How Long can you withhold Security Deposits in Colorado?
Security Deposit refunds are due back to the tenant within one month, unless your lease agreed to more, but no longer than 60 days. [38-12-103 CRS] In our lease agreements, we agree to 60 days with our tenants. We often get that back to the tenant much faster. We even have a program to pay back within one week! [There are many rules around this one and too broad for this post]
How much should you ask for in Security Deposits?
In Colorado, there is not a limit on the amount of Security Deposit you ask for. A standard we see in other listings and what tenants are accustomed to in Metro Denver and surrounding metros is around 1 months rent. While this amount may make since because it is easy to apply, it is not always in the best interest of the Landlord. If you have lower rent, then this may not be enough to cover you in the event of loss and damage. If there are pets, we ask for a higher deposit. There is a higher risk of damages with more occupants. There are many reasons to adjust this amount. But be aware of what your market can bear, because if you want too much, many tenants may not be able to come up with that amount at move in.
Obligations of Landlord at End of Lease
You may withhold some funds from the Security Deposit. This is the whole reason for the security deposit. After a tenant vacates, trying to collect sums of money owed is very difficult (I know the “joys” of this one first hand). You owe the tenant a payment for the difference between the Deposit amount and the amount you retained. That check is to be mailed to the last known address for the tenant. We ask for the tenants forwarding address as a part of our move-out package.
The Landlord also owes the tenant a statement of withholdings, essentially showing the reason any funds were not returned to the tenant upon vacating. This includes amounts for unpaid rent, utilities, cleaning or damages. However, you cannot withhold any security deposit funds in Colorado for Normal Wear and Tear. I am sure that we will cover the topic of Normal Wear and Tear here very soon as that is a whole blog post on its own and HOTLY debated between Landlords and Tenants. If you have 10 year old carpet, and your tenant has been in the unit for most of that time, it is unlikely you can claim damages for having to replace the carpet. There will be a consideration that the damages were normal wear over the 10 year life of the carpet.
If a landlord withholds without following these procedures or documenting the withholding, then the tenant can sue for a refund, including treble damages and legal fees. The judge can award up to 3 times the amount withheld if you are found in willful retention of the funds…which YOU have the burden of proving your defense. If you don’t send this statement – even when holding the full amount, you may be in for some HURT in the court system. The tenant can then go after the FULL amount, plus damages of 3x the amount withheld. They owe you 7 days to get the refund to them. You cannot forget to send this notice. After your 60 days are up, there is no remedy. You just need to cross your fingers that the tenant does not come after you — which they have 6 YEARS to do (and only one year if they went Treble Damages).
How can you Withhold Security Deposit Funds and have a Good Defense?
The best defense to this issue is to DOCUMENT, DOCUMENT, DOCUMENT!!! At my Property Management company, we take a minimum of 300+ photos of each property before the tenant moves in. We have a move-in report for our owners and we send a phone app to our tenants (MyWalkThru.com) for the tenants to take photos of the property. If there was no damage noted on one of those items and then there was damage at the end of the lease, we have a very strong case for the judge to support our withholding of security deposit funds.
If you have any more questions about this topic, reach out to my team at PMI Elevation – Property Management Inc Brokerage.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact your legal counsel or tax professional for further guidance on this issue.
PMI Elevation – Property Management Inc. Brokerage
www.DenverPropertyManagementInc.net
720-744-0790
