The tenant’s security deposit is not the property of the landlord, he is merely in possession and control of it, until the ownership of that money is legally transferred to the landlord. In light of this fact, the legislature drafted the Security Deposit Statute heavily in favor of tenants. And the courts have interpreted this statute as a tool by which tenants may equalize the balance of power in the landlord / tenant relationship, which is otherwise heavily in favor of the landlord. In fact, the Colorado Supreme Court, in Martin v Allen, stated that the law was “designed to assist tenants in vindicating their legal rights and to equalize the disparity in power which exists between landlord and tenant.”
A landlord may not protect himself by mislabeling the security deposit. For example, he cannot call the security deposit something else, such as pre-paid rent or a fee. He cannot use lease language stating that the sum is “not a security deposit.” Nor can he contractually make the security deposit “non-refundable.” These are common mistakes that get landlords into big trouble.
In sum, if not handled properly, a $1,000 security deposit can quickly turn into a $9,000 problem for the landlord. Here is how, a $1,000 deposit may be tripled to $3,000 (treble damages), $3,000 to pay the tenant’s attorney, and $3,000 to pay for the landlord’s defense attorney.
Because the facts and circumstances vary for each dispute, we encourage you to contact us regarding the facts pertaining to your case to determine how the laws discussed in this article apply to you.