Collecting a security deposit seems simple—until a dispute arises over a carpet stain, strange odor, or missing notice. As a Texas landlord, you're taking on a legal obligation, not just holding onto money paid.
One misstep, like deducting for non-refundable fees, normal wear and tear, or forgetting to send the refund via postmarked United States mail—can land you in justice court fast.
This guide walks you through when can a landlord deduct (hint: only if the tenant owes rent, causes damage, or breaks the lease), how to stay compliant, and what to do when a new tenant moves in.
We’ll also cover the only exception to refund deadlines so that you can protect your property and your bottom line—legally and effectively.
Key Takeaways
- Texas law allows landlords to collect security deposits with no maximum cap, but the amount must be reasonable and disclosed in the rental agreement.
- Security deposit laws require landlords to return the remaining deposit within 30 days after the tenant surrenders the unit.
- Deductions can only be made for unpaid rent, excessive property damage, cleaning fees, or unpaid utility bills and not for normal wear.
- Landlords must provide tenants with a detailed itemized list of deductions and the exact dollar amount withheld.
- If a landlord fails to comply, they may be held legally liable for the deposit wrongfully withheld, plus reasonable attorney’s fees.
Texas Law on Security Deposits: An Overview
Under the Texas Property Code (Title 8, Chapter 92), Dallas landlords must follow strict procedures when collecting, holding, and returning a tenant’s deposit.
These Texas security deposit laws protect both landlords and Texas tenants, ensuring financial protection for property owners and fairness for renters.
1. How Much Can You Charge?
Texas law sets no cap on security deposits, so landlords can charge a month’s rent or more, as long as it’s reasonable. You can also collect a pet deposit, application fee, or nonrefundable fees, but these must be clearly listed in the lease agreement and kept separate from the tenant’s security deposit.
Best Practice: Always label nonrefundable fees clearly to avoid confusion or claims of bad faith.
2. Permissible Deductions: What You Can and Cannot Deduct
If a tenant fails to pay rent, causes damage, or leaves unpaid utilities, a Texas landlord may legally deduct those amounts from the tenant’s security deposit. Permitted deductions include:
- Unpaid rent
- Actual costs to repair damage beyond normal wear and tear
- Cleaning fees (if stated in the lease)
- Unpaid utility bills
- Rekeying (if agreed in the rental lease)
- Lost or damaged items, with receipts showing reasonable cost
You can’t deduct for normal wear like faded paint or worn carpet, and any deductions, especially for non refundable fees. This must be backed by receipts and proof of actual costs to avoid claims of bad faith.
3. Returning Security Deposits: Legal Timeline and Procedures
Under the Texas Property Code, landlords must return the full security deposit or balance (after deductions) within 30 days after the tenant surrenders the unit, including keys. An itemized list with the exact dollar amount for each deduction must be sent to the tenant’s forwarding address, postmarked via United States mail.
If no address is provided, you're not required to send it—but it’s smart to document attempts or provide written notice requesting one.
4. Common Pitfalls That Lead to Legal Action
Suppose a Texas landlord fails to follow state rules when returning a security deposit. In that case, they risk being sued in small claims court. If found at fault, they may owe three times the amount wrongfully withheld, along with attorney’s fees and court costs, especially if they acted in bad faith.
Mistakes that cause legal issues include missing the 30-day return deadline or deducting for things like nonrefundable fees and normal wear. Other risks include using the deposit for last month’s rent without a written agreement or failing to justify deductions.
5. Best Practices for Managing Security Deposits
To comply with Texas rental laws and avoid disputes, use a clear lease or rental agreement when collecting security deposits, and document the property's condition with photos during walk-through inspections.
Don’t apply the deposit toward last month’s rent unless it's clearly agreed to in writing. It also helps to keep deposits in a separate bank account for transparency. Make sure tenants understand any monthly fees, rules for replacement tenants, and advance notice terms.
If you make deductions, send a detailed written notice with a clear breakdown. Solid documentation and a clear lease can protect you if things head to justice court or small claims court.
Security Deposits Don’t Have to Be a Legal Minefield
Texas security deposit laws can be confusing, especially for Dallas landlords. Still, with the right systems, they offer strong protection for your property and your bottom line.
Knowing what qualifies as normal wear, what you can legally deduct, and when to send a proper written notice and itemized list can save you from costly missteps.
Still, if managing deposits feels more like dodging landmines than collecting rent, it might be time to bring in reinforcements.
Let Red Team Property Management take the stress off your plate. From deposit compliance to full-service property management, we handle the details so you can focus on growing your investment—minus the legal headaches.
Reach out today and protect your rental business the smart way!
FAQs
1. How much can a landlord charge for a security deposit in Dallas, Texas?
Texas law sets no cap, so landlords can charge a month’s rent or more, as long as it's reasonable. The amount should be clearly stated in the lease agreement and based on the condition and value of the rental unit.
2. When must a landlord return a tenant’s security deposit?
Under the Texas Property Code, landlords must return the remaining deposit (after legal deductions) within 30 days after the tenant surrenders the rental unit, along with an itemized list of deductions. This must be sent to the tenant’s forwarding address, postmarked via United States mail.
3. What can a landlord legally deduct from the deposit?
A Texas landlord may deduct for rent owed, unpaid utilities, damages beyond normal wear and tear, and cleaning—if outlined in the lease. Deductions must reflect actual costs, and non refundable fees cannot be taken from the tenant’s security deposit.
4. Can the security deposit be used for last month’s rent?
Only if the lease agreement clearly states this. Otherwise, landlords may not apply the security deposit toward rent owed for the final month without written consent.
5. What happens if the landlord fails to return the deposit on time?
If a landlord fails to comply with Texas law, they may face legal action and owe three times the deposit wrongfully withheld, plus reasonable attorney’s fees and court costs—especially if acting in bad faith.
Additional Resources
What Can a Landlord Look for During a Rental Inspection? Key Items to Check in Dallas
Leasing Guidelines for Dallas Landlords: What Type of Lease Is Best for You?
