Security deposits are regulated by Colorado law, Section 38-12-101, et seq., C.R.S. A security deposit, also called a damage deposit, is any advance or deposit of money used to secure the performance of the lease. This deposit may be retained by the landlord for the following: any unpaid rent or utility bills owed by the tenant; payment for damages to the premises beyond "normal wear and tear"; any cleaning the tenant agreed to in the lease; and any other breach of the lease causing financial damage to the landlord. "Normal wear and tear" is defined by Colorado statute to mean "that deterioration which occurs based upon the use for which the rental unit is intended, without negligence, carelessness, accident, or abuse of the premises or equipment or chattel by the tenant or members of his household or their invitee or guests". Examples of normal wear and tear might be worn tracking in the carpet. Examples of things that are not considered "normal wear and tear" are nail holes in the walls, stains on carpets, and mold on grout.
Return of Securitv 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, has left no financial obligation to the landlord, and has caused no damage beyond ordinary wear and tear, the tenant is entitled to a full return of the security deposit. The tenant should 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 return the security deposit or send an itemized statement of the deductions and the balance of the deposit, if any, to the tenant within thirty days after termination of the tenancy. This time period may be extended to up to sixty days if agreed 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 retains the right to pursue damages by counter-claim against the tenant in a lawsuit for unpaid rent or for any of the charges he could have otherwise deducted from the deposit damage to the premises or any other financial obligation owed by the tenant. Treble damages may be ordered against the landlord in a lawsuit for a security deposit not returned within the required time period.
Withholding of Securitv Deposit
If the tenant vacates prior to the termination of the lease, or if the tenant never moves in, but has signed a lease, the landlord may apply the security deposit to the unpaid rent for the remainder of the lease term. The landlord may also charge for any damages to the premises, provided s/he furnishes the tenant with an itemized statement within the time period specified in the lease. In addition, if the landlord's damages exceed the security deposit the landlord may sue the tenant to recover such damages.
Rent Liability for Early Move-Out
The landlord must make a reasonable effort to re-rent the premises if the tenant moves out early. The tenant is responsible for rent until the premises are rerented or until the lease expires. If the unit is re-rented for a lower amount the tenant may be assessed the difference in the rent. The tenant may also be charged for the landlord's reasonable costs of re-renting. It is important to look to the lease to see who is responsible for retreating the unit.
Recourse for Withheld Securitv Deposit
If the landlord does not return the security deposit or does not send an itemized list of deductions within the required time period, or if the tenant disagrees with the deductions made by the landlord, the tenant should take the following steps:
1. Attempt to negotiate with the landlord for the return of the security deposit.
2. Send a letter to the landlord. This letter (often called a "seven-day demand letter") should state that the tenant will sue the landlord for three times the amount of the deposit withheld if the deposit is not returned to the tenant within seven days of the receipt of the letter. The letter must state:
a) the address of the prior rental premises,
b) the dates of the tenant's occupancy,
c) the amount of the security deposit originally paid,
d) the tenant's current mailing address, and
e) (if applicable), a statement by the tenant explaining any disagreement with charges withheld from the deposit.
The letter should be sent by certified mail, return receipt requested. The tenant may also send a copy via regular mail. The tenant should keep a copy of the letter and the certified mail receipt.
If the landlord returns the deposit in full or pays the tenant the disputed portion of the deposit within seven days of the landlord's receipt of the letter, the matter is resolved.
3. If the landlord does not return the deposit within the seven days, the tenant may sue the landlord to obtain the return of the security deposit. The tenant may request three times the amount of the deposit that has been withheld plus reasonable attorney's fees and court costs. The landlord has forfeited the right to withhold any of the deposit if s/he has failed to return it within the time required by the lease. In court, the landlord may counterclaim against the tenant for any damages caused by the tenant. Note: Under most leases, the losing party in a court action is responsible to pay attorney's fees for the winning party.
4. Contact the Community Mediation Service to arrange to mediate an outof-court settlement. Mediation is often faster, less stressful, and cheaper than going to court. Trained, neutral mediators will help to facilitate a negotiation process that often results in agreements that both parties feel are fair and that are tailored to meet the needs of the individuals involved.
Precautions to Prove the Condition of the Premises
Before the tenant moves into the premises, a list of all existing damages and necessary cleaning should be prepared and signed by all parties. If either party is unavailable or unwilling to do this, another person should witness the inventory and sign the list and then provide the other party with a copy of this list. In addition, it is best to take photographs of individual rooms and specific items to document their condition.
Upon moving out, the tenant should make an appointment with the landlord to accompany the landlord on a tour of the premises, listing damages or necessary cleaning. The tenant and the landlord should sign both copies of the list and keep a copy for their records.