Legal FAQs for REALTORS®
— Landlord-Tenant Issues
I visited one of the properties I manage because the tenants are behind in their rent. They had moved out and took their possessions but left a considerable amount of damage, plus a lot of trash. They also left a note with their new address for the owner to return their deposit. Can the property owner keep their security deposit to cover the cost of repairs and clean up? (updated June 9, 2014)
No, he cannot automatically keep the security deposit. However, he may be entitled to some or all of it, since it’s a fund to offset damages that an owner may incur because of a tenant’s default under a lease.
The Texas Association of REALTORS® Residential Lease (TAR 2001) lists the deductions that the owner can make from the security deposit because of a tenant's breach of contract of the lease. In your case, it's likely the delinquent rent and other damages you describe will exceed the amount of the security deposit and the owner will be allowed to retain all of it.
Since the tenants left a written statement of their forwarding address, you or the owner are required to give the tenants a written description and itemized list of the deductions from the security deposit within 30 days after the tenants surrendered possession of the property.
The tenants in a property I manage are a couple whose names are both on the lease. This week, they each told me that they are divorcing and gave me the required written notice to terminate their lease when it expires next month. They also both asked for the security deposit to be refunded directly to them. Who should I make the check out to if both of their names are on the lease? (Updated Nov. 14, 2014)
Paragraph 10C of the TAR Residential Lease (TAR 2001) provides that any refund of the security deposit will be made payable to all tenants named in the lease. Since both tenants are named as parties to the lease, make the check payable to both of them.
A tenant for a property I manage entered into a lease with the landlord and paid a security deposit and first month’s rent. The day before the date the lease period began, the tenant notified me that he had changed his mind and no longer wanted to rent the property. The tenant asked me to send the security deposit and first month’s rent to his new address, but the landlord wants to keep the funds. Can the landlord do this? (Updated Oct. 22, 2014)
Maybe. The landlord has an obligation to secure a satisfactory replacement tenant. A tenant may also attempt to locate a replacement tenant. If a satisfactory replacement tenant who can move in by the lease’s commencement date is not found, the landlord may hold the tenant in default and exercise the remedies in Paragraph 27 of the Residential Lease. This may allow the landlord to keep the security deposit and first month’s rent.
On the other hand, if the landlord does find a satisfactory replacement tenant who can move in by the commencement date, the landlord may only deduct from the security deposit and the first month’s rent either a sum agreed to in the lease as a cancellation fee or actual expenses incurred by the landlord in securing the replacement tenant.
After the sale of a home occupied by a renter, it was discovered that the security deposit was not transferred from the seller to the buyer as part of the closing. Now the parties can't agree on who is responsible for the security deposit when the rental ends. Who is responsible for the security deposit? (updated March 8, 2012)
Both buyer and seller could be responsible. Under the provisions of Section 92.105 of the Texas Property Code, the seller and the buyer may be liable for the security deposit and any refund of the deposit to the tenant upon termination of the rental. The new owner is liable for the return of the security deposit from the date he acquires the property. However, the seller also remains liable for the security deposit he received from the tenant until the buyer delivers to the tenant a signed statement acknowledging that the buyer is the new owner and has received and is now responsible for the tenant's security deposit. The transfer of the security deposit upon closing is now specifically addressed in the TREC One to Four Family Residential Contract. Paragraph 9(B)(5) now expressly states: “If the Property is subject to a lease, Seller shall (i) deliver to Buyer the lease(s) and the move-in condition form signed by the tenant, if any, and (ii) transfer security deposits (as defined under §92.102, Property Code), if any, to Buyer. In such an event, Buyer shall deliver to the tenant a signed statement acknowledging that the Buyer has received the security deposit and is responsible for the return of the security deposit, and specifying the exact dollar amount of the security deposit.” Texas Association of REALTORS® form 2210, Notice to Tenant of Change in Management and Accountability for Security Deposit, could also be used for this purpose with a few obvious changes. Note: Section 92.105 of the Texas Property Code does not apply to a real estate mortgage lienholder who acquires title by foreclosure.
I am the property manager for a property with three tenants. At the end of the lease term, one of the tenants decided to live alone and moved out. The two other tenants decided to sign a new lease and remain at the current rental property. The tenant that moved now wants her portion of the security deposit back. Because the lease requires that any refund of the security deposit be made payable to all tenants named in the lease, I am unsure how to handle the return or accounting of the security deposit for this tenant when two of the tenants are not leaving?
None of the tenants’ security deposit is due for refund or an accounting until 30 days after the remaining two tenants surrender the property. Generally, a landlord has a duty to refund and/or provide a written description and itemized list of all deductions on or before the 30th day after the day the tenant surrenders the rental property. “Surrender” is defined in paragraph 16 of the TAR form 2001 Residential Lease as “when all occupants have vacated the Property, in Landlord’s reasonable judgment, and one of the following events occurs: (a) the date Tenant specifies as the move-out or termination date in a written notice to Landlord has passed; or (b) Tenant returns keys and access devices that Landlord provided to Tenant under this lease.” In a situation where there are multiple tenants in a rental property, “surrender” does not occur until the last occupant moves out. Even if one tenant has moved out of the property, returned the keys, given proper notice of termination, provided a written forwarding address and is not delinquent in rent, if the remaining tenants extend or sign a new lease with the landlord, the tenant would not yet be entitled to the security deposit because not all tenants have surrendered. The remaining tenants may settle the splitting of the security deposit amongst themselves with the tenant who is vacating. This way the vacating tenant does not have to wait to see any refund or accounting of the security deposit and the property manager or landlord does not have to attempt to return a portion of the security deposit to the vacating tenant, especially when the landlord or property manager may not know what deductions may need to be taken out of the security deposit yet and because, under the lease, the tenants are jointly and severally liable for all provisions in the lease.
I manage a property for a husband and wife who both signed a Residential Leasing and Property Management Agreement (TAR 2201). After the tenant vacated, the wife called to inform me of her split from her husband and asked me to forward the tenant’s security deposit to her, so she could make improvements to the property. She planned to live there until matters were settled with her husband. The husband also called. He asked that I return the security deposit to the tenant, less any deductions for damages beyond normal wear and tear. I took deductions from the security deposit and the sent the balance, along with a written description and itemized list of deductions, to the tenant. Will I be liable to the wife since I’ve already refunded the remainder of the security deposit to the tenant? Will I be liable to the tenant if the tenant disputes the deductions I’ve taken? (updated March 1, 2012) o
No. The wife is not automatically entitled to the security deposit. If the tenant has caused damage to the property beyond normal wear and tear, both the wife and the husband are entitled to the funds, not just the wife. Furthermore, the Residential Leasing and Property Management Agreement (TAR 2201) authorizes you, as the property manager, to account for the security deposits you hold in a trust account and take any deductions from the deposits in accordance with the lease and the Property Code. Hence, you will not be liable unless you’ve failed to account for the security deposit. Also, you will not be liable to the tenant if the tenant disputes the deductions you’ve taken, because the agreement indemnifies you from any claim or loss from a tenant for the return of the security deposit.
I was managing a property, and the owner terminated the management agreement effective today. A tenant in the property previously notified us that he will not renew the lease. The lease ends 30 days from today. I have the security deposit in my trust account. What do I do with the security deposit? (updated July 1, 2004)
The security deposit is a deposit given by the tenant to the landlord as security for the tenant's performance under the lease. The landlord must account to the tenant for the deposit at the end of the lease. Under most property-management agreements, the property manager holds the security deposit during the lease term on behalf of the landlord and accounts to the tenant for the landlord at the end of the lease term. Since you are no longer the landlord's agent, you should forward the security deposit to the landlord and remind him he has a duty to account for the deposit when the tenant vacates the property. You should send written notice to the tenant advising him that you are no longer the agent for the landlord, that you tendered the security deposit to the landlord, and that the landlord is responsible to account to the tenant for the security deposit. Alternatively, you and the landlord may agree that you will continue to hold the money and account for the security deposit, but such an arrangement should be stated in writing and be specific as to the parties' responsibilities, such as who will inspect the property for damage upon move-out and who will make determinations about any deductions.
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