Rent increases, late fees and what you may charge

Bottom line first. Colorado puts hard limits on how often you can raise rent, how much notice you owe, and which fees you may charge. Break a limit and the clause or fee can be void, and the tenant can collect penalties. This lesson walks through each one in plain words. Cities such as Denver and Boulder can add their own rules, so check your city and a lawyer too. This is education, not legal advice.

Raising the rent: notice

Rent here means the money paid for the right to live in and use the home (C.R.S. 38-12-801(7)). A tenancy is the right to occupy a home for a period. If a residential tenancy has no written agreement, you may raise rent only after at least 60 days' written notice to the tenant (C.R.S. 38-12-701(2)(a)). For a business (nonresidential) tenancy of one month up to six months with no written agreement, the notice is at least 21 days (38-12-701(1)).

The section we reviewed sets that notice time for tenancies with no written agreement. When there is a written lease, read what the lease says about rent changes and follow it. Check with a lawyer for your exact lease.

One more trap: in a residential tenancy with no written agreement, you may not end the tenancy by a notice to quit when your main purpose is to push the rent up in a way that skips these rules (38-12-701(2)(b)). A notice to quit is a written notice that ends a tenancy (lesson 6).

Raising the rent: how often

You may not raise rent more than one time in any twelve-month stretch of the tenant's continuous stay. It does not matter whether there is a written lease, how long the tenancy has run, or whether it is a fixed term, month-to-month or open-ended (C.R.S. 38-12-702). Month-to-month means the tenancy renews each month with no set end date.

Late fees

A late fee is an extra charge for rent that arrives after the due date. Colorado's rules are strict (C.R.S. 38-12-105(1)). You may not:

• Charge a late fee until the rent is at least seven calendar days late.
• Charge more than the greater of $50 or 5 percent of the past-due rent payment.
• Charge a late fee that is not written in the rental agreement.
• Charge a late fee on the part of the rent that a rent subsidy provider is responsible for paying.
• Charge the fee more than once for one late payment (the law allows repeat charges only if the total stays under the cap).
• Charge interest on a late fee, or take a late fee out of a later rent payment.
• Charge a late fee unless you gave the tenant written notice of it within 180 days after the rent was due.
• Start an eviction, or end the tenancy, only because the tenant did not pay late fees.

The law also says a late fee is not rent, and a lease may not label it as rent for the nonpayment demand under C.R.S. 13-40-104(1)(d) (38-12-105(7)). A lease clause that breaks these rules is void, meaning it has no legal force (38-12-105(2)).

Penalties. A landlord who breaks the late-fee rules owes the tenant $50 for each violation (38-12-105(3)). The landlord gets seven days to fix the problem after getting written or electronic notice of it (38-12-105(4)). If you do not fix it in time, the tenant can sue for damages, a penalty of $150 up to $1,000 per violation, and costs including attorney fees to the winning side (38-12-105(5)). A tenant can also raise a late-fee violation as a defense in an eviction case (38-12-105(6)).

Pet charges

For a tenant's pet you may ask for an extra deposit of no more than $300, and it must be refundable (C.R.S. 38-12-106(1)). You may ask for pet rent of no more than the greater of $35 a month or 1.5 percent of the tenant's monthly rent (38-12-106(2)).

Other fees a lease may not carry

• Disguised rent. A lease may not call any fee "rent" (so eviction for nonpayment is available) except the set monthly payment for living there. Utility fees, service fees and other extras are not rent (C.R.S. 38-12-801(3)(a)(V)).
• Markups. If a third party bills you for a service and you pass it to the tenant, you may add a markup or fee of up to 2 percent of the bill, or up to $10 a month in total, but not both (38-12-801(3)(a)(VI)).
• Notice-of-nonrenewal penalties. A lease may not set a fee for a tenant who fails to give notice that they will not renew, except for the landlord's actual losses (38-12-801(3)(a)(IV)).
• One-way attorney fees. A clause that gives attorney fees to only one side is barred; if the lease has a fee clause it must go to whoever wins (38-12-801(3)(a)(II)).

Exceptions exist. Some of these bans do not apply to mobile home park rentals, or to a duplex, triplex or accessory dwelling unit where the owner lives on the property (38-12-801(4) and (8)). Read the section for your case.

Application fees

You may charge an application fee only to cover your real costs of processing the application, based on your actual cost or your average cost per applicant. The fee must be the same for every applicant for the same unit, and it cannot be charged to an applicant who hands you a portable tenant screening report. You must give each applicant a receipt, and a list of your expected or actual costs. If you collect more than your costs, you must make a good-faith effort to return the extra within 20 calendar days after processing the application (C.R.S. 38-12-903).

Receipts and your copy of the lease

When a tenant pays in person with cash or a money order, you must hand over a receipt right then showing the amount and date. For any other payment, if the tenant asks, you give a receipt within seven days showing the amount, the recipient and the date, unless you already have a system that gives the tenant that record. An electronic receipt is fine unless the tenant asks for paper (C.R.S. 38-12-802). Also give the tenant a signed copy of a written rental agreement by the seventh day after they sign it (38-12-801(1)).

Example with real numbers

Marcus rents a house to Priya for $1,800 a month. Her lease lists a late fee. She pays her rent on the 9th, which is eight days late.

1. The rent is at least seven days late, so a fee may be charged.
2. 5 percent of $1,800 is $90. The greater of $50 and $90 is $90.
3. Marcus may charge up to $90. He charges $120, so he has gone $30 over.
4. Priya tells him in writing. He has seven days to fix it. If he reduces the fee to $90 and refunds the extra in time, he avoids the lawsuit remedies. If he does not, she can ask a court for $150 to $1,000 per violation plus damages and fees.

Now pet rent. Priya has a dog. 1.5 percent of $1,800 is $27. The greater of $35 and $27 is $35, so Marcus may charge up to $35 a month for the dog, and a pet deposit of no more than $300 that she gets back if there is no damage.