Property management and landlord-tenant basics

Bottom line: Property management is a license-required job when done for others for pay. You hold the owner's money, so trust-account rules matter. Colorado gives tenants strong rights on deposits and on livability.

What a property manager does

• Find tenants: advertise the unit, show it, take applications.
• Screen tenants: check income, credit, rental history, and references. Fair housing applies: apply the same written criteria to every applicant. Never steer or reject based on a protected class (race, color, religion, sex, national origin, familial status, disability, and Colorado's added classes).
• Rent analysis: compare rents for similar nearby units (comparables) to set a price that fills the unit without leaving money behind.
• Collect rent, pay bills, and send the owner a monthly report (a statement of money in and out).
• Maintenance: arrange repairs, keep the unit livable, and keep records.
• Handle trust money (see below).

The management agreement

A management agreement is the written contract between owner and manager. It should say: the fee (often a percentage of rent collected, say 8%), who pays for repairs and how big a repair the manager can approve without calling the owner, how rent and deposits are held, how often the owner is paid, how long the deal lasts, and how to end it. If a security deposit is handed to the owner, the agreement should put the responsibility for returning it on the owner (4 CCR 725-1 Rule 5.8).

Trust money rules

Rent and deposits are Money Belonging to Others. A firm doing property management must keep separate trust accounts: at least one for rent receipts and at least one for security deposits (Rule 5.5). Money received for property management must be deposited within five business days of receipt or lease signing, whichever is later (Rule 5.7.A). The firm may not mix its own money with it (commingling).

An unlicensed on-site manager (a person who fills in lease blanks, shows units, quotes owner-set rents, arranges maintenance, and collects money) may work for the firm only as a salaried employee or as an independent contractor paid through the firm (Rule 1.61).

Security deposits in Colorado

• The landlord must return the full deposit within one month after the lease ends or the tenant gives up the premises, whichever is later, unless the lease sets a longer time, which cannot exceed sixty days (C.R.S. 38-12-103(1)).
• Normal wear and tear may not be deducted. That is deterioration from ordinary use without negligence, accident, or abuse (C.R.S. 38-12-102(4)). Faded paint and light carpet wear are normal.
• If the landlord keeps anything, he must send a written statement listing the exact reasons and the refund. Mailing it to the tenant's last known address counts (C.R.S. 38-12-103(1)).
• Miss the deadline for the statement and the landlord forfeits all rights to withhold any part (38-12-103(2)).
• Willful wrongful retention makes the landlord liable for three times the amount wrongfully withheld plus attorney fees and court costs. The tenant must give seven days' notice before suing, and the landlord has the burden of proving the withholding was not wrongful (38-12-103(3)).
• Tenants cannot waive these rights in a lease (38-12-103(7)).

Warranty of habitability

In every residential lease, the landlord promises the home is fit to live in (C.R.S. 38-12-503(1)). A landlord breaches it if the home is uninhabitable or materially threatens life, health, or safety, and the landlord got written or electronic notice and failed to start repairs within 24 hours (conditions threatening life, health or safety) or 96 hours (other uninhabitable conditions, when the tenant allowed entry) (38-12-503(2)). Mold tied to dampness has its own 96-hour containment step (38-12-503(2.2)). "Uninhabitable" includes lacking working plumbing, hot water, heat, electricity, weatherproofing, door locks, and similar basics (38-12-505). Tenant remedies include ending the lease after 10 to 30 days' written notice if the landlord does not fix within five business days, and seeking a court order (38-12-507).

Lease types (who pays what)

• Gross lease: tenant pays one flat rent; landlord pays taxes, insurance, and upkeep. Common for apartments.
• Net lease: tenant pays rent plus some costs. Single net = taxes; double net = taxes and insurance; triple net (NNN) = taxes, insurance, and maintenance. Common in commercial deals.
• Percentage lease: rent is a base amount plus a percentage of the tenant's sales. Common in shopping centers.
• Ground lease: the tenant leases only the land, often for 50 to 99 years, and owns what he builds.

Eviction basics

Eviction (a legal process to remove a tenant) must go through the court. The landlord gives a written demand notice first, then files, then a judge decides; only a sheriff can physically remove a tenant. Self-help evictions (changing locks, shutting off utilities) are illegal. The exact notice lengths are set by Colorado statute, so read the current forms.

Example with real numbers

Rent is $2,200 a month. The tenant paid a $2,200 deposit and moves out on March 31.

1. Deadline: one month after March 31 is April 30 (or up to 60 days, May 30, if the lease says so).
2. Damage found: a burned carpet section, $640; extra cleaning, $180; repaint after four years, $300.
3. Paint after four years is normal wear, so the $300 cannot be taken. Allowed deductions: $640 + $180 = $820.
4. Refund: $2,200 - $820 = $1,380, mailed with an itemized statement by April 30.
5. If the landlord wrongly took the $300 paint charge willfully, he owes 3 x $300 = $900, plus fees. If he missed the written-statement deadline, he loses the right to keep any of the $820.

Manager's fee at 8%: 0.08 x $2,200 = $176 a month, $2,112 a year.