Changes to the Colorado Security Deposit Statute to take Effect January 1, 2026

On June 3, 2025, Governor Jared Polis signed House Bill 25-1249 (“HB 25-1249”) into law, enacting sweeping changes to Colorado’s statute governing security deposits (C.R.S. 38-12-103 or the “Security Deposit Statute”).  These changes will take effect beginning January 1, 2026.

Under the revised Security Deposit Statute, landlords may not retain any portion of a security deposit to cover “normal wear and tear” or (as added by HB 25-1249) “any damage or defective condition that preexisted the tenancy.”  Security deposits must be returned to tenants within 30 days following termination of a lease or surrender of a premises unless the lease specifies a different period for return (which period cannot exceed 60 days).

In addition to nonpayment of rent and utility charges, HB 25-1249 provides that landlords only have “actual cause” to retain “reasonable amounts” from a security deposit for “nonpayment of other lawful charges listed in the lease” or for “necessary repair work for damage or defective conditions that exceed normal wear and tear and did not preexist the tenancy.”

Other highlights of HB 25-1249 include the following:

• Lease provisions which assign a fee or charge to a tenant for repairs, cleaning, or other necessary work due to normal wear and tear or for any damage or defective condition preexisting the tenancy are void and against public policy.
• If a landlord withholds any portion of a security deposit, they must provide all documentation in their possession (including photographs, inspection forms or reports, receipts, invoices, or estimates) relevant to the retention within 14 days following a tenant’s request.
• If the landlord returns any portion of a security deposit by check to the tenant’s last known address and the check is returned to the landlord, the landlord must hold the payment for at least one year and disburse it to the tenant within 15 days following written request.
• Landlords may not withhold any amount of a security deposit for replacement of carpet throughout a dwelling unit unless there is substantial and irreparable damage exceeding normal wear and tear that did not preexist the tenancy. Carpet cannot be deemed substantially and irreparably damaged if it has not been replaced within 10 years preceding the termination of the lease or surrender of the premises.
• Landlords may not withhold any amount of a security deposit for repainting throughout the interior of a dwelling unit unless there is substantial and irreparable damage exceeding normal wear and tear that did not preexist the tenancy.
• Upon a landlord’s or tenant’s request, a walk-through inspection identifying damage or defective conditions exceeding normal wear and tear must be conducted, if reasonably practicable, either in person or virtually.
• As was the case prior to HB 25-1249, if a landlord fails to return a security deposit or provide the required notice to a tenant detailing why the security deposit was not returned within 30 days (or such other time period agreed upon in the lease, not to exceed 60 days), the landlord waives any and all rights it had to retain any portion of the security deposit.

HB 25-1249 also provides additional clarity with respect to a tenant’s right to seek treble damages when a landlord retains any portion of a security deposit in bad faith.  Tenants now must give a landlord seven days’ prior notice before filing legal proceedings, and C.R.S. 38-12-103(2.5), (3), and (3.5) now provide detailed circumstances under which a security deposit is deemed to be withheld by a landlord in bad faith.

Notably, although the HB 25-1249 is titled “Concerning Security Deposits Submitted to Landlords by Residential Tenants,” it did not make changes to C.R.S. 38-12-103 specifying that these statutory provisions only apply in a residential leasing context.  Read together with C.R.S. 38-12-102 (Definitions), and C.R.S. 38-12-502(5), legislative intent seems to suggest the Security Deposit Statute is designed to only apply with respect to the “owner, manager, lessor, sublessor, successor in interest, or agent of the owner of a residential premises.”  Still, commercial landlords should be aware of the Security Deposit Statute in the event further case law develops explicitly extending these statutory provisions in the commercial context.