Security Deposits Texas
Texas Security Deposits

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Tenant Breaks Lease or Does not Move in After Paying a Deposit
A Texas tenant does not automatically forfeit the deposit for breaking a lease, but the deposit can be used to cover costs for which the tenant is liable. If a tenant must break a lease, doing everything possible to help the landlord re-rent the premises will reduce the tenant’s liability.

The Texas landlord may have grounds to keep some or all of a deposit given to take a rental unit off the market, based on losses the landlord suffered. If a tenant has entered into a lease with a landlord and paid a security deposit or prepaid rent, and does not move into the unit, the tenant is entitled to a full refund if the tenant finds a replacement tenant satisfactory to the landlord who moves in by the date the lease was to begin. On the other hand, if the landlord secures the replacement tenant, the landlord may deduct from the security deposit or rent prepayment any amount agreed to in the lease as a lease cancellation fee OR actual expenses incurred by the landlord, including a reasonable amount for the landlord's time in finding a replacement tenant.

Once the property is rented to someone else, the tenant is not liable for additional rent unless the unit is sublet. If the property stands vacant for several days, weeks or months the landlord will be able to deduct from the deposit the actual amount of rent the landlord lost until a new tenant starts paying. If the property remains vacant for a period that is longer than is covered by the security deposit, then the landlord can hold the tenant liable for the lost rent covering the lease term until someone does move in so long as the landlord makes reasonable efforts to lease the property. The landlord can also charge for re-renting costs such as advertising.

Some leases have a reletting fee written into the contract. This fee can be as much as one month’s rent. A tenant may successfully challenge their landlord about this arbitrary amount based on the fact that security deposits are meant to be used to cover actual financial losses

If a landlord spends the equivalent of the reletting fee to re-rent the apartment, then that is a legitimate charge. However, if a landlord runs a $50 ad, re-rents the place quickly and loses no rent but tries to charge the tenant the whole reletting fee, that may be considered a penalty and unenforceable under Texas law.

Some leases state that the tenant “forfeits”, or loses, the security deposit if the lease is breached or broken. Just because something is written in a lease does not mean that it is enforceable under Texas property law. If the tenant must break a lease and wants advice, call the Austin Tenants’ Council (ATC) (If in Austin, check your local directory) or consult a Texas  attorney for more information.

Can the Deposit be Used in Place of the Last Month's Rent?
The security deposit law also contains a protection for landlords. Normally, the tenant cannot deduct the security deposit from the last month’s rent without the landlord’s written permission. If the tenant withholds part of the rent and claims that the security deposit makes up the balance, that action will be in violation of the law. The landlord can sue the tenant for three times the amount wrongfully withheld plus court costs and reasonable attorney’s fees. However, the court must find that the tenant acted in bad faith in order to award the landlord these damages.

The only time a tenant may use the security deposit in place of the last month's rent is when the tenant terminates the lease under the repair law. 

Foreclosure
In the event of foreclosure or bankruptcy of the landlord, a tenant's claim to the security deposit takes priority over any creditor or trustee claim to the landlord's assets. See ATC's brochure, Foreclosures in the State of Texas, for more information.

What if Rental Unit Changes Ownership?
If a new owner buys a house or apartment, and it is tenant-occupied at the time, all lease agreements and deposits should be transferred from the previous owner to the new owner. This means the new owner will be responsible for the return of the security deposit. However, the old owner remains liable for a security deposit until the new owner gives the tenant a statement acknowledging receipt of the deposit. Unless there are records of the move-in inventory, the new owner will probably not be able to establish the condition of the unit when the tenant moved in. Therefore, it may be difficult for a new owner to deduct damages from the tenant's security deposit. The new owner should not keep any part of the deposit for damages unless the new owner can prove that the tenant damaged the unit.

Pet Deposit
The Texas Property Code does not address pet deposits but it is assumed the same rules apply. One difference between a security deposit and a pet deposit is that the landlord can legally withhold all or part of the pet deposit if agreed to in the lease contract. See more on Pet Deposit on RentLaw.com

Tenant Remedies
If the security deposit or itemized list is not mailed within 30 days after the tenant vacates the premises and turns in a forwarding address, the tenant has several options: the tenant can attempt to recover the deposit through mediation or the tenant can sue the landlord. A landlord can be held liable for $100, three times the amount of the deposit which is wrongfully withheld, reasonable attorney’s fees and court costs if the tenant can show the landlord acted in bad faith. However, we suggest that the tenant first give the landlord an opportunity to pay the money owed by sending a demand letter by certified mail.

ATC has form letters that tenants can pick up from the ATC office and ATC website or they can write their own. The letter should include the tenant's current and previous addresses, the date the premises were vacated, the amount of the security deposit, and a statement that if the deposit is not returned within 10 days from the day the landlord receives the letter the tenant will pursue legal remedies.

If a tenant signed a TAA lease contract, the tenant can also file a complaint with the Apartment Association's Dispute Resolution Committee. The Committee will make a decision based on documentation submitted by both the tenant and landlord. If they rule in favor of the tenant, the landlord will be instructed to refund all or part of the deposit. The committee will not review a complaint if the tenant is currently talking with an attorney or if the tenant is in the process of pursuing legal action.

Which Court is the Best?
When less than $5000 is involved, the tenant can sue without a lawyer by going to the local Justice of the Peace office. One cannot waive part of an amount due in order to get within the jurisdiction of a particular court.

Within the Justice of the Peace office are two Courts: Justice Court and Small Claims Court. The jurisdiction of these two courts overlap. The major difference is that Small Claims Court is less formal and the rules of procedure and evidence are relaxed. Justice Court is governed by the Texas Rules of Civil Procedure and Texas Rules of Evidence; it is much more formal.

In court, the major problem the judge faces is determining which side is right based on the evidence presented in court. The tenant should bring copies of the lease, deposit receipts, cancelled checks, the move-in and move-out inventories, the letter given to the landlord with the forwarding address, the demand letter, and any other materials that will be helpful in providing evidence in the case. In addition, any witnesses that are important to the case must be present.

Is an Attorney Necessary?
Although it is not necessary to have an attorney in Justice Court, if the landlord has an attorney, the tenant will be at a disadvantage. It is not impossible for the tenant to win, though, if the tenant has evidence and witnesses as indicated above. If the tenant decides to hire an attorney and wins the suit, the court can also award attorney’s fees if the landlord acted in bad faith or the lease provides for attorneys fees to the prevailing party. If unsure, the tenant can always obtain legal advice from an attorney before pursuing the matter. Keep in mind that the judge will not treat a case differently because someone is or is not represented by an attorney.
 See Also READ TEXAS SECURITY DEPOSITS, PART 1  

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