Douglas A. Turner, P.C.

With more and more people buying residential real estate for investment purposes, many novice landlords learn the hard way that keeping a security deposit can result in big trouble. Landlords must comply with Colorado’s Wrongful Withholding of Security Deposits Act (the “Act”). Read on and save yourself (or collect!) treble damages and attorneys fees.

Colorado’s Wrongful Withholding of Security Deposits Act

Colorado has a specific law regarding when and how a landlord may retain a security deposit. That law is § 38-12-103, C.R.S. Within one month after the termination of a lease or surrender and acceptance of the premises, whichever occurs last, a landlord must return to the tenant the full security deposit deposited with the landlord by the tenant, unless the lease agreement specifies a longer period of time, but not to exceed sixty days.

The security deposit cannot be retained to cover normal wear and tear. In the event that actual cause exists for retaining any portion of the security deposit, the landlord must provide the tenant with a written statement listing the exact reasons for the retention of any portion of the security deposit. When the statement is delivered, it must be accompanied by payment of the difference between any sum deposited and the amount retained.

Consequences to Wrongful Withholding of Security Deposit in Colorado

Failure to obey this law has serious consequences for the landlord. The failure of a landlord to provide a written statement within the required time works a forfeiture of all his rights to withhold any portion of the security deposit under this section.

The willful retention of a security deposit in violation of this section shall render a landlord liable for treble the amount of that portion of the security deposit withheld from the tenant, together with reasonable attorneys’ fees and court costs; except that the tenant has the obligation to give notice to the landlord of his intention to file legal proceedings a minimum of seven days prior to filing.

In simple English, if a landlord does not provide the required written statement within the required time period, the landlord must return the entire security deposit. Once the tenant gives notice that the deposit has been wrongfully withheld the landlord has seven days to return the entire security deposit. If the landlord does not return the entire security deposit, the landlord is liable for 3 times the security deposit plus attorneys fees and costs. It is a harsh law with no exceptions.

Sometimes a tenant’s damage to the rental property is substantial. It can take more than 30 days just to get all the repair estimates from contractors. In that situation, there is still no exception to the 30-day rule. A landlord must account to the tenant, in writing, within the required time period, without exception.

Some landlords believe that once the tenant gives notice that the security deposit has been wrongfully withheld, the landlord can still provide the required written accounting so long as the accounting is given within seven days. This is incorrect. Once the 30-day period runs and a written accounting has not been provided, the landlord is required to return the entire security deposit.

So what is a landlord to do if he fails to give the required notice and the tenant sends the seven-day demand letter requesting the return of the deposit? The answer is simple. The landlord must return the entire deposit. However, the landlord can still file suit to recover any damages. All the landlord loses is the right to keep the deposit. The burden is now on the landlord to file suit in either small claims court or County court.