Security deposits in Texas are regulated by Texas Property Code § 92.001 to § 92.111. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

KEY POINTS AT A GLANCE: Texas

Deposit Cap: No

Holding Requirements: No

Interest Required: No

Return Window: 30 days

COLLECTION & HOLDING REQUIREMENTS

Deposit Cap: Texas state law does not currently limit the amount that landlords/property managers can require as a security deposit.

Holding Requirements: Texas state law does not currently require security deposits to be held in a bank account within the state, in a separate account, or in an interest-bearing account.

Information Provided to Tenant: Texas state law does not currently require landlords/property managers to disclose where security deposits are held.

‍Interest on Deposits: Texas state law does not currently require landlords to pay interest to tenants on security deposits.

RETURN

Timeline: Within 30 days of vacancy, the landlord/property manager must either (1) return the full security deposit to the tenant, or (2) provide the tenant with a written description and itemized list of any deductions to the security deposit, together with the portion of the security deposit being returned. 

Documentation of Deductions: Landlords/property managers must provide tenants with a description and itemized statement of deductions from the security deposit. However, the landlord/property manager is not required to give the tenant a description and itemized list of deductions if (1) the tenant owes rent when vacating the property, and (2) there is no controversy concerning the amount of rent owed.

Permissible Deductions: Landlords/property managers may deduct the following from security deposit funds:

• Unpaid rent
• Damages beyond normal wear and tear
• Other charges due under the lease, including lease cancellation fees and expenses incurred by the landlord/property manager to secure a new tenant if the original tenant prematurely vacates the property 

‍Penalties: Failure to return the security deposit or provide an itemized list of deductions as required by Texas state law may result in the landlord/property manager being liable for up to 3x the amount of the security deposit withheld, $100 in damages per violation, forfeiture of the right to sue the tenant for causing damage to the premises, and attorney’s fees and court costs if the tenant wins in a lawsuit.

SALE OF THE RENTAL PROPERTY

If the property is sold, the new owner must deliver to the tenant a signed statement stating that they have acquired the property and are responsible for the security deposit. This statement must specify the exact amount of the security deposit retained.

SECURITY DEPOSIT ALTERNATIVE REQUIREMENTS 

‍Fee in Lieu of Security Deposit: If a security deposit is required in the lease agreement, landlords/property managers may offer tenants the option to pay a fee in lieu of a security deposit. The fee must be (1) a recurring fee of an equivalent amount (2) payable at the time rent is due. 

Landlords/property managers must notify the tenant in writing of the following when they offer them the option of paying a fee in lieu of the security deposit:

(1) that the tenant has the option to pay the security deposit instead of the fee;

(2) that the tenant has the option to terminate the agreement to pay a fee at any time and, instead, pay a security deposit in an amount that is otherwise required by the landlord/property manager for new tenants residing in substantially similar housing; and

(3) the charges for each option described above.

Landlords/property managers may not use a prospective tenant’s choice to pay a fee or a security deposit as a factor for deciding whether to approve the tenant for occupancy.

Purchase of Insurance: If a fee in lieu of a security deposit is collected by the landlord/property manager, it must be utilized to purchase insurance from a lawful insurance company. The landlord/property manager may not charge a fee that is more than the reasonable cost of obtaining and administering such insurance.

Before submitting a claim to the insurance company, the landlord/property manager must notify the tenant in writing of the damages or unpaid rent due no later than 30 days after the tenant vacates the property. The notice must include a written description and itemized list of all damages and unpaid rent, if any, including the dates that the rent payments were due.

If the tenant challenges the landlord/property manager’s claim and the tenant wins their dispute in a court of law, the landlord/property manager may not file an insurance claim for the amount due. If the landlord/property manager has already submitted a claim to the insurance company, the claim must be withdrawn. If the insurance company has already paid the landlord/property manager for the claim, the landlord/property manager must return the funds.

The landlord/property manager may not accept payment from both a tenant and the insurance company for the same claim.

‍Written Agreement: Texas state law requires a separate written agreement memorializing the tenant’s consent to pay a fee in lieu of a security deposit and the terms of this arrangement. The written agreement must be signed by (1) the landlord or the landlord’s legal representative, and (2) the tenant.