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3 Things to Remember About Returning Security Deposits in Colorado

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Posted by Joseph Stengel on September 10, 2016

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At the end of a lease, one of the last things that must be handled is preparing the property for a new tenant. Sometimes, the rental property was damaged, which typically comes out of the security deposit that was paid by the tenant when they moved into the property. This is an important consideration in real estate management.

The overall process of returning or withholding the previous tenant's rental security deposit is relatively straightforward. That's what the security deposit is ostensibly used for: Defraying the costs of repairing damage caused by the tenant. 

Please Note: A security deposit can be withheld for nonpayment of rent and is not a subject of this article. C.R.S. 38-12-103(1).

The problem for landlords, and sometimes for tenants, lies in understanding exactly what the security deposit law says about landlord security deposit return or withholding security deposit money when it is is being withheld to pay for for damages that the tenant caused. Though not particularly complex, there are details that must be adhered to, and all the more so since there is a are penalty written into Colorado statutes for those who do not follow proper withholding procedures. That penalty is treble damage awards made to an injured tenant.  Potentially, every dollar of security deposit withheld can become three dollars of damages due to the tenant if the landlord veers outside of the procedures prescribed in the law.

The Time Frame: When must a deposit be returned?

The first thing landlords need to bear in mind is that, unless otherwise specified in the lease, there is a thirty-day deadline for providing the former tenant with a full or partial refund of the landlord tenant security deposit, and an itemized accounting of any funds retained for repairing the property. This deadline can be extended to a maximum of sixty days, if the lease so specifies, but no more than sixty days in any case. Miss this deadline, and the treble damages can be assessed against any landlord who fails to make a refund. 

What to charge for repairs?

The important thing about choosing to withhold all or part of the security deposit for repairs is understanding, first, "repairs" in this context does not apply to normal wear. For example, carpet has a normal, useful life, and it wears out in normal use over a period of years. Newer carpeting that has been chewed, stained, or otherwise damaged before it's normal life cycle is used up may be replaced using some funds from the security deposit (prorated for the time the the carpet was in use.) However, carpet that is past a normal life-cycle may need replacing, but cannot be charged to the tenant because it is normal for the carpet to be worn out at this point. Likewise, painting rooms that have seen normal use and have the occasional scuffs or marks on them does not justify withholding funds from the security deposit; However, things liked repairing a hole punched in the wall does. 

This can be a tricky area for frustrated landlords faced with substantial expenses in making a property attractive to prospective new renters. Landlords must use good judgment when deciding if something has crossed the line from normal "wear and tear"  to unreasonable property damage. Just keep in mind that the deck is stacked in favor of the tenant, insofar as the tenant can sue for three times the amount the landlord withholds, plus the expenses of litigating the dispute. A thousands dollars withheld for repairs can wind up costing four or five thousand dollars if the landlord loses the case.

It is important to be reasonable when deciding what damage is due to normal wear and tear and what damage is not a result of ordinary use. For example, if a refrigerator door has been broken, and the damage could be due to normal wear and tear, is it possible to replace just the door, rather than buy a whole new refrigerator? If a window screen has a hole in it, caused by factors out of the tenant's control, can the screen be replaced in the old frame, rather than a new frame being purchased and installed? Is it much less expensive, and just as effective, to refinish a wood surface, rather than to replace it? All of these decisions must be undertaken by the landlord with the full awareness that he may find himself in litigation justifying his decisions if the proposed repairs are in the gray area of what could be considered normal wear and tear.

Please Note: Naturally, if the damages are due to the tenant's actions and are not the result of normal wear and tear then a landlord is entitled to make a claim against the tenant's rental security deposit under our security deposit laws.  

Charging for Repairs: What is allowed?

Some landlords are prone to do a lot of the work on their properties themselves, or to have their own employees do it. Others contract out even the simplest of jobs. Obviously, the major advantage of the first option tends to be reduced costs, and perhaps even some greater control of the quality of the work done. However, if the landlord is going to charge the work back to the former tenant by withholding part or all of the security deposit, the landlord must provided the tenant with an itemized estimate or bid for the work that meets the burden that the work and costs being charged are reasonable and necessary. 

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In some cases, it might be pragmatic to simply bill the costs of materials to the former tenant, if the landlord or his employees are going to do the work themselves. Such might be the case if a new tenant is in a hurry to move on to the property, and an outside contractor can't do the work in time to meet the new tenant's schedule. But in the end, it is best to bill the client only for expenses that really can't be debated.

 

Charging for the price of say, five gallons of paint to repaint the interior--assuming the repainting is necessary and not due to normal wear--is very easy to justify. Charging for the landlord's time spent repainting brings up a slew of arguments the tenant can make: What is a reasonable rate for the landlord to charge for the time spent painting? Did it take the landlord too long to do the job, and thus result in charging for too many hours? Did the carpet need replacing, or, was it replaced because the landlord spilled paint on it?

Remember: The burden of proof is on the landlord under the Colorado landlord tenant law. Every situation or circumstance is different, so the test that will be used in court is: Was the repair necessary and were the costs reasonable--if there is any question--then the landlord likely will not prevail. 

These issues seem to be simple, but the real issue at hand is, what arguments will the tenant might make in court. The simple solution is to use a commercial contractor for jobs like repainting the property, or installing a new carpet. Rates can be compared to other contractors' rates, and the contractor can, if necessary, justify his rates, and show other contracts with similar rates. There is no obvious conflict of interest, since the landlord would not be motivated to over-pay (and thus over-charge) money he is passing through to a contractor (again, assuming the landlord isn't contracting with his brother-in-law, or best friend, or some other relationship that could suggest a "sweetheart" deal for the contractor.)

The Final Analysis

At some point, it comes down to this: Landlords should expect that, from time to time, they will be required to justify the expenses they have withheld from the tenant's security deposit. In the end, the law seeks to protect tenants from landlords misusing the leverage of the security deposit. Thus, a tenant is protected by the requirement that any landlord seeking to withholding monies from the tenant's security deposit must submit an itemized statement to the tenant documenting the costs and types of repairs that were made.

Diligently adhering to the letter of the law is a business practice that protects a landlord from the threat of treble damage awards being made to a tenant. This is a prime example of a situation where it may be wise to spend a little time with an attorney on each case where the tenant's security deposit may be withheld, before going too far down any path that incurs liability for damage awards that could have been avoided.

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Topics: Colorado Landlord Tenant Law

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