed is your refund check.
The following are the reason for our retention of funds from your security deposit:
(e.g. Damage to doorframe, 42" flat screen TV, etc.)
(e.g. Carpet cleaning, roof leak repairs, shower wall damages, monthly/annual pest control, cleaning fees, appliance repairs, lightbulbs, smoke alarms, air conditioner issues, etc.)
The deduction from your security deposit was made pursuant to [property code] § 92.109 (a), (b) and (d).

Actions Available for Texas Tenants

The law allows for legal remedies when landlords fail to return security deposits or fail to provide a full accounting of which deductions they made from the deposit. Often, a threat of a lawsuit will be enough to secure a full refund with proper deductions based on the legitimate damages.
However, sometimes tenants find it necessary to file suit just to recover for the withheld deposit and/or seek damages for the misrepresentation in the use of the security deposit.
Most suits are filed in small claims court and allowed under Rule 547 of the Texas Rules of Civil Procedure and Texas Property Code § 92.109 (a).
Under these rules, if a landlord fails to deliver a full refund, or fails to give notice of the reason for the failure to return the security deposit within 30 days after termination of the lease, the tenant can sue to recover an amount equal to three times the amount of damages suffered by the tenant. The tenant is also entitled to recover court costs and reasonable attorney’s fees. Thus, if a landlord wrongfully withholds a $700.00 deposit, the tenant is entitled to sue for $2100.00. Tenants can recover the security deposit at the small claims level. However, the amount of damages for statutory treble damages and attorney’s fees may exceed the $10,000.00 limit for small claims. For that reason, a jury trial might be necessary and this would allow for further discovery and should allow the tenant to recover attorneys fees for trial.

Best Practices for Tenants & Landlords

Communicate Clearly: A clear lease agreement between the landlord and tenant that defines at what point the deposit will be returned. The lease should also set forth the procedure the landlord will use in returning the deposit (and what condition a dwelling must be in) but also state specifically when the landlord will return the deposit. Under Texas law, the landlord has 30 days after the tenant vacates the premises to return the deposit. So if the landlord waits too long, it is likely the tenant will sue and get their deposit back, plus the potential statutory damages and attorney’s fees under Texas law.
Keep It Clean: Both parties should keep a clear record of the property, including taking plenty of photos of the property both at the beginning and end of the lease. Again , one of the biggest problems that results in security deposit lawsuits is the property not being in a similar condition at the end of the lease. If the landlord can demonstrate that the condition was similar, then he/she usually wins. Same is true for tenants. If a tenant can show the property was in good condition at the beginning of the lease, they will usually win any attempted deduction that the landlord attempted for normal wear and tear.
Dispute Resolution: Also, while the lease must designate at what point the landlord has to return the lease, it does not mean that the landlord has to return the deposit at 30 days after the tenant vacates the property. They can return the deposit prior to 30 days as long as the tenant is satisfied. If all parties agree, they can also try to resolve the security deposit dispute at an earlier date. If everyone agrees, the lease can be terminated without having to litigate.