The tenant has moved out, the keys are back, and the landlord is standing in the kitchen looking at a few gouged cabinet doors and a carpet that has seen better days. Most landlords know they can keep part of the deposit to cover damage. Fewer realize how closely Colorado now regulates that decision, or how quickly a $600 deduction can turn into a $1,800 judgment plus the tenant's attorney fees.

Colorado has always protected tenants when it comes to security deposits, but the rules got noticeably stricter on January 1, 2026. Landlords who follow a clear process from move-in to move-out rarely have trouble. Landlords who wing it are the ones who end up in small claims court. This guide walks through that process one step at a time.

What Changed in 2026

House Bill 25-1249 rewrote much of Colorado's security deposit statute, effective January 1, 2026. HB25-1249. The law now defines bad faith, presumes bad faith when a landlord keeps far more than the actual damages, sets specific limits on charging for carpet and paint, gives either side the right to a pre-move-out walk-through, and requires landlords to share their photos and receipts when a tenant asks. The common thread is proof. A landlord now needs to be able to show, with documents, that every dollar kept from a deposit was justified.

Step One: Build the Record at Move-In

A deposit dispute is usually won or lost before the tenant ever moves in. Colorado law does not allow a landlord to charge a tenant for any damage or defect that existed before the tenancy began. C.R.S. 38-12-103(1)(a). When a dispute arises, the landlord has to prove the damage is new, and the move-in record is usually the only way to do that.

A good move-in record has three parts. The first is a room-by-room checklist that the landlord and tenant both sign. Unsigned checklists, or checklists signed only by the tenant, invite arguments later. The second is a set of dated photographs or a walk-through video covering every room, including close-ups of cabinets, countertops, floors, and walls. The third, which many landlords overlook, is a note of when major finishes were installed or last updated, such as the year the carpet went in or the cabinets were painted. That information becomes important when it is time to put a price on damage.

Step Two: Offer a Walk-Through Before the Tenant Leaves

Under the new law, if either the landlord or the tenant asks, the parties must do a walk-through inspection before the lease ends, if it is reasonable and practical. C.R.S. 38-12-103(1.5). The walk-through can be in person or by live video, and it should happen after the tenant has had a chance to move furniture out.  The purpose is to identify in writing any damage beyond normal wear and tear.

A smart landlord offers the walk-through even when the tenant does not ask. It gives the tenant a chance to fix problems, and it is much harder for a tenant to dispute damage they saw firsthand and acknowledged on paper. Any items identified during the walk-through should be written down and, ideally, initialed by both parties.

Step Three: Document the Unit the Day the Tenant Leaves

Once the tenant is out, the landlord should photograph or video the entire unit the same day, before any cleaning, repairs, or contractor visits. The photos should match the move-in photos as closely as possible, from the same angles, so a judge can compare them side by side. Wide shots show context, and close-ups show the damage itself. Every photo should carry a date. These photos should be kept until any possible dispute is over. If the damaged items are later thrown away during a remodel, the photos may be the only evidence the landlord has.

Step Four: Separate Damage From Normal Wear and Tear

This is where most deposit disputes are decided. A landlord may keep deposit money only for unpaid rent, unpaid utilities, other lawful charges listed in the lease, or necessary repair work for damage that goes beyond normal wear and tear and did not exist before the tenancy. C.R.S. 38-12-103(1)(b). Anything else has to be returned.

Colorado defines normal wear and tear as deterioration, damage, or uncleanliness that results from using the property for its intended purpose, without negligence, carelessness, accident, or abuse by the tenant, the tenant's household, or their guests. C.R.S. 38-12-102. In practical terms, the question is whether the condition would be expected from someone living in the home normally, or whether it came from carelessness or misuse.

Some examples help. Faded paint, light scuffs near light switches, small nail holes from hanging pictures, worn paths in carpet, and minor stains on a countertop from everyday cooking are generally normal wear and tear. A large hole punched in a wall, a burn on a countertop, pet urine soaked into carpet, a door pulled off its hinges, or crayon all over a bedroom wall generally are not. Items in between, such as a handful of scratches on cabinet doors, call for honest judgment and good photos.

Landlords should also be careful about the lease. A lease clause that charges a tenant for repairs or cleaning due to normal wear and tear, or for conditions that existed before the tenancy, is void. C.R.S. 38-12-103(7)(b). Older lease forms with automatic carpet cleaning or repainting fees deserve a second look.

Step Five: Put an Honest Price on the Damage

Once the landlord has identified real damage, the next question is how much to charge. The statute allows a landlord to keep only reasonable amounts. C.R.S. 38-12-103(1)(b). In court, the landlord bears the burden of proving the amount of actual damages. C.R.S. 38-12-103(3.5)(c).

The best practice is to get a written estimate or invoice from a contractor before sending the deduction letter. A number that comes from a contractor carries far more weight than a number the landlord came up with on his own. If the landlord does the work himself, he should keep receipts for materials and a record of his time.

The age of the damaged item matters. Except for carpet, Colorado's statute does not set out a depreciation schedule, but a landlord who charges a tenant the full cost to replace or refinish something that was already several years old risks being found to have kept more than the actual damages. A tenant should pay to fix the damage the tenant caused, not to give the landlord a brand-new kitchen. If the landlord decides to upgrade, such as replacing old cabinets instead of touching them up, the cost of the upgrade is the landlord's.

The new law also adds specific rules for carpet and paint. A landlord cannot charge for replacing carpet throughout the unit unless the carpet has substantial and irreparable damage beyond normal wear and tear. C.R.S. 38-12-103(11)(a). If the carpet was not replaced within the ten years before the tenant left, it cannot be treated as substantially and irreparably damaged at all. C.R.S. 38-12-103(11)(c). Similarly, a landlord cannot charge for repainting the entire interior unless there is substantial damage to the paint on the walls or ceilings throughout the unit, though the landlord may charge for repainting specific areas with substantial damage. C.R.S. 38-12-103(11)(b).

Finally, landlords should understand the new bad-faith rules, because they turn an overcharge into a much bigger problem. A landlord keeps a deposit in bad faith if the amount kept unreasonably exceeds the actual damages, if there is no actual cause for keeping it, if the landlord knew or should have known it exceeded the actual damages, or if it was kept for a retaliatory or discriminatory reason. C.R.S. 38-12-103(3.5)(a). If the amount kept is 125% or more of the actual damages, the law presumes the landlord acted in bad faith. C.R.S. 38-12-103(3.5)(b). When a number is close, the safer choice is to charge less.

Step Six: Write a Clear, Itemized Deduction Letter

If the landlord keeps any part of the deposit, the landlord must send the tenant a written statement listing the exact reasons for keeping each amount, together with a payment of the balance. C.R.S. 38-12-103(1)(a). A statement that does not list the exact reasons is treated as a wrongful withholding. C.R.S. 38-12-103(2.5)(b).

A good deduction letter reads like an invoice. Each item is listed separately with a short description of the damage, where it is located, and the amount charged, for example, "Replace two broken blind slats in the front bedroom, $45, per attached receipt." Vague entries such as "general repairs" or "cleaning" without detail invite a challenge. The letter should include copies of the estimates, invoices, and key photos. It should also be complete. A landlord who later tries to add charges that were not in the original letter will have a hard time explaining why.

The letter and payment may be sent to the tenant's last-known address or to an email address the landlord knows the tenant uses. C.R.S. 38-12-103(1)(a). Sending it both ways, and keeping proof of mailing, avoids later arguments about when it was sent and whether it arrived.

Step Seven: Watch the Deadline

The landlord must return the deposit, or send the deduction letter with the balance, within 30 days after the lease ends or the tenant surrenders the unit, whichever is later. C.R.S. 38-12-103(1)(a). The lease can extend that period, but never beyond 60 days. Id. A landlord who misses the deadline loses the right to keep any part of the deposit, even for real damage. C.R.S. 38-12-103(2).

Many landlords use a 60-day lease provision to allow time for repair and replacement estimates, which is sensible. But the safest approach is to treat the deadline as a backstop rather than a target. Sending the letter a week or two early leaves room for delays and mistakes.

Step Eight: Respond Promptly to Requests for Documentation

Under the new law, if the tenant asks in writing, the landlord must provide the documentation in the landlord's possession that relates to the deductions, including photographs, inspection forms, receipts, invoices, and estimates, within 14 days. C.R.S. 38-12-103(8). Failing to provide the required documentation is treated as a wrongful withholding. C.R.S. 38-12-103(2.5)(a). A landlord who has followed the earlier steps will already have everything in one folder and can respond the same day.

When a Tenant Sends a Demand Letter

Sometimes a tenant disagrees with the deductions and sends a letter demanding the money back and stating that they intend to sue. This letter is important and should never be ignored. Colorado law requires a tenant to give the landlord at least seven days' notice of the demand and the intent to file suit before the tenant can seek treble damages. C.R.S. 38-12-103(3)(a). The tenant can sue for treble damages, attorney fees, and costs only if the landlord fails to return the withheld amount within those seven days. C.R.S. 38-12-103(3)(c). In other words, the demand letter gives the landlord one last chance to take treble damages off the table.

The first thing a landlord should do is note the date the letter arrived, because the seven-day clock is short. The second is to pull out the move-in checklist, the photos, the estimates, and the deduction letter and take an honest second look. Was each charge for damage beyond normal wear and tear? Was it new damage, not something that was there at move-in? Is the dollar amount supported by an estimate or invoice, and is it fair given the age of the item? It helps to look at the file the way a judge would, not the way an irritated landlord would.

From there, the landlord has a real decision to make. If the landlord returns the full amount withheld within the seven days, the tenant cannot pursue treble damages. C.R.S. 38-12-103(3)(c). Sending an explanation or a revised accounting during that window is not enough. The Colorado Supreme Court has held that once a tenant serves a demand, returning the money is the landlord's only way to avoid treble damages. Mishkin v. Young, 107 P.3d 393 (Colo. 2005). Returning only part of the withheld amount does not eliminate the risk on the rest.

The math is worth doing. Suppose the landlord kept $800. If a judge later decides that the deduction was wrongful and made in bad faith, the landlord could owe $2,400 plus the tenant's attorney fees and court costs. Returning the $800 within seven days caps the exposure at $800. When the documentation is strong and the charges are modest and clearly tied to tenant damage, a landlord may reasonably decide to stand firm. When the file has gaps, such as no signed move-in checklist, no estimate, or charges for old finishes, refunding at least the weak items within the seven days is often the better business decision.

Whatever the landlord decides, the response should be in writing, calm, and factual. The landlord should not threaten the tenant, make new charges that were not in the original letter, or argue about matters unrelated to the deposit. A short letter that either encloses the refund or explains, item by item, why the deductions stand is the best approach. And because the clock is so short, this is the moment to call a lawyer, not after the summons arrives.

The Cost of Getting It Wrong

A landlord who fails to follow the statute, or who wrongfully withholds any part of a deposit, loses the right to keep any of it. C.R.S. 38-12-103(2). The landlord can also owe three times the amount wrongfully withheld, plus the tenant's reasonable attorney fees and court costs, and the landlord bears the burden of proving the withholding was proper. C.R.S. 38-12-103(3)(a)-(b). There is one meaningful protection for landlords who act honestly: a landlord who kept the deposit in good faith and followed every other requirement, but simply kept more than the actual damages, owes only the excess and court costs. C.R.S. 38-12-103(3.5)(d); Guzman v. McDonald, 194 Colo. 160, 570 P.2d 532 (1977). Following the steps above is how a landlord earns that protection.



Coakley Law represents residential and commercial landlords throughout the Denver metro area. Landlords with questions about a security deposit, or who have received a demand letter from a tenant, can reach us at 303-500-1778 or coakleylaw.com.

This post is for general information only and is not legal advice. Reading it does not create an attorney-client relationship. Every situation is different, so landlords should consult a lawyer about their specific facts.