Colorado Security Deposit Deduction Rules 2026

HB25-1249 redefines normal wear and tear to include deterioration, damage, or uncleanliness that occurs from the use a unit is intended for or reasonably and typically used for, as long as it happens without negligence, carelessness, accident, or abuse. This is broader than a narrow reading limited to simple fading or minor scuffing; it folds in some degree of damage and uncleanliness as long as it results from ordinary use rather than a tenant's fault.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-102]

There's an important carve-out: this broadened definition doesn't cover uncleanliness that leaves the unit substantially less clean than it was when the lease began. A landlord facing a genuinely dirty unit at move-out still has a basis for a cleaning-related deduction; the change is aimed at ordinary use-related wear, not a tenant leaving the unit in significantly worse condition than they found it.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-102]

A landlord can't deduct for carpet unless there's substantial and irreparable damage that exceeds normal wear and tear. Even where that threshold is met, there's a separate, absolute cutoff: if the carpet is 10 years old or older at lease termination, no deduction is allowed at all, regardless of how much damage there is.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

Where a deduction is valid, a landlord can retain only the minimum amount actually necessary to replace the carpet in the specific area that's damaged, not the cost of replacing carpet throughout the whole unit if only part of it is affected.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

Interior repainting deductions follow a similarly narrow standard. A landlord can't deduct for paint unless there's substantial damage to the interior walls or ceiling throughout the entire dwelling unit that exceeds normal wear and tear. As with carpet, even where that threshold is met, the landlord can retain only the minimum amount necessary to repaint the specific area that's damaged.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

The "throughout the entire dwelling unit" language matters. A single damaged wall isn't automatically enough to meet this standard on its own; the statute is written around damage that's substantial across the unit as a whole.

HB25-1249 creates a specific, numeric trigger for when a withheld amount is presumed to have been retained in bad faith: an amount is presumed unreasonable, and therefore retained in bad faith, if it's 125% or greater than the actual damages the landlord incurred.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

Bad faith isn't limited to that one numeric trigger. The statute also treats a withholding as bad faith if the amount is retained without actual cause, if it's retained despite the landlord knowing or reasonably should have known it exceeds actual damages, or if it's retained for an unlawful, retaliatory, or discriminatory purpose.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

The burden of proof sits with the landlord. If a deduction is disputed, the landlord has to prove the actual damages incurred, rather than the tenant having to disprove the landlord's claimed amount. Combined with the 125% presumption, this puts real pressure on landlords to document actual repair or replacement costs precisely rather than estimating generously.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

A landlord found to have wrongfully withheld a deposit faces treble damages, three times the wrongfully withheld amount, plus attorney fees and court costs. Before a tenant can pursue that remedy in court, they have to give the landlord 7 days' written notice first.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

That notice requirement gives a landlord a short window to resolve a legitimate dispute or correct a genuine mistake before facing the treble-damages exposure, but it doesn't change the underlying burden of proof once the matter is disputed.

The tracker note behind this article flagged a need to confirm the exact deadline wording, and the confirmed answer is 30 days. A landlord has 30 days by default to return the deposit and provide an itemized statement of any deductions after a lease terminates or the tenant surrenders the premises. That deadline can extend to a maximum of 60 days if the lease itself specifies a longer period. Property-transfer situations, where a new owner takes over from a prior landlord, separately follow a 60-day rule.

[Cite: HB25-1249, amending Colorado Revised Statutes section 38-12-103]

The practical work here is largely about tightening documentation and reconsidering standing move-out policies. A landlord with a standard practice of charging for carpet or paint replacement at every move-out needs to confirm that practice actually meets the substantial-and-irreparable, whole-unit, or age-cutoff standards described above, rather than treating a fresh coat of paint or new carpet as a routine turnover cost passed to the outgoing tenant.

Given the 125% presumption and the landlord's burden of proving actual damages, keeping specific, itemized documentation, receipts, estimates, and photographs tied to the actual damaged area, rather than a general estimate, is the practical difference between a deduction that holds up and one that's presumptively bad faith.