Colorado’s Rental Application Fairness Act
IMPORTANT DISCLAIMER: THE INFORMATION CONTAINED IN THIS ARTICLE IS NOT LEGAL ADVICE. LEGISLATION IN THIS AREA IS CHANGING ALL THE TIME. DO NOT RELY ON THIS ARTICLE. FAILURE TO PROPERLY APPLY THE LAW CAN BE DETRIMENTAL TO YOUR CLAIM AND RESULT IN A LAWSUIT AGAINST YOU. CONTACT AN ATTORNEY.
Colorado’s Rental Application Fairness Act revolves around the concept of fairness and the concept that prospective tenants should not have to pay absurd fees to even apply for a tenancy.
At this point, I have read more leases than I can count. Each lease is slightly different but sort of the same. The landlord wants to make money and the tenant wants to enjoy the premises. But before the lease takes effect and the tenant takes possession is the rental application period.
During this period, the landlord searches for prospective tenants that will not only respect their property but pay rent. All of this is okay. The problem occurs when either a landlord or the agent helping the landlord tries to generate revenue from the application process. That is what Colorado’s Rental Application Fairness Act addresses.
What is a Rental Application Fee?
The statute defines a rental application fee as “any sum of money, however denominated, that is charged or accepted by a landlord from a prospective tenant in connection with the prospective tenant’s submission of a rental application or any nonrefundable fee that precedes the onset of tenancy. Rental application fee does not include a refundable security deposit or any rent that is paid before the onset of tenancy.” C.R.S. 38-12-902 (2022).
Looking at the wording of the statute it appears plan that a rental application fee applies to more than fees that are labeled as rental application fees. Some examples that may fall under the scope of this statute may include move in fees, processing fees, credit check fees, and so on. As such, I would not be surprised to see this statute extend into some aspects of the actual lease as well. For example, many leases require fees upfront asides from the security deposit. These fees are typically non-refundable.
If you have been charged a fee that precedes you taking possession of the unit then it could potentially be considered a rental application fee. What constitutes a rental application fee is going to have to be determined on a case-by-case basis. Talk to an attorney.
How Much Can The Landlord Charge As An Application Fee?
(1) A landlord shall not charge a prospective tenant a rental application fee unless the landlord uses the entire amount of the fee to cover the landlord’s costs in processing the rental application. The landlord’s costs may be based on:
(a) The actual expense the landlord incurs in processing the rental application; or
(b) The average expense the landlord incurs per prospective tenant in the course of processing multiple rental applications.
See C.R.S. 38-12-903(1)(2022).
This is a very interesting provision because it opens up the preverbal pandora’s box. Different Colorado Court’s allow for different levels of discovery. Depending on the particular court, landlords may find themselves forced to open up their books to the Tenant to justify the fees that they are charging.
In short, if the landlord chooses to charge a fee, they must use the entire fee to cover the landlord’s costs in processing the rental application. The question would next become what costs are associated with processing a rental application.
Can A Landlord Charge Different Prospective Tenants Different Amounts?
(2) A landlord shall not charge a prospective tenant a rental application fee that is in a different amount than a rental application fee charged to another prospective tenant who applies to rent:
(a) The same dwelling unit; or
(b) If the landlord offers more than one dwelling unit for rent at the same time, any other dwelling unit offered by the landlord.
See C.R.S. 38-12-903(2) (2022).
How Do I Know If I Overpaid?
(a) A landlord shall provide to any prospective tenant who has paid a rental application fee either a disclosure of the landlord’s anticipated expenses for which the fee will be used or an itemization of the landlord’s actual expenses incurred. If a landlord charges an amount based on the average cost of processing the rental application, the landlord shall include information regarding how that average rental application fee is determined.
See C.R.S. 38-12-903(3) (2022).
In short, a landlord is supposed to give you more than a mere shoulder shrug. They need to be able to justify the amount that they are charging.
As a gut check, google how much a background report costs. Now, how much over that is the landlord charging? Processing fees can encompass many things. But in the end, it all has to add up and make sense. If the disclosure they provide you just does not make sense then call an attorney to give it a quick read.
How Do I Prove How Much I Paid?
(b) A landlord shall provide every prospective tenant with a receipt for any application fee received. The landlord may provide a prospective tenant an electronic receipt unless the prospective tenant requests a paper receipt, in which case the landlord shall provide the prospective tenant a paper receipt.
See C.R.S. 38-12-903(3) (2022).
Does My Landlord Need To Refund Any Portion Of My Rental Application Fee That They Do Not Use?
(4) A landlord who receives a rental application fee from a prospective tenant and does not use the entire amount of the fee to cover the landlord’s costs in processing the rental application shall remit to the prospective tenant the remaining amount of the fee. The landlord shall make a good-faith effort to remit such amount within twenty calendar days after processing the application.
See C.R.S. 38-12-903(4) (2022).
In short, the landlord needs to refund any portion of the rental application fee that is not used to cover the landlord’s costs to process the rental application. As identified above, the landlord has the option to charge their fee based on actual cost or an estimate. If the fee is based on an estimate, then this refund may be more likely to come into play.
What Rental Or Credit History Can The Landlord Consider When Looking At My Application?
(a) If a landlord uses rental history or credit history as criteria in consideration of an application, the landlord shall not consider any rental history or credit history beyond seven years immediately preceding the date of the application.
(b) If a landlord uses criminal history as a criterion in consideration of an application, the landlord shall not consider an arrest record of a prospective tenant from any time or any conviction of a prospective tenant that occurred more than five years before the date of the application; except that a landlord may consider any criminal conviction record or deferred judgment relating to:
(I) The unlawful distribution, manufacturing, dispensing, or sale of a material, compound, mixture, or preparation that contains methamphetamine, as described in section 18-18-405;
(II) The unlawful possession of materials to make methamphetamine and amphetamine, as described in section 18-18-412.5;
(III) Any offense that required the prospective tenant to register as a sex offender pursuant to section 16-22-103; or
(IV) Any offense described in part 1 or part 6 of article 3 of title 18.
See C.R.S. 38-12-904(1) (2022).
The key dates here are 5 and 7 years before the date of the application.
My Future Landlord Has Denied My Rental Application. Why?
(a) If a landlord denies a rental application, the landlord shall provide the prospective tenant a written notice of the denial that states the reasons for the denial. If the specific screening criteria cannot be directly cited because of the use of a proprietary screening system, the landlord shall instead provide the prospective tenant with a copy of the report from the screening company that uses the proprietary screening system. A landlord may provide a prospective tenant an electronic version of the denial notice required in this subsection (2) unless the prospective tenant requests a paper denial notice, in which case the landlord shall provide the prospective tenant a paper denial notice.
(b) A landlord who is required to provide a notice of denial to a prospective tenant as described in subsection (2)(a) of this section shall make a good-faith effort to do so not more than twenty calendar days after making the decision to deny the prospective tenant’s rental application.
See C.R.S. 38-12-904(2) (2022).
In short, if you are denied, the landlord needs to make a good faith effort within 20 days of making their decision to provide the tenant with a notice of denial that either 1) states the reason for the denial; or 2) provides a copy of the report. I hope you are seeing the pattern. The legislator does not want the prospective tenant to A) be overcharged; B) be denied due to ancient history, or C) allow a landlord to sit on their hands while the applications pile up.
Landlords must be able to justify not only their costs but the reason for each denial. As such, this forces landlord to consider each application closely. It should also be noted because it is not clear in the statute that a denial based on certain criteria may subject the landlord to additional liability under other state and/or federal statutes. I’m refereeing specifically to the numerous fair housing laws on the books. As such, Landlords should develop policies and specific criteria for making such decisions.
What Happens If The Landlord Violates The Statute?
1) Except as described in subsection (3) of this section, a landlord who violates any provision of this part 9 is liable to the person who is charged a rental application fee for treble the amount of the rental application fee, plus court costs and reasonable attorney fees.
(2) A person who intends to file an action pursuant to subsection (1) of this section shall notify the landlord of such intention not less than seven calendar days before filing the action.
(3) A landlord who corrects or cures a violation of this part 9 not more than seven calendar days after receiving notice of the violation is not liable for damages as described in subsection (1) of this section.
(4) A person who purposefully and in bad faith brings a meritless claim against a landlord under this part 9 is liable for the landlord’s court costs and reasonable attorney fees in defending the claim.
See C.R.S. 38-12-905 (2022).
Four key takeaways.
The Tenant must provide the proper notice under this section.
A landlord can cure the violation within 7 days of receiving notice.
A landlord who violates any provision of this part 9 is liable to the person who is charged a rental application fee for treble the amount of the rental application fee, plus court costs and reasonable attorney fees.
Prospective Tenants may also be liable for court costs and reasonable attorney fees if they purposefully and in bad faith brings a meritless claim against the landlord.
The Colorado’s Rental Application Fairness Act may prove to be an invaluable tool for Prospective Tenants. Only time will tell if this act achieves its intended goals.
Key Take Away Overall:
For Tenants, if you are being charged a ridiculous fee prior to starting a tenancy or have been denied without cause, contact an attorney. The statute provides for reasonable attorney fees and costs which may allow for contingent fee arrangements. On the flip side, tenants need to ensure that they are following the statute. The statute also permits the landlord to recover attorney fees and costs in certain situations. As a general rule of thumb, Landlords tend to be better represented overall than most prospective tenants for the simple fact that landlords can afford representation.
For Landlords, you need to review your policies to ensure that you do not wind up in costly litigation. This act imposes allot of new responsibilities on the Landlord.
For all, contact an attorney. These provisions may encompass a variety of situations. None of this is legal advice. Each situation is different. But I can tell you that this statute contains some very broad language and very strict penalties. I would not be surprised to see these cases litigated more often.
The information contained in this article is based on Colorado’s Rental Application Fairness Act as enacted through 2022. It has been modified. The reader should not rely on any of this information as legal advice. This article is intended to help readers identify situations where it may be appropriate to call an attorney to discuss their legal needs. It is highly encouraged that you contact an attorney if you have any questions.