Security Deposit Basics for a Texas Commercial Lease

The following is a brief overview of Texas law as it applies to security deposits provided by a tenant to a landlord as part of a commercial lease.

What is a 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 commercial rental property.

When must the landlord refund a security deposit?

The landlord shall refund the security deposit to the tenant not later than the 60th day after the date the tenant surrenders the premises and provides notice to the landlord or the landlord’s agent of the tenant’s forwarding address.

The tenant’s claim to the security deposit takes priority over the claim of any creditor of the landlord, including a trustee in bankruptcy.

When can the landlord retain or make deductions 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 damages and charges that result from a breach of the lease.

The landlord may not retain any portion of a security deposit to cover normal wear and tear.  According to Texas property law, “normal wear and tear” means deterioration that results from the intended use of the commercial premises, including 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 or by a guest or invitee of the tenant.

If the landlord retains all or part of a security deposit, the landlord shall give to the tenant the balance of the security deposit, if any, together with a written description and itemized list of all deductions.

When is a written description of deductions not required?

The landlord is not required to give the tenant a description and itemized list of deductions if the tenant owes rent when the tenant surrenders possession of the premises AND no controversy exists concerning the amount of rent owed.

 

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