Colorado Landlord Tenant Laws dictate that landlords are allowed to charge tenants money, as a security deposit prior to moving into a rental unit. A Colorado security deposit is money paid by the tenant to the landlord, at the start of the agreement, and is refundable to the tenant at move-out.
A security deposit is statutorily defined as any sum of money (no matter what you call it or label it) whose purpose is to secure performance of a lease between a landlord and tenant. There are many reasons why landlords are recommended to collect security deposits, including the following:
- Cover Unpaid Rent: If a tenant fails to pay their rent money and leaves with unpaid rent, Colorado landlords may use the security deposit to cover the unpaid rent balance and protect themselves from financial losses.
- Cover Unpaid Utility Bills: In most cases, a tenant is responsible for paying the utilities during the course of their tenancy. If a tenant has unpaid utility bills when they move out, Colorado landlords are entitled to use the security deposit to cover the unpaid utility bills.
- Cover Damages That Exceed Normal Wear and Tear: While wear and tear is fairly common, excessive unit damages from a tenant aren’t acceptable. Landlords may use the security deposit to cover these costs.
- Pay For Cleaning Services: Most agreements indicate that a tenant should leave the unit in the same condition as it was when the agreement started. If tenants fail to maintain the cleanliness of the place, landlords may charge a cleaning fee and deduct it from the security deposit.
- Encourage Responsibility: By requiring a security deposit, landlords are also encouraging tenants to take responsibility for the unit they are renting. Knowing that their deposit is at risk if they cause damage or fail to pay rent, tenants are more likely to take care of the premises and make sure that it is in good condition when they move out.
A Guide to Colorado’s Security Deposit Laws
Security Deposit Limit
In most states, landlords can only charge security deposits up to a certain limit of money. In New York, for example, landlords can charge a maximum security deposit amount equivalent to one month’s rent.
In Colorado, while there’s no statute on the maximum limit of a security deposit, it’s common for landlords to charge the equivalent of one to two month’s rent. It’s important to understand the many Colorado Landlord Tenant laws and the protections provided to both the tenant and the landlord.
Automatic Forfeiture of the Security Deposit
The Colorado Security Deposit Act C.R.S., 38-12-103 states that any lease provision that automatically results in the forfeiture of a resident’s deposit is void.
In other words, Colorado's security deposit law states the landlord must provide a full accounting of any amount that is withheld from a tenant’s security deposit. This is commonly referred to as the security deposit disposition statement, or deposit of accounting.
Non-Refundable Fees
Every security deposit must be returned to the tenant after the end of tenancy, minus any allowable deductions that the landlords may deem necessary.
If landlords opt to charge non-refundable fees, such fees must be charged separately and must not be part of the security deposit. Colorado landlords are recommended to disclose any non-refundable fees in the agreement.
Storing a Tenant’s Deposit in Colorado
In some states, landlords are required to disclose to a tenant the location, bank, and account number of where the security deposits are stored.
State law doesn’t specifically state that this disclosure is required. There are also no provisions as to which type of bank deposit account the funds should be stored in.
In addition, Colorado law doesn’t require landlords to give interest on security deposits. Some cities, however, may have their own rules regarding security deposit interest, such as Boulder, where interest on security deposits should be paid to tenants, except for mobile homes.
Written Notice After Security Deposit Receipt
Some states require landlords to issue a written receipt for the security deposit. Under the Colorado security deposit law, however, there’s no statute that mandates landlords to write a notice to tenants regarding the receipt of the security deposit.
Reasons to Withhold a Tenant’s Security Deposit in Colorado
In Colorado, the security deposit serves as a form of protection for landlords. If Under certain conditions, landlords are allowed to keep a portion of or the entire security deposit. In the state of Colorado, the following are considered allowable deductions:
- Unpaid rent
- Unpaid utilities
- Damages that go beyond wear and tear
- Monetary losses as a result of abandonment
- Unpaid fees for cleaning services
- Any other reasonable deductions beyond wear and tear
Colorado landlords are allowed to make deductions on the security deposit as long as the deductions are reasonable and do not include normal wear and tear. Some reasonable deductions include:
- Cost of unreturned garage door remotes or keys
- Unpaid late fees or penalties
- Replacement of carpets due to damage exceeding normal wear and tear (depreciated replacement cost)
- Cost of fixing large holes that caused damage to the walls
- Costs for unauthorized painting in the rental property
It’s important to note that these charges may not be included in the lease. Landlords are also not allowed to charge for any damages and cleaning services that are due to normal wear and tear.
In addition, Colorado law does not forbid the use of the security deposit to cover any outstanding rent.
If Colorado landlords do not wish to use the security deposit to cover last month’s rent, they’re recommended to include a provision in the lease agreement stating that the security deposit cannot be used for any outstanding rent until the tenant vacates the property.
The Walk-Through Inspection
There’s no statute under Colorado law that requires landlords to perform a walk-through inspection.
Some cities in Colorado, however, may have local ordinances that require landlords to perform walk-through inspections upon move-out.
Security Deposit Refund in Colorado
Colorado law requires landlords to return the security deposit, or what remains thereof, to tenants within one month from the date the property is vacated or after the lease term ends. A security deposit wrongfully withheld can have costly consequences for a landlord. This could involve court costs and reasonable attorney's fees.
If landlords wish to have more time to return the security deposit in Colorado, the landlord can specify in the lease agreement a longer period to return the security deposit, up to 60 days maximum.
If the landlord fails to return the security deposit within the required timeframe and wrongfully withholds rent, the landlord may be required to pay up to three times the original amount of the security deposit as a penalty.
Accounting for Charges Against a Tenant’s Security Deposit
According to section 38-12-103 (1), C.R.S., a landlord must return to the tenant the full security deposit within one month after the termination of the lease or the surrender of the key to the leased property, whichever date is later, unless the lease agreement specifies a longer period. The maximum allowed in the lease is 60 days.
If the landlord does not refund the entire security deposit, the landlord must provide the tenant with "a written statement listing the exact reasons for the retention of any portion of the security deposit," together with a payment equal to the amount of the security deposit, minus any amount retained.
If the landlord fails to provide the written statement within the required time, the landlord forfeits all rights to withhold any portion of the security deposit (§ 38-12-103 (2), C.R.S.).
Tenant’s Legal Recourse
If a landlord intentionally retains a security deposit without a valid reason under the statute, the landlord is obligated to pay three times the amount that was wrongfully withheld, plus court costs and reasonable attorney fees (§ 38-12-103 (3)(a), C.R.S.)
The tenant must notify the landlord of the tenant's intention to file legal proceedings at least seven days before taking action. This gives the landlord one last week to return the security deposit.
However, the landlord may avoid paying damages of three times the amount wrongfully withheld only by returning the entire security deposit during this last week.
In any court action, the landlord has the burden of proving that the landlord did not wrongfully withhold all or part of the security deposit (Turner v. Lyon, 189 Colo. 234, 539 P.2d 1241 (1975); Mishkin v. Young, 107 P.3d 393 (Colo. 2005). § 38-12-103 (3)(b), C.R.S).
Change in Property Ownership in Colorado
If the landlord sells the property the tenant is renting or otherwise loses legal title to or interest in the property, the tenant’s security deposit must be transferred to the new landlord or transferee or returned to the tenant after any legal deductions (§ 38-12-103 (4), C.R.S.).
The requirement applies to any change in ownership, whether by sale, assignment, death, appointment of a receiver, or otherwise.
Tenant Cannot Waive Rights
A tenant cannot, either orally or in writing, waive the tenant's rights under section 38-12- 103, C.R.S. A lease provision or other agreement that purports to waive those rights is not enforceable (§ 38-12-103 (7), C.R.S.).
Conclusion
As a landlord, it’s crucial to understand the Colorado security deposit laws in the state and your local city. Security deposits are an essential part of the landlord-tenant relationship.
By avoiding common mistakes regarding security deposits, landlords can protect their property and avoid legal consequences. Make sure to familiarize yourself with the Colorado security deposit laws and clearly communicate with the tenant throughout the process.
If you have other questions, it’s best to work with a reliable property management company. Talk to our experts at Alliance Property Management and we’ll be happy to serve you!
Disclaimer: This blog should not be used as a substitute for legal advice from a licensed attorney in your state. Laws change, and this post might not be updated at the time of your reading. Please contact us for any questions you have in regards to this content or any other aspect of your property management needs.
