Security deposits in Colorado are regulated by Colorado Revised Statutes § 38-12-101 to § 38-12-104. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the requirements applicable in your area.

Maximum Security Deposit

Security deposits are limited to two months’ rent. Landlords/property managers may also charge a refundable pet deposit of up to $300.

Holding & Interest Requirements

Holding Requirements: Colorado state law does not currently specify where landlords/property managers must hold security deposits.

Interest on Deposits: Colorado state law does not currently require landlords/property managers to pay tenants interest on security deposits.

Information Provided to Tenant: Colorado state law does not currently require landlords/property managers to provide tenants with any specific information about where their security deposit is held.

Deposit Refunds

Timeline: Security deposits must be returned within 30 days after the lease ends or the tenant moves-out (whichever is later), unless the lease specifies a longer period, which can be up to 60 days. If the tenant is forced to move out because of a hazardous condition that the landlord/property manager did not repair, the security deposit must be returned within 72 hours of move-out.

Permissible Deductions: Landlords/property managers may deduct the following from a security deposit:

• Unpaid rent or utilities
• Damages beyond normal wear and tear
• Other lawful charges listed in the lease

Important Limits On Deductions:

• Carpet Replacement - A landlord/property manager cannot deduct the cost of replacing carpet from a security deposit unless the carpet has serious and irreparable damage beyond normal wear and tear, which did not exist before the tenant moved in. Carpet is not considered substantially and irreparably damaged if it has not been replaced with new carpet within the last 10 years.‍
• Painting - A landlord/property manager generally cannot charge for repainting unless there is substantial damage to the walls or ceiling throughout the rental unit that exceeds normal wear and tear and which did not exist before the tenancy.

Documentation of Deductions: If either the landlord/property manager or tenant reasonably requests, a walk-through inspection of the rental unit shall be conducted either virtually or in person to identify any damages. The inspection must take place at a mutually agreed time after the tenant has removed their furniture but before the end of the lease or move-out. If the landlord/property manager keeps any portion of the security deposit, they must provide an itemized list of deductions and the exact reason for each deduction. Relevant documentation of the deductions, including photographs, inspection forms or reports, receipts, invoices, or estimates, must also be provided to the tenant within 14 days of the tenant's request.

‍Penalties for Violations: A landlord/property manager loses the right to keep any portion of the deposit if it is wrongfully withheld. ‍

A security deposit is wrongfully withheld if the landlord: 

• Fails to provide an itemized list and documentation of deductions 
• Provides a written statement that does not list the exact reasons for deductions
• Does not return the remaining portion of the security deposit, minus any deductions, on time
• Retains any portion of the security deposit in bad faith 

Bad faith includes keeping money that: 

• Is much more than the actual damages (generally a minimum of 125% more) 
• Has no reasonable justification for retention
• The landlord/property manager knew (or should have known) was excessive, 
• Is retained for unlawful, retaliatory, or discriminatory purposes 

If a landlord/property manager wrongfully withholds the entire security deposit or any portion of the deposit 7 days after receiving a demand and notice of a tenant’s intent to sue, the tenant may recover 3x the wrongfully withheld amount as well as attorney’s fees and court costs. 

If a landlord/property manager retains a security deposit or any portion of the deposit in good faith and otherwise complies with all requirements of Colorado security deposit law, but is found by a court to have reasonably retained an amount greater than the actual damages incurred, the landlord/property manager will be liable only for the excess amount retained and court costs.

Sale of the Rental Property

When a rental property is sold or transferred, the person holding the security deposit must, within 60 days (1) transfer the security deposit or any remaining portion after subtracting lawful deductions to the new owner and notify the tenant of the new owner’s name and address or (2) return the funds to the tenant.