Colorado Security Deposit Laws in 2024

Overview of Colorado Security Deposit Laws

Security deposits are funds paid by a renter to a landlord at the start of a lease to provide financial protection in case the tenant damages the unit or fails to pay rent. Landlords in Colorado can charge a security deposit, but there are limits and legal requirements around handling deposits.

The main purpose of collecting a security deposit in Colorado is to give landlords a way to cover any costs if a tenant leaves behind damage or unpaid rent. It is not meant to be an arbitrary fee or profit generator for the landlord.

Colorado law caps the maximum allowable security deposit at an amount equal to one month's rent. A landlord cannot require a security deposit over this limit, even if a tenant agrees to it. The only exception is if the property is rented unfurnished, in which case the landlord can collect up to 1.5x the monthly rent.

Landlords in Colorado must follow specific procedures for handling security deposits:

  • Deposits should be placed into a separate bank account and not mixed with the landlord's personal funds.
  • Tenants must receive a written move-in checklist detailing the current condition of the unit.
  • If keeping any portion of the deposit after move-out, the landlord must provide the tenant an itemized deduction list with receipts explaining any damages or unpaid rent charges.
  • Any unused deposit funds must be returned to the tenant within 30 days after they vacate the property.

Nonrefundable Deposits

Colorado law allows landlords to charge tenants certain nonrefundable fees and deposits in addition to a standard security deposit. 

Pet Deposits and Fees

Landlords in Colorado can require tenants with pets to pay a pet deposit or pet fee. This is different from the standard security deposit and is intended to cover any potential damages caused by the tenant's pets. Pet deposits in Colorado may not exceed 25% of the first month's rent, regardless of the number of pets. Landlords can also charge reasonable monthly pet fees and pet rent to cover the extra wear and tear.

Other Nonrefundable Fees

Beyond pet deposits and fees, Colorado landlords can charge nonrefundable fees for other purposes as well. Common nonrefundable fees in Colorado include:

  • Application fees to cover the costs of background and credit checks on prospective tenants.
  • Administrative fees for tasks like processing new lease paperwork and changing tenant information. 
  • Move-in fees to cover costs of preparing the unit for the new tenant.
  • Amenity fees for access to any optional facilities or services associated with the property.

Any nonrefundable fees a landlord wishes to charge must be agreed upon in writing in the lease agreement. The fees should be reasonable in relation to the landlord's actual expenses.

Storing the Security Deposit in Colorado 

Landlords in Colorado are required to store security deposit funds in a separate bank account that is not used for any other purpose. This ensures the deposit money is available and traceable in the event of a dispute.

Colorado law states that the landlord must provide the tenant with the name and address of the financial institution where the security deposit is held. The landlord must also provide the account number if requested by the tenant.

Landlords in Colorado do not have to pay interest on security deposits to tenants. There is no legal requirement for deposit interest accrual. 

If the rental property is sold or transferred to a new owner, the security deposit liability transfers as well. The new owner becomes responsible for handling the deposit according to Colorado law, including returning the proper amount to the tenant upon move out. 

When ownership changes, tenants must be provided written notice of the transfer and the new owner's address within 10 days. This includes an update on where the deposit is now being held.

Written Notice Requirement

Colorado law requires landlords to provide written notice to tenants regarding security deposits. 

When initially collecting a security deposit, the landlord must provide the tenant with a written notice that legally describes the landlord's policies and procedures. This notice should specify details like:

  • The amount of the security deposit 
  • A description of the portion that is refundable vs nonrefundable
  • An explanation of the terms under which the landlord may withhold the deposit

The notice should clearly state the tenant's right to receive a refund of the security deposit, less any valid deductions, within 30 days after the end of the tenancy.

As the lease term comes to an end, the landlord must send another written notice reminding the tenant about the security deposit. This end-of-lease notice should include:

  • The landlord's name and contact information
  • A reminder about the existence of the security deposit  
  • An accounting of any deductions taken from the deposit during the lease term
  • A reference to the original notice detailing the tenant's right to a refund within 30 days

If the landlord intends to keep any portion of the security deposit, they must send the tenant a written notice explaining why. This notice must contain:

  • An itemized list of any damages or costs incurred
  • The applicable state law that allows the deduction
  • Payment of any refund owed minus the deductions 

The written notices regarding security deposits help ensure both parties understand their rights and obligations under Colorado law. Proper notice provides important legal protection for landlords and tenants alike.

Colorado's Security Deposit Limit

Colorado law limits the amount a landlord can charge for a security deposit. The maximum security deposit in Colorado is equal to one month's rent. For example, if the monthly rental amount is $1,000, the landlord can only collect a security deposit of up to $1,000. 

There are some exceptions to Colorado's security deposit limit:

  • If the tenant has a pet, the landlord can collect an additional security deposit amount. This pet deposit is limited to 25% of one month's rent. For a $1,000 monthly rental, the pet deposit could be up to $250.
  • The security deposit limit does not apply to properties that are subsidized or funded by the federal government, such as Section 8 housing. These properties can charge a security deposit of up to 1.5 times the monthly rent amount.
  • Landlords who manage single family homes or condos that they own, and serve as the property manager, are exempt from the security deposit limit. They can charge any amount for the security deposit.
  • The security deposit limit only applies to the first year of tenancy. After the initial lease term, a landlord can collect additional security deposit funds if allowed in the lease.

Other than the exceptions noted above, Colorado landlords are not allowed to charge security deposits that exceed one month's rent. Requiring an extra large security deposit to approve a rental application is prohibited. Tenants should be aware of their rights regarding maximum allowable security deposits in Colorado.

Walk-through Inspection

Doing a thorough walk-through inspection at the beginning and end of a tenancy is crucial for avoiding deposit disputes. 

Move-In Inspection

Before moving in, the landlord and tenant should do a joint walk-through, carefully inspecting the rental unit and noting any existing damages, repairs needed, or general condition of the property on a move-in checklist. Having a record of the unit's state at move-in provides proof if the landlord tries to blame pre-existing damages on the tenant later when deducting from the deposit.

The move-in inspection checklist should note things like:

  • Condition of floors, carpets, walls, ceilings  
  • Appliances present and working
  • Function of electrical, plumbing, gas, HVAC systems
  • Window, door, and lock condition
  • Yard, landscaping, fence condition
  • Garage or storage areas
  • Furniture, if provided

Both parties should sign and date the checklist after the walk-through, with the tenant keeping a copy for their records.

Move-Out Inspection  

At the end of the lease, the landlord will again inspect the property and note the condition. Comparing it to the original move-in checklist helps determine if damages occurred during the tenancy that may justify deposit deductions.

Having photographic or video evidence is advisable to document the preand post-move condition. Tenants should take dated pictures or video upon move-in and move-out to protect against improper blame or exaggerated damage claims.

Returning the Security Deposit in Colorado

In Colorado, landlords must return a tenant's security deposit within 30 days after the tenancy ends and the tenant has vacated the unit. This applies regardless of whether the tenant moved out at the end of the lease or broke the lease early. 

Within that 30 day timeframe, the landlord must send the tenant their security deposit balance, minus any lawful deductions. The landlord must also include an itemized statement explaining any deductions they made from the deposit.

If the landlord needs to make deductions from the security deposit, they can legally deduct for:

  • Unpaid rent
  • Damage to the unit beyond normal wear and tear
  • Unpaid utilities that were the tenant's responsibility 
  • Cleaning needed to return the unit to the same condition at move-in
  • Rekeying costs if the tenant failed to return all keys
  • Repairs of damages caused by pets  

The landlord cannot make deductions for normal wear and tear in Colorado. Wear and tear includes minor scratches, worn carpets, faded paint/wallpaper, etc. The tenant is not responsible for paying to replace or restore items that wore out naturally over time.

If the landlord fails to return the deposit or provide a statement within 30 days, the tenant should send a formal letter requesting the refund. If the landlord still does not comply, the tenant can file a lawsuit in small claims court against the landlord. The judge can award double the amount of the security deposit if the landlord is found to have wrongfully withheld the deposit.

Deducting for Damages from the Deposit

A landlord in Colorado can legally deduct from the security deposit to cover any damages caused by the tenant beyond normal wear and tear. However, the landlord cannot deduct for normal wear and tear that occurs from regular use of the property.

Normal Wear and Tear vs. Tenant Damages 

Normal wear and tear refers to the expected decline in condition that occurs naturally over time from a tenant living in the property. Things like worn carpet, faded paint and wall scratches, worn cabinets and countertops would be considered normal wear and tear that the landlord cannot deduct for.

Tenant damages refer to excessive damage caused by the tenant's actions or negligence beyond expected normal wear. Punching holes in walls, staining carpets, breaking appliances, and damaging fixtures would be considered tenant damages. Pet damage like scratched floors or doors, urine stains, and chewed moldings are also the tenant's responsibility.

Documenting Damages for Deposit Deductions

The landlord has the burden of proof to show tenant damages if deducting from the deposit. It is essential for landlords to thoroughly document the condition of the unit at move-in and move-out. Taking dated photos or video and noting damages on inspection reports provides proof. Estimates or receipts for repair costs should be saved to justify deduction amounts.

Sending Itemized Deduction List to Tenant  

Along with returning any deposit balance, Colorado landlords must send an itemized list of any deductions from the security deposit within 30 days after the tenant moves out. This should detail each damage charge, include copies of repair estimates or receipts, and be sent along with the remaining deposit balance (if any).

Filing in Small Claims Court

If a landlord in Colorado wrongfully withholds a security deposit, one of the main resources available to tenants is taking legal action in small claims court. This allows a tenant to sue their landlord for the return of the improperly held security deposit, without needing to hire a lawyer.

The first step is for the tenant to send a formal demand letter to the landlord, requesting the return of the full deposit within 7 days. If the landlord still refuses to comply, the next step is for the tenant to file a case in small claims court. The filing fees are relatively low, usually around $50-$100 depending on the amount being disputed.  

To boost their chances of winning the case, the tenant should gather as much evidence as possible to prove their claim and justify that the full deposit should be returned. Helpful evidence includes:

  • The original lease agreement showing the deposit amount paid.
  • Bank records showing the deposit was paid. 
  • Inspection reports and photos documenting the condition at move-in and move-out.
  • Any written notices pertaining to the deposit that were exchanged with the landlord. 
  • Receipts for cleaning, repairs, or damages that were deducted.
  • Written estimates for disputed deduction amounts.

At the court hearing, the tenant will present their evidence and explain why the deductions were improper or excessive. The landlord can counter with their own documentation supporting the deposit retention. 

If the judge determines the landlord unlawfully kept the deposit, the court can award the full deposit amount to the tenant. Additional damages up to twice the amount wrongfully withheld may be granted. The landlord may also be ordered to pay the tenant's court fees and costs.

Pursuing legal action enables tenants to hold landlords accountable when security deposits are not handled properly according to Colorado laws. Having thorough evidence and following the proper steps can help tenants successfully recover their hard-earned deposit money.

Frequently Asked Questions

What are the security deposit laws in Colorado?

In Colorado, security deposit laws limit the amount a landlord can charge for a deposit, require deposits to be held in a separate bank account, and establish timelines for returning deposits when a tenant moves out. Landlords must also provide tenants with written notices about the deposit.

Can a landlord in Colorado keep my security deposit?

A Colorado landlord can only keep part or all of the security deposit if the tenant agrees or if there are unpaid rent or damages beyond normal wear and tear. The landlord must send the tenant an itemized list of deductions from the deposit within 30 days.

How much security deposit can a landlord charge in Colorado? 

Colorado law limits security deposits to no more than one month's rent for an unfurnished unit, or 1.5 times the monthly rent for a furnished unit. Local laws may further restrict deposit amounts.

When does a landlord have to return a security deposit in Colorado?

Colorado requires landlords to return security deposits within 30 days after a lease ends and the tenant vacates. If any deposit is withheld, the landlord must provide an itemized statement within that 30 day timeframe.

What can a landlord deduct from a security deposit in Colorado?

Allowable deductions include unpaid rent, damages beyond normal wear and tear, and utilities left unpaid by the tenant. The landlord cannot deduct for pre-existing conditions or normal wear and tear.

Does Colorado require security deposits to be held in a separate account? 

Yes, Colorado landlords must keep security deposits in a separate bank account that only contains tenant deposits, not other funds.

What are the rules for security deposits in Colorado?

The main rules are limits on deposit amounts, requiring deposits to be stored separately, mandating written notices, establishing timelines for returning deposits, allowing deductions only for unpaid rent/damages, and enabling tenants to recover wrongfully withheld deposits.

What are the time limits for returning a security deposit in Colorado?

Colorado landlords have 30 days after the lease termination and vacancy to return a security deposit or provide a written statement of deductions. Most security deposit disputes center around these time limits.

Can a landlord charge a non-refundable security deposit in Colorado?

No, Colorado bans non-refundable security deposits. All security deposits must be refundable barring unpaid rent or damages. Landlords can charge nonrefundable pet fees.

What happens if a landlord doesn't return a security deposit in Colorado?

If the landlord wrongly keeps a security deposit, the tenant can file a lawsuit in small claims court. The court can award the full deposit amount, plus up to twice the amount in damages.

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