Property Management Education Blog

Rental Application Fairness Act for Denver Real Estate Investors

Recently, four new laws relating to Colorado property management have impacted how Denver landlords and real estate investors manage their properties. 

Last month, we looked at the Bed Bugs in Residential Premises Act. Next, we’re moving on to discuss rental applications. 

Like most things in the world, the price of renting and applying to rent property in Denver and the surrounding communities continues to rise. 

Colorado legislature recently passed the Rental Application Fairness Act in order to make sure that landlords don’t overcharge those who apply to rent. Whether you manage one Denver rental unit, or fifty units, these rules apply to you. There are a lot of moving parts to this law, so keep reading to learn how the changes affect you. 

Parts 1-2: What It Is, and to Whom Does it Apply? 

The Rental Application Fairness Act governs rental application fees, which are defined as “any sum of money that is charged or accepted by a landlord from a prospective tenant in connection with the prospective tenant’s submission of a rental application that precedes the onset of occupancy.” 

This rental application fee is basically anything pertaining to the application to apply to rent from your Denver property, including the general application fee, holding fees, administrative fees, and if relevant, a pet application fee. 

The updated rental application fee law does three main things:

  • Limits the amount of application fees that can be charged

  • Requires disclosure of those fees

  • Requires receipts for application

Parts 3-5: How Much Can Be Charged and Who to Tell

So what is the maximum amount that can be charged for rental application fees? There is not a set amount, however the Act does say that the amount cannot be higher than:

  • The actual expense the landlord incurs in processing the rental application; or

  • The average expense the landlord incurs per prospective tenant in the course of processing multiple rental applications. 

Finding the exact dollar amount to charge for rental application fees can be tricky. You must factor in the cost of obtaining a background and credit report as well as staff time of individuals calling landlord references. However, in order to be in compliance with the Rental Application Fairness Act, you must figure out this amount. 

After calculating the correct amount to charge for your rental application fee, you must disclose that fee to the prospective tenant before they apply. If they do apply and you receive the application fee payment, you must provide them with a receipt. Electronic receipts are OK, unless the applicant requests a paper copy.

Parts 6-8: Application Fee Considerations

In some cases, a landlord might not use the full cost of the application fee. If this is the case, you must refund any unused portion of the fee to the applicant within 20 calendar days after processing the fee. This means that if you as a landlord only use $45 of a $50 application fee, you must refund the applicant $5. 

While processing a prospective tenant’s rental application, landlords and real estate investors will often pull credit and rental history of the applicant. The Rental Application Fairness Act sets guidelines for these time periods:

  • Rental and credit history beyond seven years may not be considered in making leasing decisions

  • Arrests may not be used in making leasing decisions

  • Criminal history beyond five years may not be considered in making leasing decisions except for meth and amphetamine offenses, sex offender-related offenses, and homicide and stalking offenses

This update is new for the state of Colorado, and will definitely make an immediate impact on how many landlords decide whether or not a prospective tenant is approved to lease. 

Application fees for Denver property management

Part 9: What to Do When an Applicant is Denied

Not every single person who wants to rent from your Denver property will be approved. Even if a prospective tenant’s application is denied, you as a landlord have a few steps you must follow. Within 20 calendar days of processing the application you must:

  • Provide the prospective tenant a written notice of the denial that states the reason for denial

  • Provide a prospective tenant with an electronic version of the denial notice, unless the prospective tenant requests a paper denial notice

  • 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

Parts 10-11: Liability for Denver Property Managers and Tenants

It’s always important to follow the law, especially for Denver property managers and real estate investors. If you fail to follow the Rental Application Fairness Act, these are the possible consequences:

  • Landlord may have to pay (refund) three times the amount of the rental application, plus court costs, and reasonable attorney fees

  • If the landlord corrects the violation, they are not liable for damages

Additionally, these are the liabilities of the tenants:

  • Must give seven days notice before filing suit

  • An applicant who purposely and in bad faith brings a meritless claim against a landlord is liable for the landlord’s court costs and reasonable attorney fees in defending the claim

Stay Up to Date with Grace Property Management!

While these new legal requirements may not be in the best interest of local landlords, as a Denver property manager you are required to comply with these recent rental property updates. 

Want more clarity on a property management topic or have questions about Denver property management? Our experts at Grace Property Management are happy to help you out. Contact our office today!

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