What Colorado Landlords Need to Know About Price Coordination Crackdowns

Over the years, Colorado’s reputation as a landlord-friendly state has dwindled, in part due to a series of bills that makes attracting good tenants and getting rid of bad ones equally difficult. 

Now, a proposed bill that failed in the legislature during the last session has been revived. 

It aims to crack down on landlords' use of property management software, which state and federal officials say leads to illegal price fixing.

It’s no secret that regulators don’t like property management software systems. Although these systems were developed to help real estate professionals make sense of an increasingly complex housing market, Colorado lawmakers believe certain features reduce competition and unfairly drive up rent prices. Namely, the algorithms property management software servicers use to suggest rent pricing to landlords. 

The algorithms’ proponents say they provide a practical solution to a complex issue. Federal regulators say the software goes too far. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) filed a joint legal brief accusing these software system users — landlords and property managers — of “price-fixing.” Specifically, the agencies honed in on the algorithms that allow real estate professionals to optimize rental income and occupancy rates for competing property areas. 

The DOJ later sued a prominent property management company for its algorithmic pricing practices. At the beginning of this year, Colorado’s attorney general joined other states in filing an amended complaint that alleges six landlords participated in a scheme to set rents based on each other’s competitive information through pricing algorithms. 

The Colorado Attorney General’s joint filing against property management companies wasn’t the state’s first attempt at regulating algorithms embedded within property management software systems. 

Last year, the Colorado legislature introduced a bill to prohibit landlords from using algorithmic devices to determine how much to charge tenants. However, it fell short in the Senate by one vote. 

Before casting his “no” vote, Colorado Senate Minority Leader Paul Lundeen, who called the bill generally “unnecessary, unhelpful, [and] disruptive to basic market economics,” acknowledged the legislature failed to provide landlords a protective exception. Specifically, the exception would have allowed landlords to use private lease data to set prices so long as they made a summarized version available to the public.

It’s easy to see how this bill fell apart upon further scrutiny. However, its failure has seemingly made way for a broader-sweeping version.

In January, Colorado representatives introduced a more stringent version of the same bill. Specifically, HB25-1004 prohibits a landlord or agent, representative, or subcontractor of a landlord from:

• Hiring or paying for an individual or service that helps landlords fix rent prices 

• Using a “coordinator” to facilitate an anti-competitive agreement between landlords

• Engaging in “conscious parallel pricing coordination” with two or more landlords

The key difference between this version and last year’s is that instead of fixating on the term “algorithm,” HB25-1004 focuses on analytics product “coordinators.” 

HB25-1004 defines a coordinator as “an individual who operates a software or data analytics service that performs a coordinating function for one or more landlords, including a landlord that is performing a coordinating function for the landlord’s own benefit.” 

Under the proposed bill, a coordinator could be: 

• A company that sells data-collecting software 

• A company that hires an individual or business that tracks rent prices across multiple properties

• A consultant hired by more than one landlord

• A trade association that provides individualized recommendations to landlords based on collected data (beyond exempted periodic reports)

• A landlord who informally shares pricing strategies using interpreted market data with another area landlord 

• Two neighbors who rent out their properties and agree to price rent at the same rate based on their market observations

• A real estate broker who conducts a comparative analysis of surrounding areas regarding rental amounts or how long to list a property

• A property management realtor (which meets the legal definition of a landlord) who analyzes rental amounts or listing durations

Per HB25-1004, a coordinating function plays out in the following way: 

• Gathering rental market data from two or more landlords, including past and current rental prices, the number of available units, and lease renewal information.

• Analyzing the data using a system. The bill’s language is broad enough to consider software, a spreadsheet, or a manual process system.

• Making price recommendations. The landlord receives recommendations about rent pricing, lease terms, and occupancy levels. 

If this bill becomes law, a landlord could violate the Colorado State Antitrust Act of 2023 and be accused of illegally restraining trade or commerce by price-fixing rental properties. 

Suppose this bill passes and suddenly, your current practices are called into question. Landlords face criminal and civil proceedings. 

Criminal Charges

The state can charge violators of the Colorado State Antitrust Act of 2023 with a class 5 felony, which carries a one- to three-year prison sentence, a two-year mandatory parole period, and a fine of up to $5 million. C.R.S. 6-4-118  

Civil Penalties

C.R.S. 6-4-113 allows the Colorado Attorney General to sue someone who violates the state’s antitrust law. The court can impose a civil penalty of up to $1 million for each violation. 

Civil Lawsuits

Additionally, a tenant could take you to court to recover damages. State law allows individuals injured by antitrust actions to recover three times the actual damages. For instance, if actual damages are $10,000, the court can order $30,000 in damages, plus attorney fees and other costs associated with the lawsuit.

It remains to be seen whether the House or Senate will introduce any exceptions. The ones that became a sticking point last session are not apparent in this new iteration of the bill. 

Our landlord-tenant law attorneys are following HB25-1004 and other legal challenges so that if Colorado law changes, they’ll be ready to fight for you. It’s never too early to hire an attorney who can assess your situation and offer sound advisement. Call 720-702-2892 to begin your case assessment.