Handling Security Deposits in Texas: A Landlord’s Compliance Guide Under Chapter 92

Few areas of Texas landlord-tenant law generate more litigation per dollar than security deposits.

We see this litigation cycle constantly: a landlord withholds a $1,800 deposit on what looks like an obvious claim, the tenant sues, the landlord can’t produce a properly itemized statement within 30 days, and the bad-faith presumption converts an $1,800 dispute into a judgment for three times the deposit plus $100 plus the tenant’s attorney’s fees.

The substantive merits of the underlying claim never get reached.

The statute is straightforward: return the deposit within 30 days, account for any deductions in writing, and don’t act in bad faith. Landlords trip over the procedural details constantly. The penalty structure under § 92.109 (one hundred dollars plus three times the wrongfully withheld amount, plus reasonable attorney’s fees) creates an asymmetric risk: a $200 mistake can become a $1,500 judgment plus thousands in fees.

Here’s what landlords need to know about the full deposit framework under Texas Property Code Chapter 92, including the 30-day return rule, permissible deductions, the bad-faith presumption, the $100 + 3x penalty, application deposits, and what happens when the property is sold mid-tenancy.

What counts as a security deposit under Texas law

Texas Property Code § 92.102 defines a security deposit as any advance of money, other than a rental application deposit or an advance payment of rent, that is intended primarily to secure performance under a lease of a dwelling.

This definition is broader than many landlords realize. Money labeled as a “pet deposit,” “cleaning deposit,” “redecorating deposit,” or “key deposit” is a security deposit if it secures performance under the lease. Calling it something else does not move it out of Chapter 92.

Money that is not a security deposit:

• Rental application deposits and application fees (governed by § 92.351 and § 92.352).
• Advance payments of rent that are unambiguously rent rather than security.
• Pet rent that is paid monthly as additional rent rather than withheld from a deposit.
• Late fees that have actually been earned.

The 30-day return rule

Section 92.103 requires a residential landlord to return the deposit no later than the 30th day after the tenant surrenders the premises. Surrender means the tenant has actually vacated and given up possession. For most tenants, surrender happens at lease end or at move-out. For a tenant who is evicted, surrender is the date the constable delivers possession to the landlord.

The 30-day clock does not start running until the tenant gives the landlord a written statement of the tenant’s forwarding address. Until the forwarding address arrives, the landlord has no obligation to mail a deposit refund (and has nowhere to mail it). Documenting receipt of the forwarding address is critical: a date-stamped envelope, an emailed forwarding address with date and time, or a written notation on the move-out walk-through form.

If the landlord is making deductions, the landlord must provide a written description and itemized list of all deductions, along with any balance refund, by the 30-day deadline.

Permissible deductions

A landlord can deduct from the deposit for damages and charges for which the tenant is legally liable under the lease, as a result of breach, or for which the law makes the tenant liable. Permissible deductions include:

• Unpaid rent that accrued during the tenancy.
• Unpaid late fees that were properly imposed under the lease and § 92.019.
• Damage to the property beyond normal wear and tear.
• Cleaning costs if the lease requires the unit to be returned in a particular condition and the tenant left it below that standard.
• Replacement costs for missing items (keys, remotes, fixtures) that were the tenant’s responsibility.
• Utility charges the tenant was required to pay but did not.

Damages cannot be deducted for normal wear and tear. Texas does not have a precise statutory definition of “normal wear and tear,” but courts generally treat it as deterioration that occurs without negligence, carelessness, accident, or abuse. Carpet that is showing standard wear after three years is normal. Carpet with pet stains, burns, or large tears is not.

The bad-faith presumption: § 92.109

A landlord who fails to return the deposit, or to provide a written description and itemization of deductions, within 30 days is presumed to have acted in bad faith.

This is the section that produces the dollars.

The penalties under § 92.109 are severe: a bad-faith landlord forfeits the right to withhold any portion of the deposit, forfeits the right to bring suit against the tenant for damages, and faces a tenant claim for $100 plus three times the amount wrongfully withheld plus reasonable attorney’s fees.

The presumption is rebuttable, but only with evidence that excuses the delay rather than justifies the retention. Evidence that the tenant left damage exceeding the deposit doesn’t rebut the presumption; that evidence goes to the underlying deduction analysis, which is a different question. Evidence that explains why the landlord was late, a hospitalization, a missed forwarding address, a hurricane that destroyed the office, might rebut it. In practice, the cases where the presumption is successfully rebutted are rare. Most bad-faith findings turn on procedural delay that the landlord cannot adequately explain.

The 30-day mailing: what to put in the envelope

A compliant 30-day mailing typically contains:

• The remaining deposit refund (if any).
• A written, itemized description of deductions, with the dollar amount for each deduction and the basis for each charge.
• Photographs or invoices documenting the damage or expenses, where useful.
• A clear statement that the enclosed amount represents the full and final deposit refund, if no balance remains owed by the landlord.

Send the mailing via a method that creates proof of delivery; certified mail with return receipt is the gold standard. Document the date of mailing in the file.

If deductions equal or exceed the deposit, the landlord still must send the itemized accounting within 30 days. The landlord cannot simply keep the deposit and send nothing. Failure to send the accounting triggers the bad-faith presumption even if the underlying deductions were valid.

Conspicuous-notice rules for advance-notice clauses

A narrower point worth flagging: § 92.103(b) allows the lease to condition deposit return on the tenant’s giving advance notice of surrender, but only if the advance-notice provision is underlined or printed in conspicuous bold print. A lease that buries the requirement in standard text is unenforceable on this point. Landlords using older form leases should verify the language meets the conspicuous-print standard.

Transfer of deposit on sale of the property

When the property is sold, Texas Property Code § 92.105 transfers the security deposit liability from the seller to the buyer in most cases. The mechanics:

• The seller must transfer the deposits to the buyer at closing, or refund them to the tenants.
• If the seller transfers the deposits, the buyer is fully responsible for them going forward.
• If the seller refunds the deposits to the tenants, the buyer can collect new deposits from the tenants.
• If the seller does neither, both seller and buyer can be liable to the tenants.

The seller and buyer should document the deposit transfer in the closing statement and in a separate written assignment. Many sellers retain copies of the deposit accounting documentation in case a tenant later disputes the balance with the new owner.

Application deposits and application fees

Application deposits and application fees are governed by separate statutes (§ 92.351 and § 92.352) and are not security deposits.

Application deposit. Money the prospective tenant pays to be considered for the unit. If the landlord rejects the application, the application deposit must be refunded. If the landlord accepts the application but the tenant decides not to lease, the deposit can be kept under the terms agreed.

Application fee. Money the landlord keeps to cover the cost of processing the application, credit checks, background checks, administrative costs. Application fees are not refundable as a default rule.

A landlord who acts in bad faith with respect to an application deposit is liable under § 92.354 for $100 plus three times the deposit plus reasonable attorney’s fees, paralleling the security-deposit penalty structure.

Edge cases worth knowing

Multiple co-tenants. If multiple tenants are jointly liable on the lease, the deposit refund is treated as a single sum and can be sent to any one of them at the address provided. The co-tenants are responsible for sorting it out among themselves.

Tenant dies during tenancy. If the tenant has designated a representative under § 92.014, the deposit refund goes to the designee. Otherwise, the refund goes to the tenant’s estate. See the Death of a Tenant page.

Eviction situations. After a writ of possession executes, the deposit accounting still must follow § 92.103 once the tenant provides a forwarding address. The landlord cannot simply keep the deposit because the tenant was evicted. Deductions can include unpaid rent through the date of surrender (the writ execution date) and costs of repair beyond normal wear and tear.

Holdover situations. When a tenant holds over past the lease term, the deposit remains in the landlord’s hands and the deposit accounting period does not start until actual surrender. SB 38 holdover evictions may extend this period if the tenant remains in the property contesting the eviction.

Common deposit mistakes that turn into lawsuits

Failure to send the itemized accounting. The single most common mistake. Even when deductions are valid, failure to send the itemized accounting within 30 days triggers the bad-faith presumption.

Sending only an invoice without a written description. Section 92.104 requires a written description of damages and deductions, not just receipts. A bag of receipts stapled to a check is not a compliant accounting.

Treating “pet deposit” as outside the deposit framework. Money labeled as a pet deposit is still a security deposit and is subject to all of Chapter 92.

Charging for normal wear and tear. Carpet replacement after seven years is normal wear and tear; charging for it is a common bad-faith finding.

Padding deductions. Itemizing deductions at amounts higher than actually paid invoices show. Tenants increasingly request the underlying invoices in litigation, and inflated deductions are the easiest way to lose the case.

Not documenting the forwarding-address date. The 30-day clock starts when the forwarding address is received. Without a clear receipt date, the landlord cannot prove the mailing was timely.

Conditioning return on a final inspection the tenant didn’t attend. The deposit return obligation is independent of whether the tenant participates in a walk-through.