Colorado Security Deposit Laws: What Property Managers Should Know in 2024

Colorado Security Deposit Laws: What Property Managers Should Know in 2024

Author: Kasee Godwin
Date: 10.25.2023

As a property manager in Colorado, staying well-informed about the latest security deposit laws isn’t just good practice—it’s a cornerstone of your business’s credibility and legal compliance. The Colorado security deposit law landscape has nuances that can trip up even the most seasoned professionals if overlooked.

In this guide, we’ll break down Colorado’s security deposit laws, including how much you can charge, what you can deduct, and the timeline for returning deposits. We’ll also cover what you need to know about security deposit alternatives—and if they’re required for Colorado properties.

Colorado Security Deposit Laws: Key Points

There are a few key points that property managers should know regarding legal compliance related to security deposits they receive from residents:

  • Colorado landlord-tenant laws do not allow security deposit amounts to be greater than the amount of two monthly rent payments.
  • Landlords may request additional deposits for pets—as long as they’re not service animals.
  • There are no laws dictating how Colorado property managers should store their residents’ security deposits.
  • Property managers typically reimburse the security deposit within 30 days. 60 days is the legal maximum, but only if specified in the lease agreement.

Read on to take a closer look at Colorado’s security deposit laws.

Recent Changes to Colorado’s Security Deposit Laws

Colorado lawmakers passed three new laws in 2023 to enhance housing accessibility for renters:

1. Applications

HB23-1099 requires property managers to accept previously used rental applications as long as the report is no more than 30 days old. That means if a prospective tenant supplies a screening report, the property manager can not charge either an application fee or a fee to access the screening report. 

2. Lease Agreements

HB23-1095 prevents property managers from adding language to their lease agreements that force residents to waive certain legal rights, such as the ability to participate in class-action lawsuits or jury trials.

Also, property managers may not penalize a resident for failing to provide notice that they aren’t renewing their lease. 

3. Income Requirements and Security Deposit Amounts

SB23-184 prohibits property managers from requiring that their residents’ annual income be more than double the annual cost of rent. Additionally, the law states that property managers may not require a security deposit that is greater than the amount of two monthly rent payments.

Security Deposit Alternative Laws in Colorado

As of 2024, Colorado does not have a law requiring property managers to offer residents security deposit alternatives (SDAs). However, a growing number of states have passed legislation related to SDAs, so it’s important for property managers to understand what a security deposit alternative is, and what the benefits to residents are. 

A security deposit alternative is an alternative to the traditional cash deposit required by property managers. Rather than asking residents to pay a sizeable upfront sum, alternatives such as surety bonds or installment-based deposit programs allow residents to pay smaller, recurring payments.

For example, Qira is a financial management platform for property managers that offers a security deposit program. This program allows residents to pay a monthly fee as low as $5 instead of a lump-sum cash deposit, reducing move-in costs. Qira also makes the security deposit collection process easier for property managers.

Platforms like Qira offer major benefits to both residents and property managers. Residents get to keep more cash in their pockets, and property managers don’t have to assume any additional risk—Qira handles it for them.

To learn more, check out Qira’s security deposit program here.

Collecting Security Deposits in Colorado 

Grasping the intricacies of security deposit collection is not just helpful—it’s crucial. Maneuvering the legal aspects of property management can be tricky, but with a clear strategy, you can secure your properties effectively and comply with state laws.

Maximum Security Deposits

Property managers may not charge a security deposit that is more than two months of rent payments, according to SB23-184

Pet Deposit Laws

Property managers who allow pets in their rental units may charge no more than $300 as an additional pet deposit fee, no matter what the monthly rental rate is. Additionally, property managers can charge monthly pet rent. This fee is limited to $35 per month or 1.5% of the monthly rent, whichever is greater.

Important note: If a resident’s pet qualifies as a service animal, property managers should not charge a pet deposit. However, if a service animal causes damage to the rental unit, property managers may charge the resident for necessary repairs.

Storing Security Deposits 

Property managers in Colorado are not required to store their residents’ security deposits in any certain manner. They also do not need to tell residents where the security deposit is held.

Tax Implications of Security Deposits

In the state of Colorado, a security deposit is not considered taxable income when it is first received—because it is not immediately considered revenue. This is because the property manager could still need to reimburse the security deposit to the resident. 

Once a resident moves out of a rental property, the security deposit is then considered taxable income for the property manager.

Allowable Deposit Deductibles in Colorado

Property managers in Colorado may use a portion of the deposit (or all of it) if the property suffered damage that was the direct result of abuse or negligence by the resident. Some reasons why property managers are permitted to deduct from a resident’s security deposit include:

  • Nonpayment of rent or charges related to necessary repairs
  • Unpaid utility bills
  • Abandonment of the premises (i.e. the residents moves out of the property before the lease is complete)
  • Damages to the property beyond normal wear and tear

State law distinctly prohibits property managers from deducting for things considered normal wear and tear.

What is Considered Normal Wear and Tear?

Normal wear and tear is the expected damage or natural deterioration of a rental property that occurs due to everyday use over time. For example:

  • Loose door handles
  • Faded hardwood floors
  • Small carpet stains
  • Minor scrapes on flooring or walls.

Excessive Property Damage

Any damage that is considered above and beyond normal wear and tear is commonly referred to as excessive property damage. For example: 

  • Broken windows and light fixtures
  • Large nail holes in the wall
  • Carpet stains or holes
  • Broken locks, door frames, or doors
  • Unauthorized painting or remodeling

Returning Security Deposits in Colorado

Property managers should be aware of security deposit laws and communicate with their residents to make sure the process of returning security deposits goes smoothly for everyone.

Security Deposit Return Timeline

Once a lease is over, Colorado security deposit laws require property managers to return a resident’s security deposit – and/or a specific itemized list of deductions – within 30 days after the resident moves out. These should be sent via U.S. Mail, therefore residents must provide property managers with a forwarding address.

Some lease agreements may allow the property manager up to 60 days to return the security deposit, which is the maximum amount.

Important note: The deadline for a property manager to return a security deposit is shortened to 72 hours (not counting weekends or holidays) if a hazardous condition involving gas equipment requires the resident to vacate the property.

Responding to Excessive Damage

If a resident has caused excessive damage to a rental unit, and the property manager intends to use the security deposit to pay for it, the property manager should take the following steps:

  1. Make an itemized list of the deductions.
  2. List the reasons for those deductions.
  3. Include the itemized statement with the portion of the deposit you return to the resident.
  4. Mail the security deposit and/or the itemized statement to the resident’s new address that has been provided.

The Bottom Line on Colorado’s Security Deposit Laws

Colorado property managers must maintain a strong understanding of the state’s security deposit laws. By following these guidelines, property managers can better protect their investments and ensure a fair process for everyone involved.

If you’re a property manager looking to reduce resident move-in costs and simplify the security deposit collection process, Qira can help. Qira’s security deposit program is the only cash-managed system in the industry.

If you’re ready to get started, you can book a demo and learn more about Qira today.


Qira aims to keep this information as up-to-date as possible. The content provided here is informational and should not replace legal advice. Please refer to the relevant government sources to check for any changes or updates to the law.

FAQs about Colorado’s Security Deposit Laws

Can property managers be penalized for delaying a deposit return?

If a property manager in Colorado fails to return a resident’s security deposit or provide an itemized list of deductions within 30 days (or 60 days if stipulated in the lease agreement), they can be sued by the resident for three times the amount they wrongfully withheld, plus court costs and reasonable attorney fees.

How can property managers facilitate a deposit return?

Move-out letters can facilitate deposit return. Clear communications help prevent confusion. Property managers can take proactive steps to prevent disputes over security deposits by providing a move-out letter to a resident once the resident has given notice that they intend to move out.

The property manager’s move-out letter should include:

  • Expectations for how you expect the property to be left (specific instructions about cleaning things like floors, appliances, etc.)
  • Details about your final walk-through inspection if you choose to perform one.
  • Explanation of possible deductions that you may legally make to their security deposit (outside of normal wear and tear), such as unpaid rent, necessary cleaning, and repairs, etc.
  • A reminder for the resident to return keys and provide a forwarding address for mailing the security deposit
  • Explanation of how and when you will return the deposit

Can security deposits be used as the final month’s rent?

If agreed upon and stipulated in the lease agreement, a property manager can accept a security deposit (or a portion of the deposit) as the resident’s final month’s rent.


Kasee Godwin

Position: Director of Marketing
Social Networks

Kasee is the Director of Marketing for Qira. She has nearly 15 years of experience in the real estate marketing industry, including 10 years on the client side. In her spare time, she enjoys reading science fiction, exploring new wineries, and fostering Golden Retrievers.

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