Colorado Security Deposit Law: 2026 Updates for Landlords

For landlords, security deposits are a key risk-management tool, but Colorado law imposes strict limits on how these funds are handled. As of January 1, 2026, new rules under HB25-1249 change how security deposits are defined, documented, and returned. These updates increase landlord obligations and raise the stakes for getting it wrong.

This guide explains Colorado security deposit law, highlights the 2026 changes most likely to affect you, and offers tips to help landlords avoid disputes, penalties, and claims of “bad faith”.

• Security deposits are now legally considered tenant property held in trust by landlords (2026 update)

• Landlords must return deposits within 30 days, or up to 60 days if stated in the lease

• Deductions are limited to unpaid rent, utilities, and damage beyond normal wear and tear

• Landlords must provide a written, itemized statement explaining any deductions

• Supporting documentation must be provided within 14 days of a tenant’s written request

• Withholding 125 percent or more than actual damages may be treated as bad faith

• Tenants may recover treble damages, attorney’s fees, and court costs for wrongful withholding

Colorado law defines a security deposit as “any advance or deposit of money” that primarily functions to “secure the performance of a rental agreement for a residential premises.” 

Under C.R.S. 38-12-103, landlords may retain portions of a security deposit only in specific circumstances:

• Unpaid rent

• Unpaid utility expenses

• Unpaid lawful charges as listed in the lease

• Repair work for damages exceeding normal wear and tear

As of January 1, 2026, HB25-1249, Colorado law states that security deposits belong to the tenant and that landlords are obligated to act as “fiduciary custodians.” Landlords cited for improper handling of security deposits face financial penalties or legal claims. Since deposits are now considered tenant property, landlords must carefully follow documentation and timing requirements.

Along with confirming that tenants own their security deposits, HB25-1249 sets clearer limits on what landlords can charge, deduct, and include in lease terms.

HB25-1249 expands the definition of normal “wear and tear” in three important ways:

• Uncleanliness -  General dirt is now considered “normal wear and tear.” Landlords can only deduct cleaning costs if the unit is much dirtier than it was at the time of move-in. 

• Carpet Replacement - Landlords can charge for carpet replacement only if there is major, irreparable damage exceeding normal wear and tear. Carpets that are 10 years old or older at tenant move-in aren’t eligible for damage claims.

• Painting Deductions - Landlords can only reduce the deposit for painting if there is significant paint damage beyond normal wear and tear that happened during the current tenancy.

What is “Beyond Normal Wear and Tear”?

Colorado law on security deposits does not provide guidance to determine damage from normal wear and tear. Instead, it depends on how serious the issue is and whether it’s more than ordinary use. 

Courts usually consider how serious the damage is, how long the tenant lived there, and what the condition of the property was at the time of move-in when deciding if a deduction is reasonable. Here are some examples to help you distinguish the difference:

Typically considered normal wear and tear:

• Minor scuff marks on the walls

• Faded or slightly worn carpet from regular use

• Small nail holes from hanging pictures

• Light dirt or dust that can be cleaned with routine turnover

May be considered damage (deductible):

• Large stains, burns, or tears in carpet

• Holes in walls or significant wall damage

• Unauthorized painting that requires the unit to be restored to its original condition

• Excessive filth or buildup that requires deep cleaning

• Broken fixtures, doors, or appliances caused by misuse

Beyond evaluating damages, Colorado law also restricts the types of clauses landlords can include in rental agreements to protect tenant funds. HB25-1249 makes the following lease provisions unenforceable:

• Non-refundable deposits - Landlords must coordinate the return of a security deposit.

• Leasing fees - “Move-in” fees can’t be deemed a security deposit.

• Waivers - Lease clauses that attempt to mislead tenants into surrendering their right to have their security deposit returned.

In short, landlords must refund any money that’s referred to as a “deposit” in an agreement if the tenant meets their lease obligations. 

Colorado law lets landlords deduct certain lease violations from security deposits, but only if they give the tenant a written statement listing the exact reasons.

Common allowable deductions include:

• Unpaid rent

• Unpaid utilities

• Cleaning costs necessary to restore the unit (beyond normal wear and tear)

• Repairs for tenant-caused damage

• Lost income if the tenant abandons the property

Landlords in Colorado can deduct from a security deposit only in certain cases, and only for real losses or lease violations. 

The table below outlines common categories of deductions and the conditions that typically justify them:

Category	Condition
Unpaid rent	If the tenant leaves owing rent at the time of move-out.
Utilities	If the tenant fails to pay bills they’re responsible for under the lease.
Cleaning	Only to restore the unit to its move-in condition, excluding normal wear and tear.
Repairs	Only for damage that exceeds normal wear and tear and occurred during the tenancy.
Lost income	If the tenant abandons the property before the lease ends.

Every deduction must come with a written, itemized statement. If the tenant asks, landlords also need to provide supporting documentation to justify the amount withheld. 

Not sure whether a deduction would hold up under security deposit laws in Colorado? Consider speaking with a Colorado real estate attorney before issuing your itemized statement. Getting it right up front can help you avoid disputes or claims of bad faith.

There are strict deadlines for returning deposits to tenants. If you miss them, you may lose the right to keep any part of the deposit. 

• Standard - By default, landlords must return the deposit within thirty days of lease termination or surrender. 

• Lease extension - Up to 60 days (if explicitly stated in the lease, but cannot exceed 60 days).

Under the 2026 update, a landlord must provide a tenant with the requested documentation within 14 days. 

This documentation must support the reason for withholding funds, including:

• Evidence of unpaid rent or utilities

• Lease-based charges

• Repair costs tied to damage beyond normal wear and tear

If you miss deadlines or don’t provide your tenant the right documents, you may lose your right to any of the deposit. 

If you’re unsure whether your documentation meets Colorado requirements, a legal consultation with a member of my Eviction & Landlord Team can offer clarity, so that you can avoid unnecessary disputes.

Failing to follow the Colorado security deposit law can lead to significant financial consequences. In these instances, a tenant will issue a security deposit demand letter, giving the landlord seven days to respond.

If a landlord wrongfully withholds a security deposit, the tenant may recover:

• Three times the amount wrongfully withheld

• Attorney’s fees

• Court costs

Landlords are presumed to have acted in bad faith if they retain an amount that is 125 percent or more of the actual cost of damages incurred. If you use inflated estimates or make deductions without proof, you could be inviting unwanted legal exposure. 

Tip: Conservatively price your repair estimates. As a landlord attorney who advises landlords on a range of security deposit matters, I recommend getting at least two quotes or adding a buffer note in your deposit records to show that you’ve made your estimates in good faith. 

Either the landlord or tenant may request a walk-through inspection before the lease ends.

The inspection must:

• Occur at a mutually convenient time, but before keys are returned

• Take place after the tenant has removed their belongings

• Precede the tenant returning their keys Help identify potential damages before move-out is finalized

Walk-through inspections can be done in person or online. These can help prevent disputes, as both sides can clearly document their findings. 

In Colorado, security deposits are a frequent source of friction between landlords and tenants. While standard leases offer basic protection, a poorly managed deposit process can lead to costly legal penalties and triple-damage claims. A Robinson & Henry real estate attorney can help you safeguard your investment and maintain legal compliance by: 

• Reviewing and updating lease agreements - We ensure your lease is clear, using the maximum lawful accounting period to give you ample time to assess damages.

• Vetting security deposit deductions - Our team can help you distinguish between “normal wear and tear” and tenant damage, so that your itemized statements hold up under legal scrutiny.

• Resolving tenant disputes - If a tenant contests a deduction or threatens legal action, we provide assertive representation to defend your rights and mitigate potential liabilities.

Protect your rental business. Call 303-688-0944 or book your consultation online to begin.

Landlords must return the deposit within 30 days after the lease ends or the tenant vacates the property. A lease may extend this deadline up to 60 days, but no longer.

Landlords may deduct for unpaid rent, unpaid utilities, lease-defined charges, and damage that exceeds normal wear and tear. All deductions must be itemized and, if requested, supported.

Yes. A landlord can apply a security deposit toward unpaid rent, but they must include the deduction in the written, itemized statement provided to the tenant.

Yes. In Colorado, painting without permission is considered “damage” rather than normal wear and tear. A landlord can deduct restoration costs from your deposit for unauthorized paint jobs, but must provide an itemized report within 30-60 days.

If you forget to send the statement or return the funds within the 30- or 60-day statutory deadline, you will forfeit your right to keep any of the deposit. Additionally, a landlord who misses these deadlines can be presumed to have acted in “bad faith,” which a tenant can use against you in Colorado court for the security deposit.

Either the landlord or tenant can request a walk-through inspection to identify damages, and it must take place at a mutually convenient time before the lease ends. Walk-through inspections can be conducted either in person or virtually. 

No. Colorado law provides protections for tenants who are victims of domestic violence. As of January 1, 2026, state law provides security deposit protection for domestic violence victims in Colorado. HB25-1168 prohibits landlords from deducting repair costs from a security deposit for any damage caused by an incident of abuse.