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Return of Security Deposits at Conclusion of Commercial Lease

At the end of any commercial lease, the tenant business has an interest in securing the return of any security deposits made under the lease, avoiding any unnecessary deductions from the original deposit amount. In order to anticipate and plan for the return of a security deposit, it helps to understand the relevant law governing security deposits made pursuant to commercial lease agreements. Under Texas law, a landlord must 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.

Many first time tenants may not be aware of the latter requirement, which prevents the 60 day timer for return of the deposit from starting until the tenant provides the landlord with notice of the new forwarding address. So tenants hoping to effect a speedy return of a security deposit should be prepared to submit to the landlord written notice of a post-lease mailing address immediately upon the termination of the lease. Before actually returning the security deposit, however, landlords may deduct certain amounts to cover “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”. Deductions for normal wear and tear due to age or deteriorated condition are not allowable, but any deterioration that results from negligence, carelessness, accident, or abuse of the premises or equipment by the tenant or a guest is fair game.

If the landlord makes any deductions and retains all or part of a security deposit from a commercial lease, the landlord must give the tenant the balance of the security deposit, along with a written description and itemized list of all deductions taken. But if the tenant still owes rent at the time the tenant surrenders the premises, and the amount of rent owed is not in controversy, the landlord is not required to provide the tenant any such itemized list or description.

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