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My commercial landlord is withholding my security deposit. What can I do?

by | Jun 17, 2021 | Business Law, Commercial Law |

When you signed the lease agreement to rent a space for your business to operate, you likely had to pay a month, two months or even more of advance rent as a security deposit. The understanding was that your landlord would return that deposit to you at the end of your contract unless you defaulted on rent payments or caused serious damage to the premises. For a small to mid-sized business, a security deposit represents a significant sum of money, and it can be devastating when a landlord refuses to return it. If this happens to you, what are your options?

When landlords can legally retain a deposit

The Texas Property Code governs property contracts such as commercial leases. It establishes the rules for what a landlord can and cannot use a security deposit for, and when they have to give it back to the tenant.

Under the Code, a landlord can only keep a security deposit to pay for things such as severe property damage or vandalism. They cannot retain part of the deposit in compensation for normal wear and tear. Thus, the landlord’s right to retain the deposit for damage will depend entirely upon the source of that damage.

The cause of the damage matters

The Code defines normal wear and tear as damage that results from the age or normal condition of the premises or equipment. In other words, if pipes burst, AC units wear out or carpets fray when they could be reasonably expected to due to their use and age, the landlord has to take those repairs into account as a regular business expense, and can’t offload those costs onto their tenants.

However, if a tenant is negligent, careless or abusive of the premises, and damage results, it’s an entirely different story. That’s why it’s important for a commercial tenant to train their employees and monitor their customers to ensure that no avoidable damage occurs to the premises that might cost them a large chunk – or all – of their deposit.

If a landlord improperly withholds your deposit for regular wear and tear, you have options. A lawsuit against that landlord is likely to succeed if your attorney can prove that their reason for withholding the deposit was unjustified under Texas law, and that you have a right to the return of those funds.

Running a business is a numbers game, and often every little bit of money can help you to reach your fiscal goals. Making sure that you get back every cent of your security deposit that you are entitled to can make a world of difference.

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