Landlords often require tenants to pay a security deposit before signing a lease. This deposit serves as a safety net to cover issues such as unpaid rent, repair costs, or damage to the property that goes beyond normal wear and tear.
Each state has specific regulations regarding the handling of security deposits, and Texas is no exception. As a landlord in Texas, it’s crucial to understand the state's security deposit laws. Familiarizing yourself with Chapter 92 of the Texas Property Code is especially important, as it provides clear guidelines to help you avoid disputes or wrongful withholding of a tenant’s deposit.
The following outlines key points you need to know to stay compliant and protect both your rights and your tenant’s.
Security Deposit Limit
Unlike some states, Texas law does not limit the amount a landlord may charge as a security deposit. This flexibility allows investors to tailor deposit amounts based on market conditions, property type, and tenant risk factors.
However, it’s important to balance protection with market competitiveness. Setting deposits too high can turn away qualified applicants, lengthen vacancy periods, and ultimately reduce overall returns.
In most Texas rental markets, a security deposit equal to one month’s rent tends to strike the right balance between protecting the property and attracting tenants. For applicants with higher risk profiles—such as limited income history, weaker credit, or lack of rental references—a slightly higher deposit can help offset potential risk while remaining compliant with Texas law.
Pet Deposit
In addition to the standard security deposit, Texas landlords may also require a separate pet deposit to cover potential damages caused by animals beyond normal wear and tear. This provides an added layer of protection for your investment while allowing you to accommodate pet-owning tenants—a valuable segment of the rental market.
Industry research indicates that typical pet deposits in Texas range from 40% to 85% of one month’s rent and are often charged on a per-pet basis. For instance, if the monthly rent is $2,000, a reasonable pet deposit could fall between $800 and $1,700.
Texas security deposit laws and normal wear and tear
It’s important to note, however, that pet deposits cannot be charged for service animals. Under both Texas law and the federal Fair Housing Act, tenants with disabilities who rely on service animals are entitled to full and equal access to housing. Charging a deposit or additional fee for a service animal would be considered a form of discrimination.
Fair Housing Act - Deposit Information,
Equal Access to Housing and Security Deposits.
Non-Refundable Fees
Under Texas law, security deposits are refundable at the end of a lease term, minus any lawful deductions such as unpaid rent or the cost of repairing tenant-caused damage. However, landlords may also charge non-refundable fees, as long as these charges are clearly disclosed and properly labeled in the lease agreement.
Common examples of non-refundable fees include application fees, one-time cleaning fees, or redecorating fees. These charges are separate from the security deposit and are not required to be returned to the tenant at move-out.
To remain compliant and avoid disputes, it’s essential that any non-refundable fee be explicitly identified as “non-refundable” in the lease or rental agreement. If the language is unclear, Texas courts will likely interpret the fee as refundable and subject to the same rules as a security deposit.
⚠️ Compliance Note: Under federal fair housing law, assistance animals cannot be subject to non-refundable pet fees or deposits. Tenants with disabilities who require service or emotional support animals are entitled to equal access without additional financial burden.
Monthly Fee in Lieu of Security Deposit
As of September 1, 2021, Texas law allows landlords to offer tenants the option of paying a monthly fee instead of a traditional security deposit. This provides an alternative for tenants who may prefer smaller, incremental payments while still protecting your property.
If you offer this option, Texas law requires that tenants receive clear written notice outlining:
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Their right to pay the full security deposit upfront instead of using the monthly fee option.
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Their right to stop monthly fee payments at any time and pay the full security deposit.
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The exact amounts for both options—the total security deposit and the monthly fee.
Additionally, any agreement to substitute a monthly fee for a security deposit must be documented in writing to comply with the Texas Property Code.
⚠️ Compliance Note: Even when a monthly fee is used, landlords cannot charge additional amounts for assistance animals under federal fair housing law.
Security Deposit Receipt
While Texas law does not require landlords to provide a receipt for security deposit payments, it does require that landlords maintain accurate records of all deposits received. These funds remain the property of the tenant until they are properly applied toward lawful deductions or returned at the end of the lease.
Keeping clear, organized records protects your investment by providing documentation in the event of disputes and ensures compliance with the Texas Property Code.
⚠️ Compliance Note: Even with meticulous recordkeeping, landlords cannot use security deposits for purposes prohibited by law, such as routine wear-and-tear repairs or expenses related to assistance animals.
Security Deposit Deductions
Under Texas Property Code §92, landlords are allowed to make deductions from a tenant’s security deposit, but only under specific, legally permitted circumstances. These deductions typically cover unpaid rent, repairs for tenant-caused damage beyond normal wear and tear, and other allowable charges outlined in the lease agreement.
Properly documenting and justifying any deductions protects your investment and reduces the risk of disputes at lease end, while ensuring compliance with Texas law.
⚠️ Compliance Note: Deductions cannot include normal wear and tear or costs related to assistance animals, which are protected under federal fair housing law. We suggest you take a picture of every item you withhold from a deposit.
Unpaid Rent
Tenants are responsible for paying all rent due under the lease, even if they vacate the property early, unless the lease is formally terminated by mutual agreement or the tenant departs for a legally justified reason.
Any unpaid rent may be deducted from the tenant’s security deposit, helping landlords recover losses while remaining compliant with Texas law.
Unpaid Utility Charges
When utilities—such as electricity, water, gas, garbage, or sewage—are billed in the tenant’s name, the tenant is responsible for timely payment. Any outstanding balances at the end of the lease may be deducted from the security deposit, ensuring that the property owner is not financially liable for unpaid utility charges.
Cleaning Fees
Tenants are expected to return the rental unit in the same condition it was provided, excluding normal wear and tear. Landlords may deduct cleaning or repair costs from the security deposit if the property requires extra cleaning or maintenance due to tenant negligence or excessive dirt, but ordinary usage cannot be charged.
Property Alterations
Tenants are responsible for restoring the property to its original condition. For example, if they painted the walls a different color, they are expected to repaint them to the original palette. Costs to repair unauthorized alterations can be deducted from the deposit.
Tenant Responsibility for Damages
Tenants are responsible for returning the rental property in the same condition it was provided, excluding normal wear and tear. Damages beyond ordinary use may be deducted from the security deposit. Common examples include:
- Large or excessive holes in walls
- Broken windows or screens
- Excessive dirt or debris left behind (e.g., a filthy oven or trash)
- Failure to maintain the yard, if required by the lease
- Burned-out light bulbs or neglected routine maintenance (HVAC filter changes,...)
- Property damage resulting from unreported maintenance issues
⚠️ Investor Tip: Clearly outline your expectations for property condition in the lease. Detailed documentation and photographs at move-in and move-out can protect your investment and reduce disputes over deductions.
Last Month’s Rent
Can your tenant use the deposit as last month’s rent? No! Texas law expressly prohibits this.
Returning a Tenant’s Deposit
As a landlord, you are not legally required to return a tenant’s security deposit until you have a forwarding address. However, it is best practice to make every effort to obtain the tenant’s address to avoid delays or disputes.
Once you have the tenant’s forwarding address, Texas Property Code requires that you return all or part of the security deposit within 30 days after the tenant moves out. Along with the deposit, you must provide a written, itemized accounting of any deductions, detailing the reason and cost of each.
Failing to provide the deposit or the itemized statement within this timeframe can weaken your position in small claims or justice court, making it more difficult to defend any lawful deductions.
Consequences of Wrongful Withholding
Wrongfully withholding a tenant’s security deposit in Texas can carry serious legal consequences. In such cases, landlords are generally presumed to have acted in bad faith and may be held liable for:
- $100 statutory penalty
- Three times the amount of the security deposit
- Court costs
- Attorney fees
Understanding these potential penalties emphasizes the importance of accurate recordkeeping, proper documentation of deductions, and strict compliance with Texas Property Code to protect your investment and avoid costly disputes.
Security Deposit Transfer Upon Sale of Property**
When a rental property is sold, the outgoing landlord must transfer all tenant security deposits to the new owner. Once the new owner receives the deposits, they assume full responsibility for them.
The new owner must provide written notice to the tenant confirming the change in ownership and specifying the exact amount of the security deposit received. This ensures transparency and compliance with Texas law while protecting both landlords and tenants during a property sale.
Best Practices for Documentation**
To avoid disputes over the condition of the property, take detailed photographs of the interior and exterior at move-in and move-out. Having a witness present during move-out documentation can further protect you against wrongful withholding claims. As the saying goes, a picture is worth a thousand words.
Summary
As a Texas landlord, it is of critical importance that you familiarize yourself with security deposit law and other landlord-tenant regulations like the legal eviction process, ways to break a lease, squatters rights, Texas Property Code, and rent increase rules. What’s more, because these laws are subject to change it’s important that, as a landlord, you remain up-to-date on them.
Remember, it's a deposit and the money belongs to your tenant!
If you would like help managing your rentals or staying on top of any changes to the state or federal rental laws contact the us at Rollingwood Management Inc..
Disclaimer: This blog is only meant to be informational and not a substitute for professional legal advice. Also, laws change frequently and they might not be up to date. For expert legal advice, kindly get in touch with a qualified attorney or an experienced property management company.
Updated 11/04/2025