What Do Landlords Need to Know About Security Deposits in Austin, TX

What Do Landlords Need to Know About Security Deposits in Austin, TX

Every landlord's priority should be to protect his or her property. But how do you do that sort of lucking into a streak of great tenants?

Well, one thing that can help is to be smart about handling security deposits. Think of the deposit as a safety net against any sort of tenant negligence. As long as it's there, property damage stops being a major concern.

Not sure how rental security deposits work in Austin, TX? Here's all you need to know, from how much to charge to what you can do with this money.

Security Deposit Limits

First, the good news: Texas is a landlord-friendly state. Under Texas law, there's no limit to what you can charge for a security deposit. In general, though, most landlords charge an amount equal to one month's rent.

Why not charge more? For starters, going too far above this amount can hurt your ability to find good tenants. A place like Austin isn't hurting for rental options, so a high deposit can be a difference-maker.

Security Deposit Deductions

There are several situations where you can deduct money from a security deposit. These include:

  • Non-payment of rent
  • Cleaning fees
  • Unpaid utility charges
  • Property alterations
  • Property damage

Keep in mind that property damage must involve more than regular wear and tear. Examples of damage include broken windows, holes in walls, and so on. The tenant may also be liable for not putting in maintenance requests.

Returning a Deposit

Once a tenant moves out, you'll need to return their deposit within 30 days. There are a few exceptions to this rule, though. For example, if your tenant fails to give you a lease termination letter, you can keep the deposit.

Refunding a security deposit also requires you to write a return letter. In it, you'll include an itemized list of all deductions from the deposit. If you don't send this to the tenant, they may use it against you down the road.

Wrongful Withholding

In Austin, wrongful withholding of a deposit may result in hefty fines. If found guilty, you'll be liable to pay your tenant up to three times the amount of the deposit. You'll also need to pay court costs and attorney fees.

One common example of wrongful withholding involves selling your property. In this situation, you must transfer the deposit to the new owner.

Monthly Fee in Lieu of Deposit

Don't like the idea of managing security deposits? If so, Texas law permits you to replace the deposit with a monthly fee. Instead of signing the security deposit agreement, your tenant will pay you a fee each month.

If you offer this option to your tenants, you must inform them that they can pay the deposit in full as well. If the tenants agree to pay the monthly fee, they can stop doing so at any point and pay the full deposit instead.

More on Security Deposits in Austin, TX

In Texas, security deposits are an essential part of the landlord-tenant law. This guide will help you handle them in a way that makes sense for you.

Need some help with managing a security deposit for a rental property? Contact our property management experts at PMI Austin! Fill out this form and we'll get back to you soon.