Colorado Security Deposit Law: What Every Landlord Should Know
When you own property and rent it out, you can collect a security deposit to protect your investment. This covers the possibility of excessive damage or unpaid rent. However, the state places specific regulations on how deposits are handled, and for what a Landlord can charge. By familiarizing yourself with Colorado security deposit law, you maintain good tenant relations and avoid potential lawsuits.
Your Responsibilities versus Your Tenants’ Rights
If you’re a landlord, you are legally entitled to charge tenants a security deposit. This money helps soften the financial blow if your tenants:
- cause damage exceeding normal wear and tear,
- leave without paying rent, or
- leave unpaid utility bills.
It’s incredibly important to be aware of the law and your renter’s rights. Under Colorado security deposit law, a tenant’s security deposit belongs to them, not the landlord. Instead, the landlord is merely in possession of it until the end of their lease. Colorado Revised Statutes § 38-12-102 – 104.
Rules for Security Deposits
Security deposit law in Colorado requires that landlords:
- Itemize and document reasons why portions of the deposit are withheld, and
- Return any leftover deposit money after the tenant moves out.
Based on this, it is a good practice for landlords to:
- Keep security deposit money separate from their personal finances
- Provide tenants a checklist verifying the condition of the rental when they move in
Colorado rental deposit law says that if a landlord mishandles or unlawfully withholds a tenant’s security deposit, the tenant can:
- recover three times their initial deposit, and
- get their attorney’s fees and court costs paid by the landlord or leasing company.
A landlord stands to lose thousands of dollars on one mishandled security deposit. Is that a risk worth taking?
Do Not Mislabel a Security Deposit
Be careful not to call the security deposit something else, such as a leasing fee. Lease language cannot state that deposit money is “not a security deposit.” You also cannot contractually make a security deposit non-refundable.
When a Landlord Can Keep Some or All of a Security Deposit
While the law may seem to favor tenants, you have rights as a landlord. Your tenant cannot destroy your property or leave utility bills unpaid and expect to get back their full security deposit.
You may keep some or all of your renter’s security to cover the following expenses:
- unpaid rent
- unpaid utility bills
- cleaning bills
- repairs for damage in excess of normal wear and tear
- Lost rental income if the tenant abandons the property
If you deduct some or all of the security deposit, you are legally required to give the tenant an itemized statement that specifically lists how much is being deducted and why.
Timeframe to Return a Security Deposit
How long does a landlord have to return a security deposit in Colorado? Generally, you have one month from the time the tenant vacates or the lease is otherwise terminated to return the deposit. A lease agreement may provide for up to 60 days for the Landlord to return the deposit. If the lease agreement provides for a shorter time, follow that. However, by state law, security deposits must be returned within one month or up to 60 days.
Remember:
- If you take some or all of a security deposit
- without sending the tenant an itemized list or
- you fail to return the security deposit within one month or up to 60 days,
… then you forfeit your right to keep any of the deposit. You also may be liable for other damages.
We Can Help With Colorado Security Deposit Law
Two of the best ways to avoid security deposit issues are to 1) know your responsibilities and 2) make sure your lease language is crystal clear and provides you the max time for accounting. Our real estate attorneys help you with developing a strong lease agreement as well as explain your legal duties.
If your renter is suing you for a security deposit issue, we can assist you with that, too. Call 303-688-0944 to begin a case assessment.