Even in a state like Colorado, which is fairly landlord-friendly, tenants have a number of rights. Colorado law allows tenants to sue you if they believe that you have improperly withheld money from their security deposit, or if you did not return the security deposit in a lawful way.
It’s uncommon for disputes between landlords and tenants to escalate to the point that your tenant sends you a demand letter, but it’s not unheard of.
You’ll need to know how to respond and what you should do to protect yourself.
Here’s what we suggest.
What is a Seven-Day Demand Letter?
Tenants can send you a seven-day demand letter if they believe you did not return the security deposit to them as required. Colorado law requires that the seven-day demand letter is sent by first class mail. Tenants may send a certified copy as well, with return receipt requested, but if you refuse delivery of that letter, you’ll still receive a copy through the regular mail with sufficient notice that the tenant has a dispute.
The demand letter will give you the option to return the deposit to your tenants within the stated timeframe. If you don’t return that money or contact the tenant to negotiate, you could find yourself with a lawsuit in the small claims division of your county court or in county court under the Simplified Civil Action procedure.
First, Read the Demand Letter from your Golden Tenant
First things first, you have to see what you’re working with. Tenants can send a demand letter if they think you did not return their security deposit, if they think you were late in returning your security deposit, or if they believe you withheld money from the security for damages that were not their fault.
You need to read the letter carefully and see what their complaint is. You’ll also want to gather the important information, such as the deadline for your response.
Decide if the Tenants Have a Case
Mistakes can easily be made. Review your process and make sure you didn’t unintentionally withhold too much money, send the deposit late, or forget the send it at all. If you believe you are within your rights as a rental property owner and the tenant has no case, you’ll want to prepare your response and get ready for court.
There’s also room for negotiation. It’s possible you can talk to your tenant about the issue and decide on a resolution together, without going through the court process. If you are worried your documentation and your process won’t hold up in court, this might be the best course of action for you. There’s no reason to have a long, expensive, and frustrating court battle just because you withheld $100 in cleaning charges from the deposit and your tenant is disputing that. Unless you’re confident in your ability to prove the property was not as clean as it should have been, give them the $100 and move on.
Working with Golden Property Management and Legal Counsel
The best thing you can do to protect yourself when you receive a demand letter from your tenants is to talk with your Golden property manager or an attorney who specializes in landlord and tenant cases.
Do not provide any documents or make any promises without talking to your property manager and/or your attorney.
Sometimes, you’ll be able to resolve this with your tenants immediately. You can waive any of the debt owed by the tenant or make an offer to return some or all of what the tenant is demanding.
This is one way to solve the problem, but you’ll want to make sure you get a release of liability from your tenants so the demands end there and you don’t receive another letter claiming something else in a few days. A release of liability will protect you against the problem resurfacing or the tenant making additional demands. Your property manager or your attorney can prepare a release that will provide you with the protection you need.
It’s a huge benefit to have a property manager in your corner. You won’t have to deal with your tenants at all in these cases. If you’re trying to negotiate but tenants are being difficult, step away and get legal advice right away. You aren’t required to provide any documentation except for a copy of the lease agreement and addendum. Save your move-out inspection reports and documentation for court and discuss with your attorney what to provide and when to provide it.
Avoiding the Demand Letter: Handling Security Deposits in Golden, CO
You don’t want to receive that dreaded seven-day letter from a tenant. We’ve found that if there’s going to be a dispute between tenants and landlords, it’s likely going to arise during the move-out process and the management of the security deposit.
By understanding and following Colorado’s security deposit law, you can make sure you’re not putting yourself at risk.
Here’s what you should know.
- All Security Deposits are Refundable
Don’t charge a nonrefundable deposit. Colorado law does not allow this. The security deposit is your tenant’s money that you’re responsible for holding until the end of the lease period. Tenants must have the ability to get that money back after the lease is over and you’ve determined there’s no damage and no outstanding rent that’s owed. Every security deposit in Colorado is refundable.
- Return the Security Deposit On Time
The law unequivocally states that landlords, owners, and property managers must return the deposit to their tenants within 30 days from lease termination, or when those tenants leave the property. If your lease agreement provides for a longer refund period, you can return the deposit beyond those 30 days. However, the period cannot exceed 60 days.
If you’re going to extend the time in your lease agreement, make sure it’s not more than 60 days after the termination of the lease. Otherwise, your tenants can challenge that in court.
Returning Your Tenant’s Security Deposit
When you return the full deposit, there’s little to worry about. You won’t receive a demand letter. But, if you’re going to withhold some or all of the deposit, make sure you understand how to do it legally. This will protect you from tenant disputes and claims as well as their seven-day demand letters.
First, you have to know what you can withhold from the deposit. Then, you need to know what types of documentation is necessary to keep any of the money for repairs.
Here are some of the reasons you can lawfully withhold some or all of a Golden security deposit:
1. Unpaid rent
When tenants leave with an outstanding rental balance, you can use the security deposit to pay for that rent. Maybe the last month was only partially paid. You can use the deposit to bring the tenant’s account current. Perhaps your tenant left the property before the end of the lease term, without any notice. If a tenant breaks the lease agreement, you can use the security deposit to pay for the lost income.
2. Unpaid utilities
When your tenants move out and you attempt to turn the utilities on in your own name, you may find there’s an outstanding balance on the utility accounts. It’s possible they’ve been overdue for a while. In that case, you might have a hard time getting the tenants who have already moved out to catch up with those electric or water bills. You can use the tenant’s security deposit to pay for any overdue or unpaid utility bills.
3. Cleaning and removal costs
Your lease agreement and your move-out instructions should state that you expect to get the property back in the same condition that it was given to your tenants, except for the normal wear and tear. That means it should be empty and clean. If tenants leave trash behind or personal belongings, you can charge the deposit for the cost of removing all that.
If it’s not clean, you can charge the deposit for a portion of the professional cleaning that needs to happen before new tenants can move in. The courts say it has to be “broom-clean” and for new tenants you want it to be “sparkle-clean”. Paying for a portion of the professional cleaning out of your own pocket will help you if you end up in court.
4. Property damage caused by tenants
Property damage can be caused by abuse, misuse, and neglect of the property. It clearly goes beyond wear and tear. While small nail holes cannot be deducted, large holes in the walls or floors can absolutely be deducted from the security deposit. Scratches on the floor or stains in the carpet are examples of damage. If a refrigerator no longer works because a child was hanging on the door, that’s a repair you can deduct from the deposit.
Provide a written statement that describes what you are deducting and why. If you fail to send this accompanying statement with a partial refund or no refund, you will receive a demand letter and you may lose your claim to the amount of the security deposit you were trying to withhold.
It’s upsetting to receive a seven-day demand letter from your tenants, but don’t panic. We can help you move through the process with as little risk as possible. Contact us at Laurel Property Services, Inc. In addition to providing property management in Golden, we also serve Wheatridge, Morrison, Lakewood, Arvada, and Genesee, CO.
