Security deposits are a necessary part of leasing your property. Protecting your investment and holding your renters financially accountable for any damage they may cause is part of being a smart landlord. While the basics of security deposits are similar from state to state, Texas has some particular nuances that you need to be aware of.

No Statutory Limit on Amount

Texas law does not address the maximum amount that you can ask for a security deposit so it’s up to you to ask for a reasonable amount. Don’t forget to ask for a separate pet deposit that can be applied strictly to damage caused by any pets you may allow in the property. And make sure to provide a written receipt to the renter for the security deposit. Texas does not require landlords to hold security deposits in a separate escrow account, although many landlords choose this option if they have multiple properties where maintaining a separate account just for security deposits is cost effective.

Returning the Deposit

Perhaps the most angst-filled step in the leasing cycle is the return of the security deposit at the end of the agreement term. Texas has some specific laws to address the procedure that must be followed to return the security deposit to the renter, so let’s review those steps here.

Step 1: Get the renter's forwarding address

Texas Prop. Code § 92.107 states that the landlord is not obligated to return the tenant’s security deposit or give tenant a written description of damages and charges until the tenant provides a written statement of his forwarding address.

Step 2: Determine any damage beyond normal wear and tear

If you have the forwarding address the next step is to determine the amount of any deductions, and create a written receipt itemizing the deductions. Security deposits in Texas can be applied toward damage to the rental unit or any of the buildings, common areas, or parking areas; damage to furniture, fixtures, carpet, or appliances; abandonment of the Premises, and; nonpayment of rent and unpaid late charges. Note that in Texas the landlord is not required to provide an itemized receipt of deductions if the renter owes an undisputed amount of rent to the landlord.

Step 3: Return the deposit on time

Landlords in Texas have 30 days from when the tenant surrenders the property to return the balance of the security deposit, along with the itemized settlement statement.

Many renters are unclear about the conditions where they can end up receiving less than the full amount of the deposit back (or anything at all), so it’s best to review these conditions with the renter at move-in. And as a landlord it is always in your best interest to understand and follow the law.