In a June 2024 article, Denver7 reported that according to Bankrate, a typical family home in the U.S. costs about $18,000 to own and maintain annually. Part of that goes toward yearly home upkeep and repairs, equivalent to about 2% of a property's cost.
So, if you bought a home in Denver, CO, for $500,000, its yearly maintenance and repairs could cost around $10,000! You may even spend more if you rent it out and your tenants damage it.
Fortunately, requiring security deposits can help protect you from such hefty costs.
The property management experts here at PMI Foothills explain what you need to know about security deposits, so read on.
Legal Maximum Amount for Security Deposits
Colo. Rev. Stat. § 38-12-102.5, published on the Casetext website, governs the maximum amount landlords in Colorado (and Denver) can charge tenants. Under this law, landlords can only require them to make a deposit amounting to two monthly rent payments. So, if you charge your tenant $1,000 monthly for rent, the maximum security deposit you can ask them is $2,000.
Dos and Don'ts of Using Security Deposits
Per Colo. Rev. Stat. § 38-12-102, security deposits are any monetary deposits that "secure" a rental agreement's performance. Unlike rent payments that landlords are free to use because it's theirs, security deposits aren't payments for anything that hasn't "happened" yet.
Let's move on to Colo. Rev. Stat. § 38-12-103 tenant deposit regulations. Under these laws, landlords can retain part of the security deposit for unpaid rent. Likewise, they can use part of the money to cover the following services that the tenant has contracted or is responsible for:
- Unpaid utility charges
- Cleaning services
- Repair work
You can't use security deposits to cover cleaning services or property repairs for items that have only sustained regular wear and tear. An example is a leaking faucet. If it leaks because it's old and not because the tenant damaged it, you can't use their security deposit to repair or replace it.
Returning Deposits
Another crucial fact about handling deposits landlords in Colorado must know is the return timeline.
Per Colo. Rev. Stat. § 38-12-103, Denver, CO, landlords must return the deposit to the tenant within a month from the lease agreement's termination or recovery of the property following an eviction proceeding, whichever occurs later. However, landlords can extend this to 60 days, provided such information is on the lease contract.
If returning only a portion of the deposit, you must also provide the tenants with a written statement explaining why. You must do this even if the tenants know why, such as if they didn't pay rent. If the deductions were for legal uses (e.g., repairs due to damage beyond normal wear and tear), enumerate where the money went, and if possible, include copies of receipts from the repair contractors.
PMI Foothills: Expertly Handling Security Deposits
As you learned in this guide, Denver landlords can legally require security deposits but must follow many strict laws.
Our Denver property management company, PMI Foothills, can handle their collection and management for you. In fact, with our extensive experience, combined with the knowledge and training imparted to us by PMI, a larger company with over $5 billion of assets under its management, we can manage every aspect of your rental business.
So, contact us today and get your free property analysis!
