Under Texas law, a security deposit, application fee, and application deposit are different payments with different purposes and protections.
Section 92.102 of the Texas Property Code defines “security deposit”:
A security deposit is 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 that has been entered into by a landlord and a tenant.
Section 92.351 defines “application deposit”:
"Application deposit" means a sum of money that is given to the landlord in connection with a rental application and that is refundable to the applicant if the applicant is rejected as a tenant.
This differs from the “application fee,” which the same section also defines:
"Application fee" means a nonrefundable sum of money that is given to the landlord to offset the costs of screening an applicant for acceptance as a tenant.
Tenants often ask if the landlord must give back the security deposit they were given at the beginning of the lease. Sections 92.101 through 92.110 of the Texas Property Code describe the legal protections tenants have when they pay a security deposit. Section 92.103 states:
the landlord shall refund a security deposit to the tenant on or before the 30th day after the date the tenant surrenders the premises.
However, Section 92.107 provides an exception to this:
The landlord is not obligated to return a tenant's security deposit or give the tenant a written description of damages and charges until the tenant gives the landlord a written statement of the tenant's forwarding address for the purpose of refunding the security deposit.
The same section states that even if the tenant does not provide a forwarding address to the landlord, the tenant does not give up their right to a refund. The tenant may still pursue legal action.
If a tenant who paid a security deposit to a landlord believes that it is being withheld in bad faith, the tenant has a few options. If the tenant moved out and the security deposit or itemized list of deductions is not mailed to them within 30 days of moving out, they can sue. Section 92.109 allows the tenant to sue the landlord to recover “three times the portion of the deposit wrongfully withheld” plus other fees.
When less than $20,000 is involved, the tenant can sue by going to the local justice of the peace office (justice court). These suits often do not involve attorneys. For more information on filing suit in justice court, please see our guide to Small Claims Cases.
Before a tenant files suit, the Austin Tenants Council recommends sending a refund demand letter to the landlord. Both parties may also want to consider mediation before going to court. Taking those steps could lead to an resolution that does not require going to court.
Section 92.104 of the Texas Property Code describes what a landlord may deduct from a security deposit:
Before returning a security deposit, the landlord may deduct from the deposit damages and charges for which the tenant is legally liable under the lease or as a result of breaching the lease.
"Normal wear and tear" means deterioration that results from the intended use of a dwelling, including, for the purposes of Subchapters B and D, breakage or malfunction due to age or deteriorated condition, but the term does not include deterioration that results from negligence, carelessness, accident, or abuse of the premises, equipment, or chattels by the tenant, by a member of the tenant's household, or by a guest or invitee of the tenant.
The Austin Tenants Council explains normal wear and tear can refer to “deterioration which occurs during regular, daily, intended use of the rental unit, for example nail holes in the walls from pictures or paintings. Damages caused by negligence, carelessness, accidents, or abuse of the premises by the tenant or the tenant’s guests are not normal wear and tear.”
According to Section 92.104(c) of the Texas Property Code, if a landlord uses a portion of a security deposit to repair damages, they are required to give an itemized list of all deductions if the tenant has paid the entirety of their rent and there is no controversy over the rent.
Effective September 1, 2021, state law allows landlords to give their tenants the option to pay a monthly fee with their rent instead of paying a security deposit. If a landlord takes this option, they must give their tenant written notice of:
The landlord and tenant must record the decision to pay a monthly fee in writing.
Under this law, the landlord can choose to purchase insurance to protect the rental with the monthly fee. If they do so, the fee cannot be "more than the reasonable cost of obtaining and administering the insurance" purchased under this law. If the landlord files a claim under the insurance purchased with this fee, they can't make the tenant pay them for the same damages.