Security Deposits

The Texas Property Code, §92.101 – §92.109, protects the right of renters regarding their security deposit. Unfortunately, many tenants are unaware of this law and do not receive a proper refund of their deposit. The law states that the landlord has 30 days after the tenant surrenders the premises to refund the security deposit. If the tenant fulfills the lease contract and leaves the unit in good condition except for normal wear and tear, the security deposit is always refundable; a tenant can never waive their right to a refund of the security deposit. However, the landlord can keep part of the deposit but only if the non-refundable portion has a different name, such as a “redecorating fee” or a “make-ready fee.” If the landlord retains all or part of a security deposit, the landlord is required to give to the tenant a written description and itemized list of all deductions providing the tenant meets certain conditions. These conditions are:

1. Rent Owed? A landlord is not required to give the tenant a description and itemized list of deductions if the tenant owes rent when the tenant moves out and there is no controversy over the amount of rent owed. If the landlord claims the tenant owes rent and the tenant disputes the claim, the tenant should make a written request for the deposit which states the tenant’s position about the rent.

2. Forwarding Address. The landlord is not required to return a deposit until 30 days after the tenant moves out and only if the tenant gives the landlord the tenant’s forwarding address in writing. However, the tenant does not forfeit the right to a refund of the security deposit or to receive a description of damages just because the tenant forgot to turn in a written forwarding address. Send the forwarding address certified mail, return receipt requested.

Preventative Steps to Take to Ensure a Deposit Return
A tenant must meet all of the above conditions to ensure a refund of the deposit, but meeting those conditions is not all the tenant should do. The chances of receiving return of the deposit will be increased if the following suggestions are also followed:

What Can the Landlord Deduct From the Security Deposit?
A landlord cannot legally deduct for normal wear and tear. This refers to deterioration which occurs during regular, daily, intended use of the rental unit, for example nail holes in the walls from pictures or paintings. Damages caused by negligence, carelessness, accidents, or abuse of the premises by the tenant or the tenant’s guests are not normal wear and tear.

If the tenant moves out of an apartment leaving Kool-Aid stains on the carpet, a three-inch hole in the bathroom wall, and sacks of garbage in the carport (which were not there when the tenant moved in), these could be considered damages and the landlord is entitled to use all or part of the deposit to make these repairs. However, if the tenant moves out of an apartment leaving it in the same condition as when the tenant moved in, except for normal wear and tear, and no money is owed the landlord, the tenant should get all of the deposit back.

Sometimes landlords will take deductions which are questionable. For example, if a tenant lived in a house for two years and left a cigarette burn in the 15-year-old living room carpet, the landlord should not charge the tenant the full cost for replacing the carpet throughout the house. The tenant could challenge this deduction for several reasons: the carpet was not new when the tenant moved in and the tenant damaged only the carpet in one room, not the whole house.

Deductions From the Deposit
If the landlord makes any deductions from the deposit, a written, itemized accounting of how much is being charged for each item must be sent to the tenant. If the landlord fails to provide such an accounting within 30 days after the tenant moves out, the landlord may forfeit the right to withhold any part of the deposit. Furthermore, the deductions taken from the deposit must be for actual damages suffered by the landlord.

How to Dispute Deposit Deductions
If a tenant receives a list of deductions, it is possible to dispute items on that list. The tenant should address the deductions in a letter sent to the landlord. The demand letter should include a response to each of the deductions, explaining which charges are being disputed and why. The tenant should keep a copy of the letter and send the original by certified mail, return receipt requested.

If the tenant receives a partial refund along with the list of deductions and wants to dispute some or all of the deductions, the tenant may want to refrain from cashing the check. If the tenant must cash the check then the tenant should tell the landlord in the letter that even though the check has been cashed, it does not mean the tenant agrees with the amount of the check.

What if the Tenant Breaks the Lease or Does Not Move in After Paying a Deposit?
A tenant does not automatically forfeit the deposit for breaking a lease, but the deposit can be used to cover costs for which the tenant is liable. If a tenant must break a lease, doing everything possible to help the landlord re-rent the premises will reduce the tenant’s liability.

The landlord may have grounds to keep some or all of a deposit given to take a rental unit off the market, based on losses the landlord suffered. If a tenant has entered into a lease with a landlord and paid a security deposit or prepaid rent and does not move into the unit, the tenant is entitled to a full refund if the tenant finds a replacement tenant satisfactory to the landlord who moves in by the date the lease was to begin. On the other hand, if the landlord secures the replacement tenant, the landlord may deduct from the security deposit or rent prepayment any amount agreed to in the lease as a lease cancellation fee OR actual expenses incurred by the landlord, including a reasonable amount for the landlord’s time in finding a replacement tenant.

Once the property is rented to someone else, the tenant is not liable for additional rent unless the unit is sublet. If the property stands vacant for several days, weeks, or months, the landlord will be able to deduct from the deposit the actual amount of rent the landlord lost until a new tenant starts paying. If the property remains vacant for a period that is longer than is covered by the security deposit, then the landlord can hold the tenant liable for the lost rent covering the lease term until someone does move in so long as the landlord makes reasonable efforts to lease the property. The landlord can also charge for re-renting costs such as advertising.

Some leases have a reletting fee written into the contract. This fee can be as much as one month’s rent. A tenant may successfully challenge his landlord about this arbitrary amount based on the fact that security deposits are meant to be used to cover actual financial losses. If a landlord spends the equivalent of the reletting fee to re-rent the apartment, then that is a legitimate charge. However, if a landlord runs a $50 ad, re-rents the place quickly, and loses no rent but tries to charge the tenant the whole reletting fee, that may be considered a penalty and unenforceable under Texas law.

Some leases state that the tenant “forfeits” or loses the security deposit if the lease is breached or broken. Just because something is written in a lease does not mean that it is enforceable under Texas property law. If the tenant must break a lease and wants advice, call the Austin Tenants’ Council (ATC) or consult an attorney for more information.

Can the Deposit Be Used in Place of the Last Month’s Rent?
The security deposit law also contains a protection for landlords. Normally, the tenant cannot deduct the security deposit from the last month’s rent without the landlord’s written permission. If the tenant withholds part of the rent and claims that the security deposit makes up the balance, that action will be in violation of the law. The landlord can sue the tenant for three times the amount wrongfully withheld plus court costs and reasonable attorney’s fees. However, the court must find that the tenant acted in bad faith to award the landlord these damages.

The only time a tenant may use the security deposit in place of the last month’s rent is when the tenant terminates the lease under the repair law. See ATC’s brochure, Repairs: The Tenant’s Rights and the Landlord’s Responsibilities, for more information.

Foreclosure
In the event of foreclosure or bankruptcy of the landlord, a tenant’s claim to the security deposit takes priority over any creditor or trustee claim to the landlord’s assets. See ATC’s brochure, Foreclosures for more information.

What if Rental Unit Changes Ownership?
If a new owner buys a house or apartment and it is tenant-occupied at the time, all lease agreements and deposits should be transferred from the previous owner to the new owner. This means the new owner will be responsible for the return of the security deposit. However, the old owner remains liable for a security deposit until the new owner gives the tenant a statement acknowledging receipt of the deposit. Unless there are records of the move-in inventory, the new owner will probably not be able to establish the condition of the unit when the tenant moved in. Therefore, it may be difficult for a new owner to deduct damages from the tenant’s security deposit. The new owner should not keep any part of the deposit for damages unless the new owner can prove that the tenant damaged the unit.

Pet Deposit
The Texas Property Code does not address pet deposits but it is assumed the same rules apply. One difference between a security deposit and a pet deposit is that the landlord can legally withhold all or part of the pet deposit if agreed in the lease contract that the pet deposit is non-refundable.

Tenant Remedies
If the security deposit or itemized list is not mailed within 30 days after the tenant vacates the premises and turns in a forwarding address, the tenant has several options. The tenant can attempt to recover the deposit through mediation or the tenant can sue the landlord. A landlord can be held liable for $100, three times the amount of the deposit which is wrongfully withheld, reasonable attorney’s fees, and court costs if the tenant can show the landlord acted in bad faith. However, we suggest that the tenant first give the landlord an opportunity to pay the money owed by sending a demand letter by certified mail.

ATC has form letters or they can write their own letter. The letter should include the tenant’s current and previous addresses, the date the premises were vacated, the amount of the security deposit, and a statement that if the deposit is not returned within 10 days from the day the landlord receives the letter the tenant will pursue legal remedies.

Which Court Is the Best?
When less than $10,000 is involved, the tenant can sue without a lawyer by going to the local justice of the peace office. One cannot waive part of an amount due to get within the jurisdiction of a particular court.

Within the justice of the peace office are two courts: justice court and small claims court. The jurisdiction of these two courts overlap. The major difference is that small claims court is less formal and the rules of procedure and evidence are relaxed. Justice court is governed by the Texas Rules of Civil Procedure and Texas Rules of Evidence; it is much more formal.

Do not be intimidated by the prospect of going to court. The forms that must be filled out are self-explanatory. The staff of the justice of peace office can give you the proper forms, but they will not offer any legal advice. Soon after the suit is filed and the landlord is served with a copy, a hearing will be set. The hearing will take about an hour or so, but plan on several hours in case there is a delay. A tenant may also pick up ATC’s brochure, Filing Suit in Small Claims Court, for more useful information.

In Travis County, the filing fee is $92 ($27 filing fee and $65 service fee). For an extra $5, a jury trial can be requested, and for $65, a witness can be subpoenaed. (These costs may vary from court to court.)

In court, the major problem the judge faces is determining which side is right based on the evidence presented in court. The tenant should bring copies of the lease, deposit receipts, cancelled checks, the move-in and move-out inventories, the letter given to the landlord with the forwarding address, the demand letter, and any other materials that will be helpful in providing evidence in the case. In addition, any witnesses that are important to the case must be present.

Is an Attorney Necessary?
Although it is not necessary to have an attorney in justice court, the tenant will be at a disadvantage if the landlord has an attorney. It is not impossible for the tenant to win, though, if the tenant has evidence and witnesses as indicated above. If the tenant decides to hire an attorney and wins the suit, the court can also award attorney’s fees if the landlord acted in bad faith or the lease provides for attorney’s fees to the prevailing party. If unsure, the tenant can always obtain legal advice from an attorney before pursuing the matter. Keep in mind that the judge will not treat a case differently because someone is or is not represented by an attorney.

The information in this brochure is a summary of the subject and other pertinent matters. It should not be considered conclusive or a substitute for legal advice. Unique facts can render broad statements inapplicable. Anyone needing legal assistance should contact an attorney.

Austin Tenants’ Council • 1640-B East 2nd Street • Austin, TX 78702 • 512.474.7006