Residential Rental Applications: What You Should Know as a Landlord or as a Tenant

As a Colorado homeowner considering renting out your residential property, or an experienced landlord managing your portfolio, the rental application process might appear to be a straightforward administrative step. However, beneath the surface lies a complex web of federal and Colorado state laws that dictate what you can and cannot do when evaluating prospective tenants. Missteps in this crucial phase can expose you to significant legal liabilities, including costly discrimination claims and substantial financial penalties, transforming a seemingly simple task into a high-stakes challenge.

The implications of non-compliant tenant screening are far-reaching, from financial losses due to fines and lawsuits to damage to your reputation and difficulty in securing reliable tenants. Colorado's stringent regulations, including the Rental Application Fairness Act and various fair housing laws, govern everything from permissible inquiries and background checks to the handling of application fees and adverse action notices. GLO specializes in equipping landlords with the essential knowledge and legal strategies to navigate these nuanced requirements, ensuring your rental application process is fully compliant, transparent, and provides maximum protection against potential litigation, ultimately giving you peace of mind.

The Technical and Risky Landscape of Rental Application Compliance

The seemingly simple act of reviewing a rental application is fraught with legal intricacies, making it a highly technical and risky endeavor for landlords who are not fully conversant with the latest regulations. Navigating these requirements demands meticulous attention to detail and an understanding of evolving legal interpretations.

Understanding the Evolving Anti-Discrimination Landscape and Its Broad Reach

The bedrock of rental application law rests on federal and state anti-discrimination statutes. The federal Fair Housing Act prohibits discrimination based on race, color, religion, national origin, sex, familial status, and disability. While this federal law includes certain exemptions for smaller properties (e.g., buildings with four or fewer units where the owner resides, or single-family homes owned by landlords with fewer than three rental homes), Colorado law significantly broadens these protections. Notably, Colorado extends anti-discrimination protections to include sexual orientation and gender identity, regardless of property size or owner-occupancy status. This means that even if your property is federally exempt, you are still bound by Colorado's broader anti-discrimination provisions.

The risk for landlords arises from not just overt discriminatory practices, but also from policies or questions that could have a "disparate impact" on a protected class. For instance, asking for identifying information related to any protected characteristic on a rental application, even if seemingly innocuous, can open the door to scrutiny regarding discriminatory practices. Furthermore, relying on outdated criteria or blanket policies without considering individual circumstances can lead to fair housing complaints. The legal landscape is dynamic; what was permissible a few years ago might not be today, underscoring the critical need for landlords to stay current with legislative changes and legal precedents to avoid costly and reputation-damaging litigation.

The Perils of Background Checks: Criminal History, Credit Reports, and Fee Management

Beyond anti-discrimination laws, Colorado has specific regulations governing what information landlords can consider from background checks and how application fees must be handled. For instance, Colorado law provides significant protections regarding criminal records: landlords generally cannot consider any criminal offense that is more than five years old, with very narrow exceptions for offenses like murder, sex offenses, stalking, or crimes involving methamphetamines. Similarly, landlords are prohibited from considering poor rental or credit history, such as evictions or bankruptcies, if these occurred more than seven years before the date of the application. These look-back periods are strict, and violating them can lead to severe penalties.

Moreover, the handling of rental application fees presents another area of high risk. While landlords are permitted to charge fees to cover the costs of processing applications (such as for credit and background checks), Colorado law imposes two crucial requirements: first, the expected or actual costs must be fully disclosed to the applicant; and second, any excess fee must be returned to the prospective tenant. For example, if a landlord charges a $50 application fee expecting to run a $25 background check and a $25 credit check, but then only completes the background check before rejecting the applicant, the remaining $25 for the unperformed credit check must be returned. Landlords are obligated to make a good-faith effort to return any excess funds within 20 days. Failure to provide full disclosure of all steps in the application process, or to return excess fees promptly, can result in claims for treble damages (three times the actual damages) and attorney's fees for the applicant, turning a seemingly minor oversight into a significant financial burden.

How GLO Can Help

For landlords in Colorado, navigating the complexities of residential rental applications demands a sophisticated understanding of both federal and state regulations. At GLO, our experienced Colorado landlord-tenant attorneys are dedicated to providing the comprehensive legal guidance necessary to protect your interests and ensure full compliance.

We work proactively with property owners to meticulously review and, if necessary, revise your rental application forms and screening processes. Our goal is to ensure they are compliant with all applicable anti-discrimination laws, including the nuanced aspects of federal and Colorado fair housing laws regarding familial status, disability, sexual orientation, and gender identity. We provide clear, actionable advice on permissible questions and the appropriate use of background checks, including the strict look-back periods for criminal history and credit information. Furthermore, GLO offers expert consultation on the legal requirements for rental application fees, advising you on proper disclosure practices and the crucial obligation to return excess funds, minimizing your risk of liability. By partnering with GLO, you can confidently screen prospective tenants, knowing that your process is legally sound, transparent, and designed to minimize potential legal disputes, allowing you to focus on the successful management of your valuable rental property.

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GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients through a specific fee agreement. GLO does not guarantee any results.