Leasing & Occupancy Laws in Colorado
Leasing a property can be a great way to earn money through real estate. However, it can get a little complicated if you are not familiar with the local tenant laws. Fortunately, when you work with a property management company like Progressive Property Group, we can help you understand the leasing laws in Colorado and ensure that you stay in compliance with all your obligations as a landlord.
Occupancy limits are restrictions placed on the number of people who can occupy a unit. For occupancy limits that are set by law, this is often relative to the number of bedrooms or the square footage of the rental unit. If you are setting occupancy limits as a landlord, you can simply determine the appropriate cap for each unit in your inventory.
There are not currently any state-wide occupancy laws in Colorado limiting the number of people per unit. However, there are often local ordinances that set occupancy limits.
Progressive Property Group is compliant with the Department of Housing and Urban Development which does set the general standard of two people per bedroom.
For more information, please click here which details occupancy standards.
Under various fair housing laws, Colorado tenants have various legal protections. Many landlords will follow these without even thinking about it, but it is helpful to know your obligations under the law.
Federal Fair Housing Act
The Federal Fair Housing Act establishes several protected classes. When selecting tenants, you cannot discriminate against people based on the following characteristics:
- Skin Color
- Race
- Disability Status
- Sex
- Familial Status
- National Origin
- Religion
Colorado’s Fair Housing Act
Colorado has a parallel law that establishes several additional protected classes. These are additions to the seven above-listed classes:
- Creed
- Ancestry
- Sexual Orientation
- Marital Status
Thus, you cannot refuse to choose a married tenant over a single-tenant simply because you prefer married couples. Similarly, you cannot deny an applicant due to their sexual identity.
One of the most common leasing requirements for rental properties is a security deposit. The landlord can hold this to cover any potential damage to the property. The security deposit laws in Colorado are fairly simple. The landlord can require a one-time deposit of any amount (although excessive deposits will turn off tenants), and it can be stored in any manner you see fit.
You may take deductions from the deposit for unpaid rent, unpaid utilities, unpaid cleaning or repair bills, or any damage to the unit. Many landlords make some allowance for normal wear and tear that will not be deducted.
Average Rental Rates
The average rental rate across the Colorado Springs area is $1,172 for a one-bedroom apartment, marking a 9% decrease from the annual average. For two-bedroom apartments, there’s a further decline, with the average rental price at $1,527—a 12% drop from the annual average. These averages, however, vary significantly across neighborhoods in the Colorado Springs area. Northwest Colorado Springs emerges as the most expensive, boasting an average of $2,250 for a one-bedroom and $2,695 for a two-bedroom apartment. In contrast, Southeast Colorado Springs stands as the most affordable area, with averages of $1,000 for a one-bedroom and $1,299 for a two-bedroom apartment. While Northwest COS has consistently maintained these averages, Southeast COS has experienced a noteworthy decline in rental prices throughout 2023. In comparison to the Colorado Springs area, Manitou Springs proves to be the most similar. A 2-bedroom apartment in Manitou Springs costs an average of $1,400. The Denver area has proven to be the most expensive out of the group. On average, a 1-bedroom apartment is approximately $2,043, and a 2-bedroom is $2,741. On the other hand, the Fountain and Pueblo areas have consistently been the most affordable. The median gross rent for the Pueblo area is $700, and for Fountain, it’s $795.
Rental Vacancy Rates
Nationally, as a country, we have experienced a rise in rental vacancy rates, reaching an all-time high of 6.4% since 2020. This trend is reflected regionally, with the Midwest having the second highest vacancy rate after the South. On a statewide level, we observe a steady increase. Between the second and third quarters of 2023, Colorado’s rental vacancy rate rose from 5% to 8%. It is commonly believed that the increasing rental vacancy rate is a direct result of widespread apartment construction, both at the state and national levels. This trend has significantly influenced the housing market, leading to a decrease in homeowners selling. For those who do decide to sell, the average time on the market has extended to 40 days and beyond.
It is common for landlords to set occupancy limits in their lease language. It makes sense that you would not want too many people in a unit. For example, you wouldn’t want ten people occupying a studio apartment. Typically, the most effective language is setting the occupancy for a unit for consecutive (e.g., no more than two occupants for more than seven consecutive days). That way, your tenants can have guests without going against the lease terms.
There are two major types of residential leases defined by the State of Colorado: term and month-to-month. The former is a lease that is in effect from a starting date to an ending date. The latter is a lease that automatically renews each month until one or both parties decide to terminate it.
Neither the landlord nor the tenant needs to give notice to end a term lease in Colorado. Instead, they simply need to not renew the lease. Nonetheless, both landlords and tenants often pay each other the courtesy of providing notice.
A month-to-month lease must be terminated with notice. This is 10-days by default but can be specified in the lease, as a longer notice period such as 30 days. Although most month-to-month leases are written contracts, there is a default, implied month-to-month lease for any tenant that pays monthly. If a term lease expires and the tenant continues to pay, the lease will switch to the default Colorado lease.
Although the leasing laws in Colorado are largely in place to protect tenants, they also establish some obligations for renters. The basic requirements are that tenants make timely rent payments and follow the rules of the lease. Additionally, tenant laws require that renters keep their units in a clean and sanitary state and respect the quiet enjoyment of their neighbors.
Bear in mind that tenants may be able to challenge lease terms that are unreasonable or predatory. However, within a reasonable scope, you can set almost any rules in your lease, provided that the tenant agrees to them.