Mountain Law: Security deposits: Know your rights
When a lease is over, it’s not uncommon for landlords and tenants to dispute the return of the security deposit. Here is an overview of the law in this area.
Colorado law requires a landlord: (a) within one month after the lease ends by its terms or the tenant vacates the property, whichever occurs last, to return the tenant’s entire security deposit; or (b) if the landlord has cause for keeping the security deposit, to provide the tenant with a written accounting listing the exact reasons for keeping of any portion of the deposit. The lease may extend the time for the landlord to account for the deposit up to 60 days.
A landlord must mail the security deposit or accounting to the tenant’s last known address. Failure to do so in the time required forfeits any right the landlord has to the security deposit (even if there is damage to the leased property). A landlord is not prevented from keeping a security deposit for cause other than normal wear and tear provided that the landlord properly accounts to the tenant.
A landlord who fails to comply with the law can be liable to the tenant for three times the amount of the security deposit plus attorney fees and court costs. A tenant must mail the landlord notice of intention to file legal proceedings a minimum of seven days before filing. A landlord can avoid liability for three times the amount of the security deposit and attorney fees and costs by returning the full security deposit within the seven day period. However, the landlord is no longer permitted to retain any portion of the security deposit at that time.
Here are a few pointers with regard to the effect of this law:
1. It’s a good idea for landlords to take advantage of the opportunity to extend the deadline up to 60 days when they draft their leases.
2. If a tenant makes a claim, the landlord must prove compliance with the law. Therefore, it’s a good idea for landlords to send accountings by certified mail.
3. Because an accounting must be sent to the tenant’s last known address, it’s a good idea for tenants to make sure their landlords have a current address for them, particularly if they move. A landlord must mail the accounting as opposed to sending it by email.
4. The law does not prevent a landlord from making a claim against a tenant for damages to the leased property as an offset to the tenant’s claim for the security deposit. Landlords often use the threat of such claims to pressure tenants not to file suit.
5. A landlord using a property management company to manage a rental property should ensure the company is contractually responsible for accounting to tenants for security deposits as required.
6. There is surprisingly little legal guidance on what that constitutes “normal wear and tear.” For example, I had a landlord client whose tenant damaged a wood floor with lots of tiny “pock” marks by walking on it daily in high heels, which was her normal business attire. The parties disputed whether this was normal wear and tear. To avoid such disputes, landlords may wish to define the meaning of normal wear and tear in their leases.
Landlords who know the law and properly account for security deposits usually have little to worry about with respect to claims by their former tenants, but when they fail to do so, tenants have the threat of triple damages and attorney fees on their side.
Noah Klug is principal of The Klug Law Firm, LLC, a general law practice in Summit County emphasizing real estate, business law and litigation. He may be reached at (970) 468-4953 or Noah@TheKlugLawFirm.com.
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