Big changes in store for Colorado real estate in the upcoming legislature Colorado Governor…
There are two big laws coming into effect 1/1/2021 that will drastically alter Colorado’s Landlord tenant laws. HB21.1121 and SB21.173. Each have large changes in what a landlord can or cannot do and defenses a tenant can easily make to not pay rent. Are you ready for these changes? How will these changes impact every residential/multifamily property in the state? How will these changes impact affordable housing?
I’m going to outline the key changes in each of the bills below (links at the bottom for the full bill). Note, I am a private lender in Colorado. I am not an attorney and not providing any legal advice.
HB21.1121: Concerning protections for residential tenants related to actions by landlords.
There are three major changes in HB21.1121:
- The act updates language that must be included on a court summons issued to a defendant-tenant in an eviction action explaining the consequences for failing to answer the complaint, the content of an answer, and the fees and deposits related to filing an answer.
- The act prohibits a county sheriff from executing a writ of restitution, which directs the sheriff to assist the landlord in removing the tenant, until at least 10 days after a landlord wins judgment in an eviction action.
- The act prohibits residential landlords from increasing rent more than one time in a 12-month period of tenancy. For a residential tenancy of any duration in which there is no written agreement, the act requires a landlord to give a tenant 60 days’ notice prior to increasing rent. The act prohibits a landlord from terminating a residential tenancy in which there is no written agreement with the primary purpose of increasing a tenant’s rent without providing 60 days’ notice.
SB21.173: Concerning rights related to residential rental agreements, and, in connection therewith, making an appropriation.
Senate Bill 21.173 will be considerably more onerous that HB 21.1121. The big focus of the senate bill is the issue of warranty of habitability. Here are the key items in the bill:
- Eliminates the bond requirement for the warranty of habitability and allows the tenant to assert an alleged breach of the warranty of habitability as an affirmative defense. This is a huge change; a tenant now theoretically could allege that their failure to pay rent is due to a light fixture that is not functioning or a garbage can with a broken top. There is no requirement for a tenant to post a bond of the unpaid rent to make these claims
- Establishes allowable court procedures and remedies in cases of an alleged breach of warranty of habitability.
- Bans unreasonable liquidated damage clauses that assign a cost to a party stemming from a rental violation or an eviction action
- Prohibits rental agreements that contain one-way fee-shifting clauses that award attorney fees and court costs only to one party
What is warranty of Habitability (here is the definition from the state of Colorado)
The premises substantially lacks (CRS § 38-12-505):
- Waterproofing and weather protection of roof and exterior walls maintained in good working order, including unbroken windows and doors
- Plumbing or gas facilities that conformed to applicable law in effect at the time of installation and that are maintained in good working order
- Running water and reasonable amounts of hot water at all times furnished to appropriate fixtures and connected to a sewage disposal system approved under applicable law
- Functioning heating facilities that conformed to applicable law at the time of installation and that are maintained in good working order
- Electrical lighting, with wiring and electrical equipment that conformed to applicable law at the time of installation, maintained in good working order
- Common areas and areas under the control of the landlord that are kept reasonably clean, sanitary, and free from all accumulations of debris, filth, rubbish, and garbage and that have appropriate extermination in response to the infestation of rodents or vermin
- Appropriate extermination in response to the infestation of rodents or vermin throughout a residential premises
- An adequate number of appropriate exterior receptacles for garbage and rubbish, in good repair
- Floors, stairways, and railings maintained in good repair
- Locks on all exterior doors and locks or security devices on windows designed to be opened that are maintained in good working order
- Compliance with all applicable building, housing, and health codes which, if violated, would constitute a condition that is dangerous or hazardous to a Tenant’s life, health, or safety
- Or otherwise unfit for human habitation
As you can see there are several defenses a tenant can utilize to not pay rent from the mundane like a broken light fixture or outlet to ants in the property regardless of whether they are in working order when the tenant moves in.
Affordable housing eliminated
Unfortunately, many well intentioned bills have substantial unintended consequences. In the case of these two bills landlords will make the decision to focus on higher tier tenants to eliminate/mitigate the risk of the new laws above. For example, property owners will likely not rent to a tenant that has had a prior eviction or doesn’t have good payment histories.
HB21.1121 and SB21.173 will drastically alter the rental landscape in Colorado. Both bills will make it harder to evict and ultimately more expensive for landlords which will be passed on to tenants. Furthermore landlords will shy away from higher risk tenants without solid payment histories to help mitigate the risks/costs from the new loans which will substantially decrease whatever affordable housing was left in many of Colorado’s largest cities. Unfortunately, well intended laws like HB21.1121 and SB21.173 will have the opposite impact of what the backers had hoped as landlords refuse to rent to higher risk tenants in lower income properties.
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Written by Glen Weinberg, Owner Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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