In an ideal world, security deposits wouldn’t exist. Tenants would move into a rental –and look after it with the best of care. They would always pay the rent on time, and continually abide by the terms of the lease
Unfortunately, though, things don’t always work out this way. Things happen and mistakes are made. Sometimes, tenants end up vacating a property, leaving it in a state that requires renovations and repairs. Other times, they may fall behind on the rent –and leave owing thousands of dollars in bills and back rent.
Security deposits provide an ideal solution to the problem of tenant damage and owed rent. Think of them as an insurance policy for the home. The landlord collects the deposit at the time that the tenant moves in, and when they move out, the landlord applies the funds towards any outstanding rent, or damage that was caused by the tenant.
Security deposits, though, are not a simple cut and dry issue. Each state has different laws and requirements pertaining to the collection, use of, and sometimes even storage of security deposits, and landlords should take care to ensure that they’re operating in a way that’s in compliance with both state and municipal law. Additionally, security deposits are often a hotly contended issue –tenants usually assume they will be getting all of their deposit back, while landlords will usually attempt to keep the deposit and use it to fix up the rental. Property managers, unfortunately, often find themselves stuck in the middle –trying to ensure that the deposit is applied correctly, while at the same time helping to manage the expectations of both the landlord and the tenant. Little wonder that disputes about security deposits are one of the most common reasons that landlords and tenants end up in court.
Landlords and tenants would do well to know the law as it pertains to security deposits, and to have a clear understanding of their requirements when it comes to the use of the deposit. For landlords, this is vital for staying on the right side of the law, while for tenants, having a good knowledge of security deposits will help them to know their rights, and understand what they can do to ensure that they will get their deposit back.
With this in mind, let’s take a look at security deposits, and see what the law says about handling them. We’ll also uncover what tenants can do to increase their chances of getting their deposits back –in full!
Purpose of the Security Deposit
First, let’s look at the purpose of the security deposit. The security deposit is designed to cover damage, caused by the tenant, as well as unpaid rent and outstanding bills. It can also be used to cover cleaning services to restore the rental to the condition that it was in before the tenant moved in.
In the event that the total damages and unpaid rent are higher than the security deposit itself, the landlord or property manager has the option to pursue the tenant for back rent and damages. The deposit, however, usually helps to fill the gap and provides a level of protection.
According to Colorado state law, a landlord may keep all or a portion of the security deposit for any of the following reasons:
- Unpaid rent
- Unpaid utility bills
- Cleaning required to restore the rental to its previous condition
- Cleaning services, for example, a professional rug shampoo, that was agreed to under the lease
- Payment for damages to the rental that are beyond “normal wear and tear”
- Any other breach of the lease causing financial damage to the landlord
Damages to the Rental
While a landlord may keep the security deposit for any of the above, they cannot keep the deposit for anything that’s considered to be normal wear and tear. This includes faded paint and drapes, worn hinges on doors or locks, and old or worn carpet.
Here’s a look at some damages that a landlord cannot apply the deposit towards. The following are generally considered to be normal wear and tear.
In most cases, the deposit should not be held for the following:
- Faded or chipped paint
- Faded curtains or drapes
- Old, worn carpet or furniture marks in carpet
- Worn hinges on doors or locks
- Hole in wall from missing door stop
- Broken plumbing pipes, unless damaged by the tenant
- Central drain problems, unless caused by incorrect disposal of items
- General dust, including dusty blinds
- Bulb that went out in the refrigerator
On the other hand, the deposit can be used for damages that the tenant caused –issues that go beyond normal wear and tear.
Landlords can generally use the deposit for:
- Large holes or excessive damage to walls
- Stained carpet
- Flooring that has tears, holes, or burn marks
- Broken windows
- Damaged window screens
- Damaged doors and locks
- Appliances that were broken by misuse
- Clogged drains from misuse
- Damaged/missing window blinds
- Broken or damaged fixtures
Just because there was damage, though, doesn’t mean that the landlord can keep the entire deposit. The item or fixture’s age and condition when the tenant moved in must be taken into consideration as well. A common way to calculate how much of the deposit should be used for damages is applying the deposit so that the tenant only pays for what is known as the “remaining useful life” of the item.
So, for example, suppose a tenant has damaged carpet that’s seven years old. Supposing the carpet has a lifespan of about ten years, and a replacement carpet of comparable quality would cost $1,000, the landlord could charge only $300 for the three years’ worth of life that would have remained had the tenant not damaged the carpet.
In addition to damages, a security deposit can also be applied toward cleaning the rental, especially if it was excessively dirty. Trash or belongings left behind, grime or dirt in the kitchens and bathroom, and a general state of uncleanliness can usually all be considered excessively dirty.
It’s important to note that “clean” can mean different things to different people. It’s a good idea for the landlord to outline in the lease exactly what type of condition they expect their property to be left in when the tenants leave.
Here’s a list of cleanliness issues that the security deposit can generally be held for:
- Dirty kitchen appliances
- Food left in the fridge or cupboards, crumbs in drawers
- Gunk around toilets
- Trash or belongings left in the home
- Dirty carpets
- Dirty baseboards
Specific cleanliness requirements should be outlined in the lease. For instance, if it’s stipulated in the lease that carpets should be professionally cleaned at each change of occupancy, this means that the tenants should ensure that they hire a professional to clean the carpets. Simply opting for the cheapest carpet cleaner usually isn’t enough to tackle excessively dirty carpets.
In some cases, tenants may leave unpaid bills, including utilities, when they vacate a property. In these situations, the security deposit can be kept and applied toward these outstanding balances.
If stipulated in the lease, landscape maintenance is another area where the security deposit can be applied. Landscape maintenance issues include a dead lawn caused by neglecting to water it, uncut grass, as well as dead trees and bushes. The lease should always outline who is responsible for landscape maintenance.
The Refund Process
If the tenant has complied with all of the terms of the lease, has paid the rent in full and on time every month, has left no outstanding bills for the landlord to cover, and has caused no damage that goes beyond normal wear and tear, then the tenant is entitled to the return of their security deposit.
Laws pertaining to the return of security deposits vary considerably from state to state. But in Colorado, landlords are required to return the security deposit within 30 days, in most cases, although landlords and property managers can take up to 60 days if stipulated in the lease. However, they should never go beyond the 60-day limit. Any more than 60 days and the landlord or property manager could be held liable for three times the amount that was withheld.
If there are any deductions, the landlord or property manager should provide an itemized list of expenses incurred, along with the price of the necessary costs or repairs. Although the landlord is not required to provide the tenant with copies of receipts for expenses or repairs, they may wish to do so as further clarification.
Any remainder of the deposit should be returned to the tenant.
Tenants should either arrange to either collect the security deposit from the landlord in person or leave a forwarding address where the landlord to can mail the security deposit.
If the tenant disagrees with the deductions taken for expenses and damages, or if the landlord has not provided an itemized list, within 30 days, or up to 60 if specified in the lease, the tenant may send out what’s known as a “Seven-day Demand Letter” to the landlord. This letter should itemize the charges that the tenant is disputing, and state that the tenant may sue the landlord for three times the amount of the deposit withheld if the entire deposit or the disputed portion is not returned to the tenant within seven days of receipt of the letter.
The Seven-day Demand Letter should be sent certified mail, return receipt requested, and the tenant should keep a copy of the letter.
If the landlord returns the security deposit in full, or pays the tenant the disputed portion within seven days, the matter is considered to be resolved.
If the tenant has the intention of filing a legal suit against the landlord, they must notify the landlord seven days before doing so. This allows the landlord time to return any amount that may have been wrongfully withheld, outside of court.
A Seven-day Demand Letter Must Include:
- The address of the rental property
- The dates of the tenant’s occupancy
- The amount of the security deposit
- The tenant’s current mailing address
- If applicable, an explanation of the disagreement regarding the portion of the deposit withheld
If the tenant does not hear from the landlord within the seven days as specified by the demand letter, they can then choose to pursue legal action. For more information security deposits and tenant recourse in Colorado, see this document by the City of Longmont Colorado.
What Happens If a Landlord Fails to Follow Colorado’s Security Deposit Law?
If the landlord does not return the security deposit or an itemized list of deductions within the time period, they forfeit all rights to the deposit.
Additionally, if the landlord fails to follow security deposit laws in the state of Colorado, the tenant could be awarded up to three times the amount wrongfully withheld, plus reasonable attorney’s fees and court costs.
In some cases, clauses that are contrary to Colorado state law may be written into the lease. These clauses cannot be enforced in court. Landlords should take care to identify and eliminate these clauses before the lease is signed. If either party has a question concerning the enforceability of a lease term, they should seek legal advice.
Steps Tenants Should Take to Ensure That They Get Their Deposit Back
There are a number of things that tenants can do to ensure that they will get their deposit back.
One of the most important steps that a tenant should take is to ensure that they have carefully read and understand the terms of the lease. The lease should outline what is required of tenants in terms of lawn maintenance, as well as the condition that they should leave the property in when they vacate. It should also include additional stipulations, if they are required, such as having carpets professionally cleaned.
As a general rule, if tenants leave the rental in the same condition that it was in when they moved in, and paid the rent as well as any other bills, they should get their security deposit back
Tenants should also be sure to give proper notice when vacating the property, and should ensure that they remove all of their furniture and belongings, and clean the unit before they leave.
It’s also a good idea to document the condition of the rental when they first move in, and when they move out.
Document the condition of the rental:
- At the time of move in: Tenants should walk through the apartment, ideally with the landlord or property manager, and take note of any damage that they see. They should make a list, and have the landlord sign it; and take photos of each room and any damage that they note.
- At the time of move out: Tenants should also take pictures of the rental when they move out. They should keep the photos in case there are any issues with the return of the security deposit.
Colorado Security Deposits: FAQs
“Does Colorado law limit the amount that a landlord can charge for the Security Deposit?”
No. At the state level, Colorado does not set a limit on the maximum amount that a landlord can charge for a security deposit. But landlords should check city and county laws to ensure that there’s no limit set by their municipality.
“Can a landlord charge a nonrefundable deposit?”
No. A security deposit is considered to be the property of the tenant, and as such, the landlord holds the deposit as a security, in case the tenant violates the terms of the lease.
“Are there requirements for storing the security deposit?”
No. While some states require the landlord to store the security deposit in a financial institution and even require the deposit to earn interest, there are no requirements for how a landlord must store a security deposit in Colorado.
While security deposits may seem like a straightforward process, there’s still plenty of room for confusion and disputes to arise. To simplify the process, and help prevent misunderstandings surrounding the deposit, landlords should detail their process for handling security deposits in the lease. This should include important details, like what’s considered to go beyond normal wear and tear, the type of condition that the tenant should leave the unit in, and the process for returning the security deposit itself.
It’s also important for landlords to have walk-through inspections and to take photos or collect video footage to document the condition of the rental. This will provide irrefutable proof of the state of the unit, at the time that the tenant moved in.
Having both photographic evidence and an airtight lease will help to inform and educate tenants on what the deposit is used for, and what they can do to ensure that they will get it back. For landlords, they will also prove to be invaluable evidence, should they have to prove their case in court.
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