Texas Property Sale and Lease Survival: § 92.105 Deposit Transfer and Buyer Obligations

When a Texas residential rental property is sold, the lease does not disappear. The buyer steps into the seller’s shoes as landlord, the lease continues on its existing terms, and the security deposit becomes the buyer’s responsibility under § 92.105. For DFW residential transactions, lease-survival issues come up routinely in single-family rental sales, small multifamily transactions, and portfolio dispositions across Dallas, Tarrant, Collin, and Denton counties. These rules are simple to state but consistently mishandled at closing. Sellers fail to credit the deposit to the buyer, buyers fail to acknowledge the deposit obligation, and tenants get caught in the middle when something goes wrong with their deposit return months later. This page covers the lease-survival doctrine, the § 92.105 deposit transfer rule, the seller’s and buyer’s continuing obligations, and the closing-document language that prevents the most common disputes.

The lease survives the sale

Texas follows the general common-law rule that an existing lease survives the sale of the underlying real property. The buyer takes the property “subject to” the lease, meaning:

• The lease continues on its existing terms.
• The buyer becomes the landlord and is bound by all the seller-landlord’s obligations going forward.
• The tenant continues paying rent (now to the buyer) and remains entitled to all the rights the lease provides.

The buyer cannot unilaterally terminate the lease just because of the sale. The lease’s term, the tenant’s rights, and the rent obligations all carry forward.

The lease survives even if the buyer didn’t know about it at the time of sale. A buyer who buys a “vacant” property and discovers a tenant in possession is bound by the lease (if real). The buyer’s recourse is against the seller for misrepresentation, not against the tenant.

The lease survives even if the sale documents don’t expressly mention it. The lease’s existence is independent of the sale paperwork.

Key exception: foreclosure. The federal Protecting Tenants at Foreclosure Act (PTFA) and Texas-law principles modify lease survival in foreclosure situations. See the Foreclosure and PTFA page.

§ 92.105: security deposit transfer

Section 92.105 governs what happens to the security deposit when a Texas residential rental property is sold or otherwise transferred. The basic rule:

• Under § 92.105(a), the new owner (buyer) is liable to the tenant for return of the security deposit from the date title to the premises is acquired, regardless of whether the deposit was actually transferred at closing.
• Under § 92.105(b), the former owner (seller) remains liable for a deposit received while the seller owned the premises until the new owner delivers to the tenant a signed statement acknowledging that the new owner has received and is responsible for the deposit and specifying the exact dollar amount of the deposit.
• Under § 92.105(b-1), added by S.B. 1367 effective January 1, 2016, the seller is alternatively released from that liability if the seller transfers the deposit to the new owner and gives the tenant written notice of the transfer that includes the new owner’s name and address.
• The statute does not impose a duty to transfer the deposit by a particular closing date; it allocates liability. As a practical matter the parties handle the deposit at closing, but a failure to move the money on the closing date does not by itself violate § 92.105.

The dual-liability provision is the most operationally important. Even if the seller pockets the deposit at closing instead of transferring it to the buyer, the buyer still owes the tenant the deposit when the tenancy ends. The buyer’s recourse is against the seller for breach of the closing agreement; the tenant’s claim against the buyer is independent.

This means buyers absolutely must verify that they have received the deposit (or a credit for it) at closing. A buyer who closes without confirming the deposit transfer is exposed to deposit-return liability that the seller already pocketed.

How the deposit transfer typically happens at closing

In a routine residential rental property closing, the deposit is handled in one of three ways:

• Option 1: Cash transfer at closing. The seller transfers the actual deposit funds to the buyer, who deposits them into a separate trust account or general account.
• Option 2: Closing credit. The closing statement shows a credit to the buyer in the amount of the deposit, reducing the cash the buyer pays at closing by that amount. The buyer is treated as having received the deposit and is responsible for return.
• Option 3: Tenant credit at closing. In some closings, the seller refunds the deposit to the tenant at closing and the lease starts fresh with no deposit (or with a new deposit collected by the buyer). This is uncommon but happens when the parties prefer a clean break.

Most Texas residential closings use Option 2 (closing credit), which is the operationally simplest. The closing statement should clearly identify the deposit credit, the tenant’s name, the unit, and the amount.

Notice to the tenant after sale

Section 92.201 (the ownership and management disclosure statute) requires the landlord to disclose, in writing, the new landlord’s name, address, and the person authorized to receive notices. After a sale, this disclosure must be updated within a reasonable time.

Best practice is for the buyer to send a written notice to each tenant within a few days of closing, including:

• Confirmation that the property has been sold.
• Identification of the new landlord (buyer or buyer’s entity).
• Address for rent payments going forward.
• Address for notices and complaints.
• Identity of the property manager (if any) and authorized agent.
• Statement that the lease continues unchanged.
• A signed statement acknowledging the security deposit. This is not merely a courtesy: under § 92.105(b) the buyer’s signed statement acknowledging receipt of and responsibility for the deposit, and specifying the exact dollar amount, is what releases the seller from continuing liability, so it should state the exact deposit amount.

This notice protects the buyer in two ways: it ensures rent gets paid to the right place, and it documents the buyer’s acknowledgment of the deposit obligation.

Seller’s continuing obligations

Even after sale, the seller retains some obligations:

• The seller remains liable to the tenant for any deposit that wasn’t transferred to the buyer or refunded to the tenant.
• The seller may have warranty obligations to the buyer about the lease’s terms (typically in the purchase agreement).
• The seller may have continuing obligations under the seller’s old lease provisions for past events (e.g., damages claims for events during the seller’s ownership).
• The seller’s eviction or other claims that were already filed before sale may continue with the seller as plaintiff.

Most of the seller’s continuing obligations are satisfied at closing or shortly after. But the deposit obligation is the most common source of post-closing disputes between seller and buyer.

Buyer’s diligence before closing

A buyer of a Texas residential rental property should perform several diligence steps before closing:

• Review the lease. Get a copy of the lease, including all amendments and addenda. Verify the term, the rent, the deposit amount, the tenant’s name, and any unusual provisions.
• Confirm the deposit amount. Through the seller’s written representation, the lease, and the rent ledger.
• Estoppel certificate. Many sophisticated buyers require an estoppel certificate from each tenant confirming the lease terms, the deposit amount, the rent currently paid, and any disputes between the tenant and seller-landlord. Tenants are typically obligated to provide estoppel certificates under standard lease provisions.
• Rent ledger review. The seller’s rent ledger should show the deposit, the rent payment history, any late fees assessed, and any deductions. Discrepancies between the ledger and the lease should be resolved before closing.
• Inspection of the property. Coordinate with the tenant’s right of entry under the lease. Buyers should physically inspect the property before closing.
• Confirmation of any pending claims. Are there pending eviction cases? Pending repair requests? Pending fair housing complaints? The buyer takes subject to all of these.

Closing-document language

The purchase agreement and closing documents should clearly address:

• Lease assignment. The seller assigns and the buyer assumes the lease. This formalizes the transfer of the landlord’s position under the lease.
• Deposit credit. The buyer receives a closing credit in the amount of the deposit (or a cash transfer equivalent).
• Seller’s representations and warranties. The seller represents that the lease is in good standing, that no defaults exist, that the deposit amount is as stated, and that no pending claims exist (or disclosing any that do).
• Buyer’s indemnity for post-closing claims. The buyer typically agrees to indemnify the seller for tenant claims arising from buyer’s conduct after closing.
• Seller’s indemnity for pre-closing claims. The seller typically agrees to indemnify the buyer for tenant claims arising from seller’s conduct before closing, including the deposit liability if the seller failed to transfer.
• Estoppel certificate requirements. The lease typically requires the tenant to provide an estoppel certificate on landlord’s request. The closing documents should require the seller to deliver these certificates.

Common disputes after sale

• The deposit-not-transferred dispute. Tenant moves out months after closing. Buyer refunds the deposit (or doesn’t, claiming offsets). Tenant sues. Buyer realizes the seller never transferred the deposit. The buyer is liable to the tenant under § 92.105 and must pursue the seller separately.
• The lease-not-disclosed dispute. Buyer claims to have bought a “vacant” property; tenant produces a valid lease. The lease survives. Buyer’s recourse is against the seller for misrepresentation, not against the tenant.
• The disputed-tenancy dispute. Buyer claims the lease was already terminated before closing; tenant claims it wasn’t. Documentation (notice of termination, court orders, settlement agreements) determines the outcome.
• The pre-existing damage dispute. Tenant claims the buyer is trying to deduct from the deposit for damage that pre-existed the buyer’s ownership. The dispute typically becomes a documentation contest about who caused the damage.
• The retaliation dispute. Tenant claims the buyer’s actions (e.g., terminating a month-to-month lease shortly after acquisition) are retaliatory. The retaliation analysis depends on the timing and the protected acts the tenant has performed.

Wrinkles and edge cases

• Sale of a single rental unit in a multi-unit property. The sale of one unit (rare in residential, more common in commercial condo arrangements) doesn’t affect leases in the other units. The buyer takes subject only to the lease on the unit purchased.
• Sale during eviction. If the seller has filed eviction and the property is sold during the case, the buyer typically takes subject to the lease but inherits the eviction case. The case may need to be amended to substitute the buyer as plaintiff.
• Sale to a related entity. Sale from one LLC to another LLC under common ownership is technically a sale and triggers § 92.105’s transfer obligations. Treat it like any other sale.
• Sale of a property with multiple tenancies. The deposit transfer applies to each tenant separately. The buyer should receive a credit (or transfer) for each deposit, with documentation identifying each.
• Sale of a property in foreclosure or short sale. The PTFA and additional federal/Texas rules apply. See the Foreclosure and PTFA page.