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Full Refund of Security Deposit: Fact or Fiction? by R. Scott Alagood

If you have ever leased an apartment, house, or even an office, warehouse or storage unit, you more than likely had to pay a deposit to the Landlord as security for your performance under the Lease. That deposit is typically referred to as a Security Deposit.

The Texas Property Code defines a “Security Deposit” as any advance of money, other than an advance rent payment or rental application fee. Tex. Prop. Code Section 92.102 (residential lease) and Section 93.004 (commercial lease). Under both types of leases, the Landlord has an obligation to refund a Security Deposit to a Tenant following the date that a Tenant surrenders possession of the leased premises. However, in a residential setting, the Landlord only has thirty (30) days to refund the lawfully due balance of the Security Deposit to the Tenant. Tex. Prop. Code Section 92.103(a). In a commercial setting, the Landlord has sixty (60) days. Tex. Prop. Code Section 93.005(a).

In a residential lease, a condition requiring the Tenant to give the Landlord advance notice of surrender before the Landlord is required to refund the Security Deposit is effective only if it is in writing and underlined or printed in conspicuous bold print in the lease. Tex. Prop. Code Section 92.103(b). No such corresponding requirement exists for a commercial lease.

In both types of leases, a Landlord’s duty to refund the Tenant’s Security Deposit is abated until the Tenant gives the Landlord a written statement of the Tenant’s forwarding address for the purpose of refunding the Security Deposit. Tex. Prop. Code Section 92.107(a) (residential lease) and Section 93.009(a) (commercial lease). However, the Tenant’s failure to give the Landlord such written statement of the Tenant’s forwarding address does not forfeit the Tenant’s right to receive the refund once such statement has been provided. Tex. Prop. Code Section 92.107(b) and Section 93.009(b).

In addition to the Landlord’s obligation to refund the Security Deposit, the Landlord must also provide the Tenant with a written description and itemized list of all deductions that the Landlord retained from the Security Deposit. Tex. Prop. Code Section 92.104(c) (residential lease) and Section 93.006(c) (commercial lease). This itemized list must be provided to the Tenant within the deadline required for the refund of the balance of the Security Deposit (see above), even if no refund is being provided. If the Tenant owes rent at the time possession is surrendered and there is no controversy about the amount of rent owed, then the Landlord is not required to supply the Tenant with the itemized list of deductions. Tex. Prop. Code Section 92.104(c) (residential lease) and Section 93.006(c) (commercial lease).

The Landlord may not retain any portion of a Security Deposit to cover “normal wear and tear”. Tex. Prop. Code Section 92.104(b) (residential lease) and Section 93.006(b) (commercial lease). The term “normal wear and tear” means deterioration that results from the intended use of the leased premises (residential or commercial), including breakage or malfunction due to age or deteriorated condition, but does not include deterioration that results from the negligence, carelessness, accident, or abuse of the premises, equipment, or other of Landlord’s personal property by the Tenant or the Tenant’s guests or invitees. Tex. Prop. Code Section 92.001(4) (residential lease) and Section 93.006(b) (commercial lease).

It’s extremely important that the provisions in a written lease relating to a refund of a security deposit be followed except to the extent that they may conflict with the statutory law. Generally, absent other provisions in a written lease, the following procedure should allow the Tenant to receive (and the Landlord to provide) a full refund of the Security Deposit in either a residential or commercial setting:

a. Full performance of all of Tenant’s obligations under the lease through the surrender date, including the payment of all rent and other sums owed under the lease (it is unlawful for the tenant to require the Landlord to use the security deposit to cover the last month’s rent under the lease, and there are penalties associated with attempting to do so. Tex. Prop. Code Section 92.108 (residential lease) Section 93.010 (commercial lease));

b. Vacate the dwelling in good condition, normal wear and tear excepted;

c. Provide the Landlord in writing (with proof of service or receipt in accordance with the lease requirements) with a forwarding address where the deposit may be returned, and in a residential setting with advance notice of surrender if properly required in a written lease (see above); and

d. Comply with any other reasonable conditions, such as returning all keys and garage door openers to the premises and the removal of any allowable fixtures from the premises and repairing any damage that may be caused by the removal of the fixtures.

If a Landlord retains any portion of a Tenant’s Security Deposit in bad faith, the Landlord may become liable to the Tenant for a sum of $100.00 plus three times the portion of the deposit wrongfully withheld, and the Tenant’s reasonable attorney’s fees. Tex. Prop. Code Section 92.109(a) (residential lease) and Section 93.011(a) (commercial lease). If the Landlord fails to provide the itemized statement of deductions to the Tenant in bad faith, then the Landlord forfeits the right to withhold any portion of the Security Deposit or sue the Tenant for damage to the premises, and is liable to the Tenant for their reasonable attorney’s fees in a suit to recover the deposit. Tex. Prop. Code Section 92.109(b) (residential lease) and Section 93.011(b) (commercial lease). A Landlord who either fails to refund the Security Deposit or provide the itemized statement within the prescribed time period is presumed to have acted in “bad faith”. Tex. Prop. Code Section 92.101(d) (residential lease) and Section 93.011(d) (commercial lease).

In short, whether you are a Landlord or a Tenant, reading your lease and following some basic steps may save you a lot of grief and headaches down the road when dealing with the refund of a Security Deposit.