REAL ESTATE: Security Deposits

By John Kokish, Kokish & Goldmanis, P.C. - Castle Rock
Posted

If you either are or have been a landlord or tenant, you undoubtedly have heard of Colorado’s treble damage statute pertaining to security deposits.

Knowing that the statute exists is not enough.  It is important to understand how it really works.  The purpose of a security deposit is to provide the landlord with a financial resource in the event of a default by the tenant or for damages done by the tenant to the property.  However, the money, although held by the landlord, still belongs to the tenant.

Colorado law requires that at the end of one month after the termination of a lease or surrender of the premises, whichever occurs last, the landlord must either return the full amount of the security deposit to the tenant or provide the tenant with a written accounting of the damages incurred and how that portion of the security deposit is to be withheld and applied by the landlord to repair damages.  This is true, whether there is a written lease or not.  The landlord may, in a written lease, extend the one month time period to no more than sixty days from the lease termination or surrender of the premises.

If the landlord fails to either return the full amount of the security deposit or does not provide the written accounting required by the statute, together with the check for the remainder of the security deposit, the landlord forfeits all of his rights to recover any part of the security deposit.  The landlord then also becomes potentially liable for treble the amount of the security deposit, plus attorney fees and court costs, in the event that suit is brought against him.  However, in order for the tenant to recover treble damages, attorney fees and court costs, he must send a written notice to the landlord providing him with a seven day notice that a suit will be brought in the event that the full amount of the security deposit is not returned.  It is then too late for the landlord to get a second bite of the apple and refund only that portion of the security deposit after damages are deducted.  The landlord must return the full amount of the security deposit since he has forfeited all of it in failing to comply with the original one month or 60 day deadline called for by the statute, under C.R.S. 38-12-103.       

Too often landlords think that they can provide a list of damages within the seven day notice period and return only that portion of the security deposit that they feel the tenant is entitled to because of the damages incurred.  However, the landlord has missed the boat and is now responsible for the full amount of the deposit despite any damages that may have been done to the premises.

If the case is brought to court, the landlord will be stuck with treble damages, attorney fees and court costs, but may be allowed an offset for the damages incurred.  If he fails to request that offset, he might have to bring a separate court action only on damages incurred to the premises, but in both cases, he will still be stuck with treble damages, attorney fees and court costs, all of which will make his oversight, even if  an offset is allowed, a losing proposition.

It is probably a good idea for a landlord to include in his lease a 60 day time period within which to return the security deposit in order to give him sufficient time to assess the amount of damages, if any, that were incurred.  It is also important to note that the landlord may retain the security deposit in full for non-payment of rent, abandonment of the premises, non-payment of utility charges, repair work or cleaning contracted for by the tenant.  He may not retain any portion of the security deposit for normal wear and tear.

Knowing how the statute works is essential to understanding your rights, whether you are a landlord or tenant.  

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