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Property Management Blog


How to Handle Security Deposits

In Colorado, there’s no limit on the amount of a security deposit landlords can collect. However, there are some strict regulations on how it’s returned and in what timeframe. This is an easy place to make a mistake, and those mistakes are often expensive. Tenant disputes over security deposit returns are frequent, and you have to make sure everything is documented and in order if you want to avoid any conflicts or claims with your tenants after they move out.

Conduct a Move-Out Inspection

Your move-out inspection actually begins before your tenant moves into the property. You’re comparing the condition of your property now to the condition of the property before a tenant took possession. That means you need a well-documented inspection report with photographs. Take that inspection report from the move-in period and use it to walk through the property once the tenant has vacated. This will give you an opportunity to see where things are different. If it’s not as clean as it was when you handed over the keys, you can deduct cleaning fees from the deposit. If the walls are a different color, you can charge the security deposit for the cost of repainting.

The move-out inspection requires a lot of detail and hundreds of pictures. If the tenant tries to dispute a deduction you make from the security deposit, you’ll want some supporting documentation to prove your claim.

Returning a Colorado Security Deposit: Wear and Tear vs. Damage

When it’s time to return the security deposit, you’ll need to decide whether the tenant is getting the full amount back or whether you’re making deductions from it.

Landlords and Lakewood property managers can withhold money from the security deposit for the following reasons:

  • To cover any unpaid rent.
  • To clean the home and return it to the condition it was in when the tenant took possession.
  • To pay for any damages that were caused by the tenant’s abuse, misuse, or neglect of the property.
  • To cover the costs incurred by a tenant’s early termination of the lease agreement.

Those tiny nail holes in a wall are considered general wear and tear, and can’t be deducted from a deposit. However, stains on the carpet from juice or a child’s art project should be considered damage.

Returning the Deposit: Timelines

Under Colorado law, a landlord must return the tenant's security deposit within one month of the tenant vacating the property, unless the lease agreement specifies a longer period of time. If you do write a longer period of time into your lease agreement, note that it cannot be more than 60 days.

If you miss the deadline, you can be held accountable for refunding the tenant three times the entire deposit amount, regardless of what you might have deducted from it.

When you return the full deposit, do it without delay. If you’re going to keep some of the money to pay for things like cleaning and damage, make sure you provide a complete itemization of each charge so the tenants know why. Include copies of invoices for the work. This careful attention to detail will help you avoid disputes and tenant court claims.

Every now and then, there’s a worst-case scenario, where the amount of the security deposit doesn’t cover the full amount of the damages that the tenant left behind. In this case, you’ll need to try and collect the remaining balance from your tenants. We’re going to address that in another blog soon, so be sure to look for it.

For additional help with security deposits, contact us at Assured Management, Lakewood property management experts serving residential landlords in West Denver and the surrounding areas, including Littleton, Golden, Wheat Ridge, Arvada, and more.