Security deposits are regulated by Colorado law, Section 38-12-101, et seq., C.R.S. A security deposit (also called a damage deposit, cleaning deposit, last month's rent, etc.) is any advance or deposit of money used to secure the performance of the lease. The landlord may deduct from the deposit for the following:
If the tenant vacates prior to the termination of the lease, the landlord may apply the security deposit to the unpaid rent for the rest of the lease term (unless the premises are re-rented at a rate high enough to cover the damages that the landlord suffered) as well as for any damages to the premises, provided he/she furnishes the tenant with an itemized statement according to law. In addition, if the landlord's damages exceed the security deposit, the landlord may sue the tenant to recover for such damages.
In Boulder, landlords are required to return interest at 5.5% per annum to tenants. The interest is paid on the full amount of the security deposit. See Interest on Security Deposit.
Return of the Security Deposit
If the tenant has fulfilled all the terms of the lease (including giving the landlord proper notice, if required), has paid the rent in full and on time, and has left no financial obligation to the landlord, and if the unit is left in the same condition as when the tenant moved in, minus "normal wear and tear," the tenant is entitled to a full return of the security deposit. The tenant should either collect the security deposit in person or leave a forwarding address with the landlord so that the landlord can return the deposit.
Colorado law requires that the landlord send the security deposit or an itemized statement of the deductions and the balance of the deposit, if any, to the tenant within one month after the termination of the lease or the surrender and acceptance of the premises, whichever occurs last. This time period may be extended to up to sixty days if specified in the lease. The landlord must either deliver or mail the full deposit or a statement of deductions and the balance of the deposit to the last known address of the tenant. If the landlord fails to provide a written statement of deductions and the balance of the deposit in full within the specified time period, the landlord forfeits his/her right to withhold any portion of the security deposit. However, the landlord would still have the right to pursue compensatory damages against the tenant in a lawsuit for unpaid rent, damage to the premises, or any other financial obligation owed by the tenant.
How to Protect Your Security Deposit
The following steps can help ensure that you will get back your security deposit. Most likely, your landlord will refund your deposit in full if you follow these steps. If your landlord does not refund your deposit in full, you will probably have grounds for taking action against your landlord.
1. When you pay your deposit, get a receipt that specifies the amount you have paid as a security deposit. This may be a specific clause in your lease stating that you have paid a certain deposit. Save your receipt and cancelled checks for your records. (It is best not to pay the deposit in cash.)
2. Inspect the premises carefully!before you move in, if possible; at the latest, the day you move in. Fill out a checklist (see Appendix for Sample Check-in/Check-out Sheet). Carefully list ALL existing damages, large and small, and describe the condition of the place in regard to cleanliness. If it is a furnished apartment, make an inventory list of all the furniture provided so that you are not charged for "missing" pieces that were never there in the first place. Get the landlord or manager to accompany you as you inspect; if this is not possible, have a friend or a neighbor witness the inspection. Be sure to have the landlord and/or your witnesses sign the checklist, and make a copy for your records. If the landlord does not agree to accompany you on an inspection of your new apartment, we recommend that you send a copy of your witnessed checklist to your landlord by registered mail. This checklist is important protection for you and can serve as evidence of the condition of the apartment if you have to negotiate with your landlord or go to court to get your deposit back. The checklist can also serve to inform the landlord of needed repairs and provide an opportunity for you to negotiate with the landlord about getting the repairs made. If possible, get a written agreement from the landlord to complete any necessary repairs with definite dates for completing these repairs. See Maintenance and Repairs.
3. It is highly recommended that you take photographs of your apartment, including individual rooms and specific items to record any damage that already exists and to record the general condition of the apartment. Keep these pictures in your file of rental documents.
4. Pay your rent in full and on time. Keep a record of your payments.
5. Take care of the premises. Contact the landlord promptly if something needs repair. If he/she doesn't respond right away, notify him/her in writing about the defect and keep a copy for your records.
6. When you move out, it is advisable to clean the apartment thoroughly. If your apartment is excessively dirty, the landlord can deduct cleaning charges from your deposit if he/she so specified in the lease. It will be cheaper if you clean it yourself! If you do not do a satisfactory job of cleaning the mess you caused (over and above normal wear and tear, of course) then the landlord is entitled to use professional cleaners to finish the job. Tenants are required to leave the premises in the same condition as when first rented, with the exception of normal wear and tear. A landlord should expect to have to repaint and clean carpets periodically. Furniture normally gets worn with use. Carpets and draperies will fade due to normal wear and tear. However, if you never vacuumed your carpet in a year's time, or the cat or party guest has a few accidents, the landlord may, indeed, charge you for the cost of having it cleaned. You should repair any damages, such as broken furniture or picture-hook-holes in the wall. A little effort combined with glue, nails, and paint may save you the money that your landlord would spend to have a professional do the work -- at professional rates.
7. Upon moving out, make an appointment with the landlord to accompany him/her on a tour of the premises, listing any damages or necessary cleaning. Be sure to complete a checklist similar to the one used when you moved into the apartment. If at all possible, don't let the landlord complete the checklist alone because it will make it difficult to contest the damages with the landlord before he/she deducts them from your security deposit. If both you and the landlord agree on the specific condition of the apartment and the damages, if any, that you are responsible for, then both you and the landlord should sign and date the checklist. If you disagree, list your differences and try to have the landlord sign this as well. Keep a copy. If the landlord is unable or unwilling to accompany you, have a friend or neighbor witness the inspection and sign the checklist. Give a copy to the landlord. Keep a copy for your records. These lists will be valuable evidence if you should go to court.
8. Take photographs of your apartment. Save these pictures with your other rental documents.
9. Leave a forwarding address with your landlord so that he/she knows where to send your deposit.
10. If you have roommates, come to an agreement regarding the disposition of your deposit: who should receive how much back?, who is responsible for what damage? All the roommates should sign and date this agreement. Give this agreement to your landlord and request that he/she divide and return the deposit accordingly (the landlord is not obligated to do this, but may be willing to comply with your wishes if all the roommates have agreed).
Division of Security Deposit
All of the tenants who sign the lease are jointly and severally liable for the performance of all of the conditions of the lease. Unless the lease states otherwise, the landlord may return the deposit, or the balance of the deposit that remains after deductions, to any one or more of the tenants. It is common practice, but not required, for the landlord to divide the remainder of the security deposit equally among the tenants. The landlord is not required to determine which tenant is responsible for what damage. It is then up to the tenants to determine among themselves which tenant is responsible for which deductions and to collect amounts owed from one another. It is helpful for the tenants to agree ahead of time as to how the deposit or its remaining balance should be divided, to write and sign a statement of this agreement, and to present this agreement to the landlord and request the landlord to return the deposit as designated by the tenants.
Interest on Security Deposits
A Boulder city ordinance adopted by the people at the November 5, 1985, election and effective December 5, 1985, provides that 5.5% per annum simple interest must be paid on the full amount of all security deposits on deposit for residential property in Boulder. The interest must be paid, or written notice of the reasons for nonpayment given, within one month after termination of the lease or surrender and acceptance of the premises, whichever occurs last. A landlord may withhold the payment of interest only for those reasons permitted under State law for retention of the security deposit. Waivers of the provision of the ordinance are not permitted and are declared void. Since the ordinance defines security deposit as an advance to secure performance of a rental agreement, the last month's rent is a deposit requiring payment of interest, whereas a deposit to hold a unit prior to signing a lease is exempt.
The ordinance provides for actions against landlords by tenants to recover treble damages or $100.00, whichever is greater, plus attorney's fees and court costs, if the interest is willfully and wrongfully retained. The tenant must give the landlord at least seven days notice before filing an action. The "interest on the security deposit ordinance" is a municipal law and is enforced in municipal court. If you need assistance in receiving interest on your security deposit, contact the City of Boulder Human Rights Office at 441-4364. If the lease does not contain a clause specifying payment of this interest, the county courts probably will not enforce payment of interest or treble damages, because this is a municipal, not a state, law.
A major unresolved issue is the federal income tax treatment of security deposit interest. Although no guarantee can be given, the ordinance has been drafted in an effort to avoid any landlord reporting requirement ("1099 Form") to the Internal Revenue Service. However, individuals should seek independent tax advice, and the City of Boulder cannot provide such advice.
The ordinance is codified at Section 12-2-4 through 12-2-6, B.R.C. 1981. Mobile home parks are not covered by the law. The City of Boulder Human Rights Office, 441-4364, can be contacted concerning the enforcement of the law. Noncompliance with the ordinance may result in prosecution by the City in Municipal Court.
What To Do If You Do Not Get Your Deposit Back Or If You Disagree With What Your Landlord Has Withheld
If the landlord does not return the security deposit or does not send the itemized list of deductions within the required time period, or if the tenant disagrees with the deductions made by the landlord, the tenant should attempt to negotiate with the landlord for the return of the security deposit. If this fails, the tenant should take the following steps:
1. The tenant must send a letter to the landlord in order to be eligible to receive "treble damages." This letter, often called the "seven day demand letter," should state that the tenant will sue the landlord for three times the amount of the deposit wrongfully and willfully withheld if the deposit is not returned to the tenant within seven days of the receipt of the letter. The letter should state the address of the rental premises, the dates of occupancy and the amount of security deposit paid. The letter should be sent by certified mail, return receipt requested, so that the tenant will receive a dated receipt after the landlord receives the letter; in addition, the tenant may also send a copy via regular mail. The tenant should keep a copy of this letter for his/her records. See the Appendix for a sample "seven day demand letter."
2. If the landlord returns the deposit in full or pays the tenant the disputed portion of the deposit within the seven days, the matter will end. Even if the landlord returns the deposit in full, he/she may take action against the tenant (i.e., sue) for damages to the premises or money owed to the landlord by the tenant.
3. If the landlord does not respond to the satisfaction of the tenant within seven days, the tenant may sue the landlord to obtain the return of the security deposit. If the landlord has willfully and wrongfully withheld any portion of the security deposit, the tenant may recover three times the amount that has been willfully and wrongfully withheld, plus reasonable attorney's fees and court costs. In court, the landlord has the burden of proving that he/she was right in withholding the damage deposit. Even though the landlord forfeits the right to withhold any of the security deposit if he/she has failed to return it or a statement of deductions within the required time period, the landlord may counterclaim against the tenant for any damages caused by the tenant. Further, the tenant's liability is not limited to the amount of the security deposit. Many leases provide that a landlord may recover his/her attorneys' fees and court costs if the landlord wins.