Colorado Security Deposit Law: 2026 Updates for Landlords

For landlords, security deposits are a risk-management tool. These deposits function as a financial offset for any damages resulting from tenant negligence. However, Colorado law strictly regulates how landlords handle security deposits. This article provides an overview of security deposit laws in Colorado, including how landlords can avoid “bad faith” lawsuits from aggrieved tenants. 

Deposit Limit	Security deposits are capped at one month’s rent, as of 2026. Previously, landlords could collect up to two months.
Installments	Tenants may now request to pay the security deposit in up to six monthly installments.
Carpet Rule	No deductions for carpet that has not been replaced in the 10 years preceding lease termination.
Walk-Through	Landlords must conduct a walk-through inspection at the end of the lease if the tenant requests it.
Bad Faith Presumption	Triggered if the amount of security deposit withheld is 125 percent or greater than the actual repair costs.

Colorado law defines a security deposit as “any advance or deposit of money” that primarily functions to “secure the performance of a rental agreement for a residential premises.” 

As of January 1, 2026, HB25-1249, Colorado law stipulates that security deposits are the property of tenants and that landlords act as fiduciary custodians, tasked with holding onto the funds until the lease concludes. However, C.R.S. 38-12-103 allows landlords to retain reasonable amounts from a tenant’s security deposit in cases involving: 

• Unpaid rent

• Unpaid utility expenses

• Unpaid lawful charges as listed in the lease

• Repair work for damages exceeding normal wear and tear

In addition to establishing tenants as the rightful owners of their security deposits, how much landlords can charge is now limited by the following restrictions under HB25-1249. 

HB25-1249 expands the definition of normal “wear and tear” in three important ways:

1. Uncleanliness -  General dirtiness is considered “wear and tear.” A landlord can only deduct for cleaning if the unit is “substantially less clean” than before the tenant moved in. 

2. Carpet Replacement - Landlords can only charge for carpet replacement if there is major, irreparable damage that exceeds normal wear and tear. Carpets that are 10 years old or older at the time the tenant moved in are ineligible for damage claims. 

3. Painting Deductions - Deposit reductions for painting are only permitted when there is substantial damage to the paint that exceeds normal wear and tear and occurred during the current tenancy. 

HB25-1249 also makes the following lease terms unenforceable:

• Non-refundable deposits - Landlords must coordinate the return of a security deposit.

• Leasing fees - Landlords can’t call “move-in” fees a security deposit.

• Waivers - Lease clauses that attempt to mislead tenants into surrendering their right to have their security deposit returned.

Essentially, any money labeled as a “deposit” is inherently refundable if the tenant meets their lease obligations. 

Colorado law allows landlords to deduct from security deposits for specific lease breaches only if they provide the tenant with a formal written statement itemizing the exact reasons for the retention. 

Category	Condition
Unpaid Rent	If the tenant leaves owing rent.
Utilities	If bills are left unpaid.
Cleaning	Allowable to restore the unit to pre-lease conditions (minus wear and tear).
Repairs	Only for damage exceeding normal wear and tear.
Lost Income	If the tenant abandons the property during the lease.

Strict timelines apply to returning the funds. Missing these deadlines can result in forfeiting the right to keep the deposit. 

2026 Return Windows

• Standard - By default, landlords must return the deposit within thirty days  of lease termination or surrender. 

• Lease extension - A lease agreement may extend this window, but it can’t exceed 60 days. 

The “14-Day” Documentation Rule

Under the 2026 update, a landlord must supply a tenant with the requested, relevant documentation within 14 days. Landlord documentation must prove actual cause for withholding a portion of the security deposit, such as unpaid rent or utilities, lawful charges as per the lease, or that reflect necessary repairs for damage exceeding normal wear and tear. 

If a landlord is accused of wrongful withholding, the financial consequences can be severe. In these instances, a tenant will issue a security deposit demand letter, giving the landlord seven days to respond.

Treble Damages

Colorado security deposit law states that if a landlord wrongfully withholds the deposit, the tenant may recover three times the amount of the deposit wrongfully withheld, plus attorney fees and court costs. 

The 125 Percent Rule

Landlords are considered to have acted in bad faith if they retain an amount that is 125 percent or more of the actual cost of damages incurred.

Tip: Conservatively price your repair estimates. As a landlord attorney who helps with security deposits, I suggest obtaining at least two quotes or including a “buffer disclosure” in your security deposit accounting. This way, you’re demonstrating that your estimates were made in good faith.  

One of the best ways to avoid security deposit issues before they begin involves ensuring your lease is written clearly and provides for the maximum accounting time. Our real estate attorneys offer assistance with security deposit matters. We can explain your legal responsibilities and help you craft a robust lease agreement that protects your investment for the long haul. Call 303-688-0944 or book your consultation online to begin.

Can Landlords Charge a Tenant for Repainting if the Tenant Painted the Walls Without Permission?

Yes. In Colorado, painting without permission is considered “damage” rather than normal wear and tear. A landlord can deduct restoration costs from your deposit for unauthorized paint jobs, but must provide an itemized report within 30-60 days.

What Happens if I Forget to Send the Itemized Statement?

If you forget to send the statement or return the funds within the 30- or 60-day statutory deadline, you will forfeit your right to keep any of the deposit. Additionally, a landlord who misses these deadlines can be presumed to have acted in “bad faith,” which a tenant can use against you in Colorado court for the security deposit.

Who Can Require a Walk-through Inspection?

Either the landlord or tenant can request a walk-through inspection to identify damages, and it must take place at a mutually convenient time before the lease ends. Walk-through inspections can be conducted either in person or virtually. 

Can a Landlord Withhold a Security Deposit to Cover Damages Caused by an Abusive Partner? 

As of January 1, 2026, state law provides security deposit protection for domestic violence victims in Colorado. Under HB25-1168, landlords are statutorily prohibited from deducting repair costs from a security deposit for any damage caused by an incident of abuse. However, the right to leave in Colorado requires the tenant to provide the landlord with the required documentation—a police report, protection order, signed affidavit, or a professional letter—when terminating the lease.