Colorado Security Deposit Laws

Through the passage of HB 25-1249 ("Tenant Security Deposit Protections"), Colorado drastically overhauled its security deposit framework. These specific new caps and provisions take full effect on January 1, 2026, severely limiting what landlords can charge and how they process end-of-lease deductions.

Deposit Limits and Installments (Effective Jan 1, 2026)

Colorado landlords are subject to strict financial limits upon move-in:

• Maximum Amount: A landlord may not inherently demand a security deposit that exceeds one month's rent.
• Installment Payments: Tenants hold the legal right to pay their security deposit in monthly installments. Landlords must allow the tenant a minimum of six (6) months to complete the payment.
• Eviction Protections: A landlord cannot file an eviction lawsuit (unlawful detainer) solely because a tenant missed a security deposit installment payment; the landlord must instead sue in civil/small claims court for the missing funds.

Holding the Deposit

Unlike some states, Colorado does not legally require landlords to hold security deposits in a separate, interest-bearing escrow account, nor are they required to pay out accrued interest to the tenant at the end of the lease.

Allowable Deductions

Landlords may deduct from the deposit for unpaid rent, unpaid utility bills, or damages extending beyond "normal wear and tear." However, Colorado law heavily restricts what constitutes damage:

• Carpets and Paint: Deductions for carpet cleaning/replacement and painting are heavily restricted. A landlord cannot charge for carpet replacement if the damage existed before the tenant moved in or if the carpet is over 10 years old.
• Cleaning Fees: Deducting funds for routine cleaning associated with normal usage is strictly prohibited.
• Walk-Through Rights: Tenants have the right to request a formal walk-through inspection to document damages. Landlords are forbidden from retaining funds for damages not actively documented during this physical walk-through.

Return Deadlines and Required Documentation

The timeline to return the remaining balance of the deposit is firm:

• Default Timeline: Within 30 days of the tenant surrendering the property.
• Lease Extension: If specifically written into the lease agreement, the landlord may extend this return period up to a maximum of 60 days.

If any money is withheld, the landlord must provide an exact written statement listing the reasons. Furthermore, if the tenant makes a written request, the landlord has 14 days to provide supporting evidence for the deductions—which must include photographs, original inspection notes, contractor receipts, and exact repair estimates.

Penalties for "Bad Faith" Withholding

Colorado brutally penalizes "bad faith" retention of security deposits. If a landlord willfully wrongfully retains a deposit—or retains an amount that unreasonably exceeds actual damages (e.g., deducting 125% of actual repair costs)—the tenant is entitled to sue.

Following a 7-day intent-to-sue notice, a tenant can recover three times (treble) the amount wrongfully withheld, plus court costs and attorney's fees.

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Simplify Colorado Compliance

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