Quick Reference: Colorado Security Deposit Rules Under HB25-1249 (Effective January 1, 2026)

A Denver property manager processes a move-out the way she always has: a quick walk-through, a repaint of the whole unit, a carpet replacement billed to the tenant, and an itemized statement mailed on day 35. Under the rules in place through 2025, that might have survived a challenge. As of January 1, 2026, almost every step of that routine is now a potential violation. The repaint and carpet charges may not be allowed, the day-35 statement is late, and a late statement forfeits the right to keep any of the deposit at all.

That shift comes from House Bill 25-1249, the Tenant Security Deposit Protections Act, signed by Governor Polis on June 3, 2025 and effective January 1, 2026. It is the most significant overhaul of Colorado's security deposit statute (C.R.S. 38-12-103) in decades. This guide walks Colorado property managers through what the law actually changed: the 30-day return rule, the narrowed list of allowable deductions, the new documentation and walk-through requirements, and the stiffer penalties for getting it wrong. It also clears up two widely repeated claims about the bill that are simply not true.

What HB25-1249 Changed at a Glance

• Broadened the definition of normal wear and tear.

• Barred deductions for conditions that preexisted the tenancy.

• Restated the return deadline as 30 days (up to 60 if the lease specifies).

• Added a walk-through inspection right.

• Required supporting documentation within 14 days of a written request.

• Tightened the rules on carpet and paint charges.

• Defined bad faith and added a 125% presumption, backed by treble damages.

• Set fixed timelines for ownership transfers and returned refund payments.

• Did not change Colorado's existing two-month security deposit cap.

First, Two Myths to Clear Up

If you have read about HB25-1249 anywhere in the past year, you have probably seen two claims that are worth addressing head-on, because both are wrong.

The first myth is that HB25-1249 capped security deposits at one month's rent. It did not. Colorado does cap security deposits, but at two months' rent, and that cap comes from a separate 2023 law (Senate Bill 23-184), codified at C.R.S. 38-12-102.5 and effective August 7, 2023, not from HB25-1249. HB25-1249 left the cap untouched. The confusion is understandable: the version of HB25-1249 introduced in February 2025 proposed changes to the upfront deposit amount, and an early fiscal note referenced them. But those provisions were amended out before passage, so the two-month cap from 2023 still governs.

The second myth is that tenants now have a right to pay the deposit in installments over six months. They do not. Like the proposed deposit-amount changes, an installment provision appeared in an earlier draft and was removed. Under the enacted law, a landlord may still require the full deposit at move-in.

The 30-Day Return Rule

The headline operational change is timing. Under prior law, a landlord had to return the deposit within "one month" after the lease terminated or the tenant surrendered the premises, whichever came last. HB25-1249 replaces the ambiguous "one month" language with a clean 30 days. The lease may still specify a longer period, but that period may not exceed 60 days. In other words, the default is 30 days, and 60 days is the absolute ceiling and only if the lease says so.

Within that window, the landlord must return the full deposit, minus any lawful deductions, together with a written statement listing the exact reasons for any amount retained. When the statement goes out, it must be accompanied by payment of the difference between the deposit and the amount kept. Mailing the statement and any payment due to the tenant's last known address satisfies the requirement.

The penalty for missing the deadline is severe and unchanged in its harshness: a landlord who fails to provide the written statement within the required time forfeits all right to withhold any portion of the deposit. This is not a partial penalty. Miss the deadline, and even legitimate, well-documented damage becomes unrecoverable from the deposit. For a portfolio processing dozens of move-outs a month, a reliable system for tracking each deposit's clock is no longer a nice-to-have. Our look at the hidden challenges of move-outs covers how a structured process keeps that deadline from slipping.

Narrowed Deductions: Wear and Tear, Preexisting Damage, Carpet, and Paint

The heart of HB25-1249 is a much tighter definition of what a landlord may deduct. The bill both expands the meaning of normal wear and tear and adds explicit new limits.

Colorado law has long barred landlords from retaining any part of a deposit to cover normal wear and tear. HB25-1249 broadens that definition to include deterioration, damage, or uncleanliness that occurs based on the use for which the unit is intended or reasonably and typically used, without negligence, carelessness, accident, or abuse by the tenant or their household or guests. Crucially, the new definition draws a line on cleanliness: normal wear and tear does not include uncleanliness that renders the unit substantially less clean than it was when the lease began. So everyday dirt is now wear and tear, and a landlord can only charge for cleaning when the unit is meaningfully dirtier than it was at move-in.

The law also adds a new category the old statute did not address directly: a landlord may not retain any portion of a deposit to cover damage or a defective condition that preexisted the tenancy. If a scuff, stain, or broken fixture was there before the tenant moved in, the tenant cannot be charged for it. This makes a documented move-in baseline more important than ever, because a landlord who cannot show the condition at move-in cannot prove the damage is not preexisting.

Carpet and paint get their own dedicated rules, because they were among the most abused deductions. A landlord has no actual cause to retain anything for carpet replacement or repainting unless there is substantial, irreparable damage to the carpet, or substantial damage to the paint, that exceeds normal wear and tear and did not preexist the tenancy. Even then, the landlord may retain only the minimum amount necessary to replace the carpet or repaint the specific area that is damaged, not the whole unit. And there is a bright-line rule for aging carpet: a landlord may not deem carpet substantially and irreparably damaged if it has not been replaced with new carpet within the 10 years preceding the end of the lease. Old carpet is treated as having reached the end of its useful life, so its replacement is a cost of doing business, not a tenant charge.

Finally, the law closes a loophole around lease drafting. Any provision that assigns a fee or charge to a tenant for repairs, cleaning, or other necessary work due to normal wear and tear, or for any preexisting damage or defective condition, is now against public policy and void. Landlords cannot contract around these limits by burying a cleaning fee or a flat "repainting charge" in the lease.

For property managers, these deduction rules put a premium on clean lease terms and airtight move-in records. RIOO's contracts and renewals tools help keep lease language compliant and consistent across a portfolio, so a void clause doesn't quietly undermine an otherwise valid claim.

Documentation: The Written Statement and the 14-Day Rule

Alongside the narrower deductions, HB25-1249 raises the evidentiary bar. If a landlord retains any portion of a deposit, the written statement must list the exact reasons for the retention. Vague entries like "cleaning" or "damages" will not satisfy the requirement.

The bill then adds a documentation-on-demand rule. If the tenant makes a written request, the landlord must deliver, within 14 days, all relevant documentation in the landlord's possession or control supporting the retention. That includes photographs, inspection forms or reports, receipts, invoices, and estimates. The burden of proof has shifted firmly onto the landlord: in any court action, the landlord bears the burden of proving both that the withholding was not wrongful and that they complied with the statute, including proving the amount of actual damages incurred.

This is where documentation discipline stops being paperwork and becomes financial protection. Timestamped move-in and move-out photos, a maintenance history showing when carpet or paint was last replaced, and receipts tied to specific repairs are exactly what a landlord needs within that 14-day window. Capturing that record at the source, rather than reconstructing it after a dispute, is the point of RIOO's move-ins and move-outs module, which documents unit condition with time-stamped records. Our guide to property management accounting challenges covers the related discipline of treating deposits as tenant funds rather than income.

The New Walk-Through Inspection Right

HB25-1249 introduces a walk-through inspection into Colorado law for the first time. On the request of either the landlord or the tenant, and when reasonable and practicable, the parties must conduct a walk-through inspection of the unit to identify in writing any damage or defective conditions that are beyond normal wear and tear and that did not preexist the tenancy.

The mechanics matter. The inspection must take place at a time mutually convenient to the parties, before the lease terminates or the premises are surrendered, and after the tenant has had the opportunity to remove their furniture. It can be conducted in person or through a telecommunication-assisted interactive walk-through, so a video call can satisfy the requirement when an in-person visit is impractical.

The practical value is prevention. A joint, written walk-through gives the tenant a chance to fix issues before moving out and gives the landlord a contemporaneous, agreed record of condition, which is powerful evidence if a deduction is later challenged. For teams that already run structured move-out processes, folding this inspection into the existing checklist is straightforward; our piece on ten ways to streamline move-ins and move-outs shows how to build that consistency.

Penalties: Wrongful Withholding, Bad Faith, and Treble Damages

HB25-1249 sharpens both what counts as wrongful withholding and what it costs. A landlord wrongfully withholds a deposit if the landlord fails to timely provide the written statement and any required documentation, provides a statement that fails to list the exact reasons for retention, fails to timely return the difference between the deposit and the amount kept, or retains any portion in bad faith.

Bad faith now has a statutory definition. A landlord retains in bad faith if the amount kept unreasonably exceeds actual damages, is retained without actual cause, is an amount the landlord knew or should have known exceeded the actual damages, or is retained solely or in part for an unlawful, retaliatory, or discriminatory purpose. The bill adds a concrete presumption: retaining 125% or more of the actual damages is presumed to be an unreasonable amount. That single number gives tenants and courts a clear yardstick and gives landlords a strong incentive to keep deductions closely tied to documented costs.

The financial exposure is treble damages. A landlord who retains a deposit in bad faith can be liable for three times the wrongfully withheld amount, plus, under the broader statute, the tenant's reasonable attorney fees and costs. There is one important procedural guardrail for landlords: before filing suit, the tenant must give the landlord at least seven days' notice of the demand for return and the intention to file legal proceedings. That seven-day window is a genuine opportunity to cure a mistake and return what is owed before treble damages are on the table. Once litigation begins, though, the landlord carries the burden of proving the withholding was justified and compliant.

Other Changes Worth Knowing

Three additional provisions round out the law.

When ownership changes hands, the timeline is now fixed. Upon cessation of a landlord's interest in a unit, whether by sale, assignment, death, or appointment of a receiver, the person holding the deposit must, within 60 days, either transfer the funds to the successor in interest and notify the tenant by mail of the transfer and the transferee's name and address, or return the funds, or any remainder after lawful deductions, to the tenant. Buyers of occupied Colorado rentals should confirm at closing that deposits are being properly transferred and accounted for.

Returned refund payments now have a holding rule. If a landlord's payment refunding a deposit is returned undelivered, the landlord must hold the payment for at least one year and disburse it to the tenant within 15 calendar days of the tenant's request. Deposit money that cannot be delivered does not simply revert to the landlord.

Finally, the effective date carries a wrinkle worth noting. Parts of HB25-1249 were written to depend on the passage of a companion bill, HB25-1168, which addressed housing protections for survivors of domestic violence and abuse. Because HB25-1168 became law, the coordinated version of the security deposit amendments took effect. The whole package applies to conduct occurring on or after January 1, 2026.

What Colorado Property Managers Should Do Now

The through-line of HB25-1249 is that speed and documentation decide outcomes, and the penalties for slipping are steep. A few priorities stand out.

• Reset the return clock to 30 days.
  Treat 30 days as the operating deadline for every move-out, and rely on a longer period only if the lease specifies one, never beyond 60 days. A late statement forfeits everything.

• Rebuild your deduction playbook.
  Stop charging for routine repainting, general cleaning, and aged carpet. Reserve carpet and paint deductions for substantial, irreparable damage, keep the charge to the minimum area affected, and never bill for carpet older than ten years.

• Document at the source.
  Capture time-stamped move-in and move-out condition, keep receipts tied to specific repairs, and track when carpet and paint were last replaced. You may have to produce all of it within 14 days of a written request.

• Offer and document the walk-through: 
  in person or by video, and put its findings in writing. And audit your lease to remove any clause charging tenants for wear and tear or preexisting conditions; those clauses are now void.

Property managers who operate across state lines should also remember how much these rules vary. Our companion guides to California, Washington, and Texas security deposit laws show how different the deadlines, caps, and documentation standards are from one state to the next.

Conclusion

HB25-1249 did not change Colorado's security deposit cap, which remains two months' rent under a separate 2023 law, and it did not mandate installment payments, despite what many summaries claim. What it does is reshape the back end of every tenancy: a firm 30-day return deadline, a broader definition of wear and tear, tight new limits on carpet and paint charges, a bar on charging for preexisting conditions, a 14-day documentation-on-demand rule, a new walk-through inspection right, and a bad-faith standard backed by treble damages and a 125% presumption.

For Colorado landlords and property managers, the takeaway is not that deposits have become impossible to keep. It is that keeping them now requires discipline: a documented baseline, deductions tied to real and substantial damage, clean lease terms, and a statement that goes out on time with the evidence to back it. The operators who build that discipline into their process will be well positioned to comply and to avoid costly disputes. The ones who treat move-outs the way they always have are the ones who will forfeit deposits they might otherwise have kept.

This blog is for informational purposes only and does not constitute legal advice. Colorado law and local ordinances change, and individual situations vary. For guidance specific to your Colorado portfolio, consult a licensed Colorado attorney experienced in landlord-tenant law. You can review the enacted bill and its official summary on the Colorado General Assembly website and the Colorado Division of Real Estate summary.

Frequently Asked Questions

Q1. Does HB25-1249 cap Colorado security deposits at one month's rent?
No. HB25-1249 did not create or change any deposit cap. Colorado does cap security deposits at two months' rent, but that limit comes from a separate 2023 law (C.R.S. 38-12-102.5, effective August 7, 2023), not from HB25-1249. The "one month" figure traces to an early draft of HB25-1249 that was removed before passage.

Q2. Can Colorado tenants pay their security deposit in installments?
Not as a matter of law. HB25-1249 does not require landlords to accept installment payments, so a landlord may still require the full deposit at move-in. Like the cap, an installment provision was in an earlier version of the bill and did not become law.

Q3. How long does a Colorado landlord have to return a security deposit in 2026?
30 days after the lease terminates or the tenant surrenders the premises, whichever is last. The lease may specify a longer period, but it cannot exceed 60 days. Missing the deadline forfeits the landlord's right to withhold any portion of the deposit.

Q4. What can a Colorado landlord deduct from a security deposit under the new law?
Reasonable amounts for unpaid rent, abandonment, unpaid utility charges, repair or cleaning the tenant contracted for, other lawful charges listed in the lease, and necessary repairs for damage that exceeds normal wear and tear and did not preexist the tenancy. Landlords cannot deduct for normal wear and tear, everyday dirt, or preexisting conditions.

Q5. Can a landlord charge a tenant for repainting or new carpet in Colorado?
Only for substantial, irreparable damage that exceeds normal wear and tear and did not preexist the tenancy, and only up to the minimum amount needed to fix the damaged area. Carpet that has not been replaced within the previous 10 years cannot be treated as irreparably damaged, so its replacement cannot be charged to the tenant.

Q6. What is the walk-through inspection requirement?
On the request of the landlord or the tenant, the parties must conduct a walk-through, in person or by an interactive video call, before the lease ends or the tenant surrenders the premises and after the tenant removes furniture, to identify in writing any damage beyond normal wear and tear that did not preexist the tenancy.

Q7. What are the penalties for wrongfully withholding a deposit in Colorado?
A landlord who retains a deposit in bad faith can face treble damages plus the tenant's reasonable attorney fees and costs. Retaining 125% or more of actual damages is presumed unreasonable. Before suing, a tenant must give the landlord at least seven days' notice of the demand and intent to file, and in court the landlord bears the burden of proving the withholding was justified.

Q8. When does HB25-1249 take effect?
January 1, 2026. It applies to conduct occurring on or after that date, so move-outs and deposit returns handled in 2026 fall under the new rules.