A Colorado property manager has agreed to pay $1 million over the next year to settle claims that it illegally charged residents for routine repairs and other services.
Four Star Realty — which manages about 4,600 Colorado properties, predominantly in Denver, Boulder, Fort Collins and Greeley — regularly charged residents for damage they did not cause, billed them for unnecessary work done in their units and charged fees that were not described in their leases, according to a yearlong investigation by the Colorado Attorney General’s Office.
Although it rents to all kinds of people, Four Star specializes in managing off-campus units rented to college students. Students are particularly vulnerable to housing discrimination because they lack the knowledge and experience needed to understand and advocate for their rights as tenants, Colorado Attorney General Phil Weiser said at a news conference Tuesday morning.
The Four Star settlement marks the first time the state attorney general’s office has enforced a law enacted in 2022 that gives the office authority to investigate housing complaints.
“Too often, renters are nickel-and-dimed and misled by property managers and landlords,” Weiser said. “When renters move out, they’re at a particularly vulnerable time and their security deposits often cannot return to them, as the law requires.”
By early March, Four Star will give the attorney general’s office the names of all residents who moved out of properties it managed between Jan. 1, 2020, and Dec. 1, 2023.
The list will help the state determine how many tenants will receive refunds for things such as overpaid utility bills, fees to change the access code on electronic door locks and routine maintenance the attorney general’s office said should have been covered by the property owner.
The settlement sets a standard for transparency and fairness that other housing industry leaders must follow to comply with the new state law, Weiser said.
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“This settlement represents a significant step forward for the tenants and renters throughout the state of Colorado,” said Boulder District Attorney Michael Dougherty, whose office brought the Four Star case to the attorney general. “The more transparency we build into lease agreements, the more we do to reduce fees and the more we can lower costs for people who are struggling to get by and struggling to pay rent.”
Under the agreement, Four Star Realty is also reforming its business practices to comply with tenant laws, including by not keeping any money from a resident’s security deposit to rekey, install new locks or reprogram an electronic lock unless the tenant damages the lock. The company also will not deduct money from a security deposit or charge residents for painting if the tenant reasonably maintained the condition and cleanliness of the walls and other painted surfaces.
“Four Star strongly denies many of the factual allegations made by the state, including that it engaged in a course of conduct to improperly withhold security deposits,” the company wrote in a statement.
“Nonetheless, rather than spend years of expensive litigation defending itself, Four Star Realty decided to put this matter behind it and instead focus on its business, including developing industry-leading processes and controls,” the statement says.
Caldwell Sullivan, CEO of Four Star Realty, which is based in Boulder, said in the statement the organization is committed to following industry standards. However, he added, progressive tenant advocacy is quickly changing the landscape of property management in Colorado.
“We experienced scrutiny in this investigation for practices that are widely used in the industry,” he said. “Industry standards will undergo many changes as a result of these policy decisions. We look forward to leading the industry in adapting to those changes.”
The attorney general’s office said none of the residents who complained were willing to comment.
Enforcing a new housing law
Four Star is accused of illegally charging hundreds of residents “a move out coordination fee” that was never disclosed and for billing tenants to repair an entire wall that was damaged by scuffs and scratches, for example.
Tenants also were charged for things like tightening door handles and toilet seats and, in some cases, their security deposits were kept to cover the cost of painting an entire apartment or cleaning carpets whether they needed it or not.
Under Colorado law, landlords cannot charge residents fees that aren’t disclosed in lease agreements. State law also bars landlords from keeping security deposits to pay for normal wear and tear in their units.
Deposits also can’t be used to pay for damage by prior tenants. And any illegal fees charged by landlords must be returned to residents, Weiser said Tuesday.
“If those principles are violated, our office stands ready to act,” he said Tuesday morning. “For the property managers and landlords paying attention, this is a wake-up call.”
A 2022 law created a Fair Housing unit in the attorney general’s office and gave it authority to investigate landlords and property managers who violate housing statutes including illegally withholding security deposits.
The Four Star case was referred to the Colorado Attorney General’s Office by the 20th Judicial District Attorney’s Office in Boulder led by Dougherty.
Over the past couple of years, the Boulder District Attorney’s Office received complaints from tenants, many of whom were college students, their parents, the city of Boulder and the University of Colorado. They all said they were concerned about security deposits being withheld in whole or in part by Four Star.
The Boulder District Attorney’s Office and the Colorado Attorney General’s Office partnered to investigate the complaints.
In Boulder, It’s not uncommon for security deposits to range in cost from $5,000 to $10,000, Dougherty said. Security deposits are the property of the tenant and do not belong to the management company or the property owner, he said.
“When a company comes in, when a tenant has left the property and their caulking tile, or painting walls, or fixing loose door knobs — whether or not the tenant actually caused any damage to the property or not — what they’re actually doing is maintaining, if not improving the value of the rental property, so that they can use it and market it and rent it again in the future,” he said.
“The repainting of a property just to make it look better, and perhaps get more rent next time around — that can’t be done on the back of the tenant,” he said.
In addition to paying up to $1 million through the settlement, Four Star has also agreed to disclose all fees, rent, and other costs to tenants clearly on lease documents.
Four Star will be required to maintain photos and records of property inspections and documentation of withholding security deposits for three years. It will also provide those records to tenants upon request.
It cannot withhold any money from a tenant’s security deposit unless the amount is directly related to the resident’s conduct.
It’s possible the damages paid to residents could surpass the $1 million available through the settlement, Weiser said.
State officials could also have trouble finding transient college students who have since moved to other states and may have money left over from the settlement, he said. “Some people will be easier to locate than others,” Weiser said.
“We’re going to do our very best to get all the money back to people who were mistreated,” he said. “And if we have that problem, we have to figure out how to deal with it.”
The attorney general’s office, which expects to hear from more Four Star residents in the coming weeks and months, said it will give updates about how much restitution has been paid out to tenants. Any money that remains from the settlement will be used in other ways to protect tenants, a spokesman for Weiser’s office said.
MORE: Coloradans can report fraud, scams and other law violations at stopfraudcolorado.gov, a site run by the attorney general’s office.