Security deposits under Texas law are funds that are designed to be given to a landlord to provide them with some protection against damages that a tenant may potentially cause. Deposits may also be used to cover the costs of other tenant failures should they occur.
Under the Texas Security Deposit Law, advanced rent payments, application deposits, and other fees are not considered to be part of the deposit, but extra funds for the privilege of having a pet in a rental unit are. Otherwise many of the security deposit laws that are available in Texas tend to favor the landlord.
Here are the key points that both landlords and tenants are going to want to know.
1. Landlords are not required to keep separate accounts.
As soon as a landlord receives a security deposit, they are essentially able to treat it as if it were their own money.
There is no requirement to keep a security deposit separate from other funds. This means if a landlord goes into foreclosure or files for bankruptcy, the funds disappear. Tenants in this situation would be forced to sue for the return of their deposit or file to become a creditor.
2. The security deposit cannot be used for the last month of rent due.
Although the law does allow it in some places, tenants can be liable for up to 3x the rent wrongfully paid through the use of a security deposit due to Section 92.108 of the property code. Because of this, it is considered a best practice to always pay the rent separately.
3. There is no limit to the amount a landlord can charge.
Texas does not place a cap on the amount a security deposit can be. The only requirement is that landlords charge the same amount to every applicant unless one applicant wishes to have a pet and another one does not.
Race, religion, color, gender, or having children are not allowable reasons to increase a security deposit.
4. Landlords do have a duty to mitigate.
Landlords can deduct their actual costs to find a new tenant when a lease is not fulfilled or they can charge reletting fees of up to 85% of one month's rent as a claim against a security deposit if a tenant signs a lease, pays a security deposit, but then does not move into the unit. If a tenant cannot be found, even with the duty to mitigate, then landlords can demand that rent be paid.
5. Tenants who do not give advanced notice of vacating a unit may forfeit their deposit entirely.
Texas requires that a landlord must use underlined or bold print in a lease that failing to provide proper notice can result in a complete forfeiture of a security deposit. If this occurs and the tenant's signature is on the rental agreement, then any breach of this allows for the landlord to keep the full amount of the deposit.
6. Landlords have 30 days to return a deposit.
From the time a tenant moves out, landlords have 30 days to provide a tenant with their security deposit funds. This deadline does not apply if a tenant has failed to provide a landlord with a forwarding address.
An itemized list of claims against the deposit is also required. This requirement is not in place for tenants who owe rent at the time of moving out and the amount owed is not being challenged.
7. Landlords can also be held to 3x damages.
If landlords are proven to be withholding a security deposit without cause or they have failed to provide a written notice for damage claims against the amount, then tenants have the right to seek out triple damages on the amount in question.
Both parties also have the option to seek out attorney fees which may occur in trying to recover the funds which are owed to them.
8. Security deposit interests transfer with a property sale.
If a rental property is sold, the previous landlord remains on the hook for the security deposit funds that have been paid until the new owner sends out written notices of ownership to each tenant. These notices must be signed and state that the new owner is in possession of the security deposit.
These key points of the Texas security deposit law are intended to be used for informational purposes only. This guide does not serve as a substitute for legal advice.
For more answers, review Texas Property Code Section 92.101-109 for the full scope of the law.
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