Recently, the Denver City Council passed Bill 21-0420, which imposes licensing requirements on property owners offering long-term rentals within Denver County. The City Council’s passage of Bill 21-0420 will undoubtedly impact potential buyers looking to invest in residential rental property. The real estate agents who represent these potential buyers will need to be familiar with Bill 21-0420’s licensing requirements. The following is a list of general questions, and corresponding answers, that agents will likely receive from clients interested in purchasing residential rental property in Denver. While this list provides some general information, it is always advisable for the broker to direct the client to consult with an attorney should the client have any specific questions regarding Denver rental property requirements.
- Who or What Does Bill 21-0420 Apply to?
Bill 21-0420’s requirements apply to owners offering residential rental property (including, but not limited to, apartment complexes, multi-unit homes, single family homes, a single condominium unit, and a single rowhouse unit) with leases longer than thirty (30) days.
- When Does Bill 21-0420 Become Effective?
For residential property offering multiple rental units, such as apartment complexes and multi-unit homes, Bill 21-0420’s requirements take effect after January 1, 2023. For residential property offering a single rental unit, such as single family homes or a single condominium unit, Bill 21-0420’s requirements take effect after January 1, 2024.
- What Is Bill 21-0420’s Licensing Requirements?
Rental property owners must apply for a long-term rental license and establish that their rental property meets various habitability requirements—such as having a functioning smoke and carbon monoxide detector—to qualify for a long-term rental license. In conjunction with their application, rental property owners must also submit a verification that the subject rental property passed an inspection performed by a home inspector. For residential rental property offering multiple rental units, Bill 21-0420 requires an inspection of ten percent (10%) of the property’s units, selected at random.
Importantly, newly constructed rental properties are exempt from an initial inspection if the rental property owner submits a license application within four years after the date that the property receives a permanent or temporary certificate of occupancy.
- What Is Bill 21-0420’s Licensing Costs?
For all rentals, a long-term rental license applicant must pay: 1) a fifty dollar ($50) application fee for any application submitted after Bill 21-0420’s effective dates—January 1, 2023 for multi-unit rentals and January 1, 2024 for single-unit rentals—and 2) a yearly license fee which is dependent on the number of rental units offered—the minimum cost is fifty dollars ($50) (for single rental units) and the maximum cost is five hundred dollars ($500) (for rental property offering over two hundred and fifty (250) rental units).
- Can Landlords Transfer Their Long-Term Rental Licenses?
Bill 21-0420 prohibits transfers for long-term rental licenses. As a result, a buyer will need submit a new application for a long-term rental license after purchasing rental property.
- What Are the Punishments for Failing to Comply with Bill 21-0420?
A landlord’s failure to comply with Bill 21-0420 could result in, among other things, a suspension or revocation of the landlord’s long-term rental license or fines.
- Are There Any Other Requirements That A Landlord Should Be Aware Of?
In addition to the abovementioned licensing requirements, Bill 21-0420 also requires, starting January 1, 2022, that landlords provide tenants a copy of any executed written lease and a tenants’ rights and resources form. Landlords must also provide a tenants’ rights and resources form whenever they make a demand for rent.
- What Impact Will Bill 21-0420 Have on Denver’s Real Estate Market?
Denver renters will likely see an increase in rents as a result of Bill 21-0420’s licensing requirements as Landlords—faced with the additional expenses associated with obtaining a long-term rental license—will likely pass along these costs to their tenants. Bill 21-0420’s regulations may also affect Denver’s real estate market more generally. Faced with the additional hassles associated with rental property management in Denver, prospective rental property buyers may look to purchase rental property in the surrounding markets adjacent to Denver such as Aurora, Englewood, or Lakewood. This change could result in increased property prices for the areas directly outside of Denver County. It remains to be seen, however, whether the rental property demand is a significant driving force in the real estate market. If this population of property buyers is relatively small, then the market may not experience any substantial changes as a result of Bill 21-420.
By James M. Meseck* and Anthony Lally†
White and Steele. P.C.
Dominion Towers, North Tower
600 Seventeenth Street, 600N
Denver, Colorado 80202-5406
*James M. Meseck (firstname.lastname@example.org) is a shareholder at White and Steele, P.C. His practice centers on litigation with a focus on real estate professional liability defense, personal injury defense, and legal malpractice defense.
†Anthony Lally (email@example.com) is an associate at White and Steele, P.C. His practice centers on insurance defense litigation, specifically professional liability defense, insurance bad faith defense, personal injury defense, and construction defect litigation.