Security Deposit Refund and Accounting in Residential Tenancies

Security Deposit For a Residential Tenant

In Texas, landlords are under a strict set of guidelines that must be obeyed regarding security deposit refund and accounting. If a landlord fails to follow the law, severe penalties may be assessed against the landlord.

Texas law makes it clear that a landlord has a duty to return the security deposit in full OR provide an accounting of the funds to the tenant within 30 days of surrender of the property. Tex. Prop. Code § 92.103 (West 2017). The accounting must consist of a written description and itemization of all proper deductions applied to the security deposit. Tex. Prop. Code § 92.104 (West 2017). A landlord may not deduct funds for normal wear and tear. Id. A tenant, however, must first notify the landlord, in writing, of the tenant's forwarding address before a landlord has to provide an accounting. Tex. Prop. Code § 92.107 (West 2017).

When a landlord fails to either return the security deposit in full or fails to provide an accounting for all legitimate deductions within the 30-day timeframe, the landlord will be presumed to have acted in bad faith. Tex. Prop. Code §§ 92.108; 92.109 (West 2017). If a landlord is unable to rebut the presumption that he acted in bad faith in either retaining the whole of the deposit, making deductions based upon normal wear and tear, or by failing to provide an accounting, the landlord may be assessed a $100 fine, have to pay three-times the amount of the security deposit, and be assessed attorney's fees. Additionally, the landlord is estopped from recovering any damages to the property if he was found to have acted in bad faith. Tex. Prop. Code § 92.109 (West 2017).

However, the presumption of bad faith can be overcome by a landlord. The courts have held that "'bad faith" implies an intention to deprive the tenant of the refund lawfully due." A. B. Inv. Corp. v. Dorman, 604 S.W.2d 506, 508 (Tex. Civ. App. -Dallas 1980). If the landlord is able to provide evidence that retention of the funds was reasonable, or that the tenant was not due a refund, he will likely be held to have not acted with bad faith. In other words, if a landlord is able to show evidence that he acted in good faith, the landlord will not likely be said to have acted in bad faith, even though he failed to return the deposit or provide an accounting.

Best practices indicate that a landlord should always provide an accounting to the tenant for every deduction within the 30-day timeframe. A landlord should be proactive in obtaining a forwarding address and send the accounting and/or security deposit refund via certified mail, return receipt requested. It is prudent to contact a competent real estate attorney when defending or prosecuting residential security deposit claims.

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