As a landlord, collecting a security deposit offers numerous benefits. You are able to cushion yourself against potential financial issues that can arise during the term of the tenancy. Including, when the tenant moves out without clearing a rent balance.
That said, a security deposit may not always provide enough cushion in such situations. So, what are you to do if the deposit doesn’t cover unpaid rent?
The following are the options you have when that happens.
Make Appropriate Deductions
Under Texas security deposit laws, a landlord may be able to make certain deductions on a tenant’s security deposit. Aside from unpaid rent, you may be able to make deductions for the following things.
- The cost of fixing damage exceeds normal wear and tear.
- If the tenant tries to “live out” their security deposit by using it as last month’s rent.
- Costs incurred from finding a replacement tenant if the tenant breaches the lease.
Please note that you are required to return the tenant’s security deposit within 30 days of moving out. This rule, however, won’t apply if the deductions are higher than the security deposit can cover.
Send the Tenant a Demand Letter
Send the tenant a demand letter for the amount of money they owe you. For the letter to be effective, the following are a few things you will need to keep in mind.
Begin the letter by mentioning important information, such as both you and your tenant’s names and contact information, the rental address, the rent balance, and the date of the missed rent payments.
Next, draft a clear and concise letter. Mention how much rent the tenant owes you, how much notice they have had to pay, and that you may take legal action against them if they don’t pay within the timeframe.
You will also want to deliver the letter via either personal delivery or certified mail. This will provide you with proper documentation should the matter end up in court. You may additionally want to communicate with the tenant to let them know the letter is coming.
If the notice period ends and the tenant hasn’t paid up, send them a follow-up letter. In the follow-up letter, reiterate your demand for payment and warn them of legal consequences.
If the follow-up letter also fails to work, then consider hiring expert legal help.
Filing a Lawsuit against the Tenant
If the tenant ignores the demand letter, you should consider escalating the matter to the courts. Specifically, consider filing the case in a small claims court.
But, while a small claims court can provide a speedy and inexpensive resolution, it has its cons too. For one, preparing for a court case requires time. You’ll need to gather evidence, conduct due diligence on the legal process, and attend the hearing.
What’s more, you’ll have to pay a filing fee. The fee varies depending on your state’s rules and regulations.
Another disadvantage of taking the tenant to court is that the tenant may actually not be in a position to pay you. If they don’t have the funds, you’ll need to wait until they are in a position to pay up the debt they owe you.
There is also the risk of a countersuit. The tenant may also choose to file a countersuit against you.
Inspect the Property Regularly
This is a recipe for running a successful rental investment and avoiding tenant complaints. Regularly inspecting your investment property comes with multiple benefits.
For one, you are able to check on the tenant’s adherence to the terms of the lease. For instance, whether they are abiding by the subletting rules or occupancy limits.
Regular inspections are also able to help you check on the condition of the property. This is key as the responsibility of ensuring the property remains livable lies significantly with you.
Before accessing the rental, though, make sure to notify the tenant beforehand. And while Texas doesn’t require landlords to provide any prior notice, providing a 24 hours’ notice is ideal.
During the inspection, pay attention to things like wall damage, stains, and pet odors.
Conduct a Walk-through Inspection
Before the tenant can move out, walk through the property to document its condition. This can help you avoid disputes with the tenant regarding security deposit deductions.
To conduct an effective walk-through inspection, the following are a few things you will want to do.
- Give the tenant a heads-up of your intention to conduct the inspection. A 24 hours’ advance notice should suffice.
- Have a checklist to make sure you document everything.
- Take photos and videos of any existing damage, especially if you are a long-distance landlord.
- Append your signatures on the checklist.
Some states have laws that require landlords to abide by certain rules during a walk-through inspection. But, Texas isn’t one of these states. That said, nothing stops you from conducting one, as long as you don’t violate any of your tenant’s rights.
There you have it – the options you have if the deposit doesn’t cover unpaid rent. A security deposit is meant to cover you in case you incur a financial liability during the term of the lease. For instance, if the tenant moves out without clearing their rent balance or utility bills, or fails to fix damage exceeding normal wear and tear.
However, the deposit may not always provide a sufficient financial cushion. And this is where you should know what options you have. Hopefully, this blog has helped you do just that!
If you still have a question or need expert help in managing your Texas property, Bigham & Associates can help. We provide Austin residential property owners with quality property management services for peace of mind. Get in touch to learn more!