Property Management Education

SB 23-184 Landlords May No Longer Consider Credit Score On Some Applicants

SB 23-184 Landlords May No Longer Consider Credit Score On Some Applicants

Key points:

  • No more credit score considerations: New Colorado legislation restricts landlords from using credit scores in some cases, redefining tenant evaluation norms.

  • Security deposit and income limits: The bill sets a cap on security deposits and maximum income requirements. Aiming to ensure fair rental terms and accessibility.

  • Broadened definitions and eviction defense: "Subsidized" tenant definitions expanded, impacting landlords;  while tenants gain the ability to cite anti-discriminatory violations as an eviction defense, reshaping legal dynamics in the rental process.

Understanding Colorado's Landlord-Tenant Legislation SB23-184: A Comprehensive Overview

Whether you're a Colorado landlord, real estate investor, tenant, or resident, this new bill passed by the Colorado legislature will have a dramatic impact on the rental landscape in Colorado. The bill is very complex and we provide just a brief overview of some of the most impactful parts of this transformative bill. This legislation carries implications that will reshape the way landlords, tenants, and residents consider credit scores within the Colorado rental market.

The Core Implication: Credit Scores and Rental Applications

Historically, a prospective tenant's credit score has been an important tool for landlords to use when screening an applicant who applies to rent a property. Under the new rules, landlords are now prohibited, in many cases, from considering an applicant's credit score, lack of credit score, or negative credit events, during the screening process. This change will reshape the landscape of tenant screening.

Redefining Landlord Practices

Previously, the credit score served as a pivotal tool for landlords, helping them predict a potential tenant's ability to meet their rental obligations. However, this new legislation effectively removes this tool from landlords, altering the way landlords evaluate applicants. 

Other Parts of Law

While the credit score shift is a pivotal aspect of this bill, it's essential to note that this legislation comprises numerous other components that will influence both landlords and tenants.

1. Security Deposit and Income Requirements

The bill introduces caps on security deposits, ensuring that landlords can't require more than twice the monthly rent as a security deposit. Similarly, the bill limits landlords to require tenants to have a maximum income of two times the rent amount. These provisions seek to ensure that tenants are not burdened with excessively high upfront costs and that landlords cannot impose overly restrictive income criteria.

2. Expanding the Definition of "Subsidized"

The legislation redefines the concept of "subsidized" tenants. Now, any rental payment derived from public or private assistance, grants, or loan programs qualifies as a subsidy. This broadened definition means that more applicants will fall into this category of credit protection when applying to rent a property.

3. Affirmative Defense in Eviction Proceedings

The bill also allows tenants to assert an affirmative defense in eviction proceedings, claiming that landlords violated anti-discriminatory housing laws. This addition adds a layer of complexity to eviction cases, offering tenants new avenues to challenge an eviction based on discrimination claims.

Conclusion: Navigating the New Landscape

The legislation, effective since August 7th, 2023, has the potential to reshape the landlord-tenant dynamic in Colorado significantly. While it aims to improve access to housing and tenant protections, it may inadvertently lead to tenants occupying properties they can't financially sustain. It's vital for landlords, tenants, and industry stakeholders to stay informed about these changes and adapt their practices to ensure compliance with the new regulations.

The full legal and practical implications of this bill will be played out over the coming years. You may access the full bill using this link to SB23-184.  

We believe that when property management is performed with integrity, both tenants and landlords benefit. Property Management is not just our business - it is a relationship between us, our owner-clients, and our tenant-residents. If these are important to you, we may be a good fit to provide you, your property, and your tenant residence with our award-winning property management service. Feel free to reach out to us for assistance.

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