Denver City Council recently passed a new bill that imposes licensing restrictions on long-term rental property owners. In this webinar, attorney Anthony Lally from White & Steele, and Dave Miller, Regional Vice President of Fidelity National Home Warranty, discuss what these changes mean for property owners and real estate professionals.
This informative webinar covers:
- What the new bill aims to achieve and who it applies to
- Key dates for property managers
- How the new licensing process will work
- Exemptions
- Fees
- Penalties and fines for non-compliance
- Property owner and property manager responsibilities
- Potential impact on the rental market in Denver
Whether you’re a property manager or a real estate professional representing a buyer, this new bill could potentially change the investment property landscape in Denver. If you want to manage your risk, prevent claims and protect your real estate business, watch the full webinar, listen to the podcast, or view the transcript below to find out more:
Video Transcript: New Licensing Requirements for Property Owners Offering Long-Term Rentals (Denver County, Colorado)
Laura Prouse:
Thank you for joining us today regarding the new mandate imposing licensing requirements on property owners offering long-term rentals in Denver County.
I’m Laura Prouse with CRES Insurance Services. Today, we welcome attorney Anthony Lally from White & Steele. Anthony is an active member of the CRES legal panel and a contributing author to our risk management blog. Along with Anthony, we have Dave Miller, Regional Vice President of Fidelity National Home Warranty. Dave manages the CRES Advantage home warranty plan. When you have CRES real estate E&O and purchase a CRES Advantage Home Warranty through Fidelity, you can reduce your out-of-pocket claims costs up to $5,000 (depending on your state).
Dave Miller:
Anthony, what’s happening in your state with regards to this new bill and property managers needing to be licensed?
Anthony J. Lally:
This new bill, recently passed by the Denver City Council and signed into law by the Denver mayor, imposes licensing restrictions. The general stated purpose of the bill is to try to regulate the quality and affordability of rental properties within Denver County.
Dave Miller:
Who does the bill apply to? Is it just the property owners? And is it just for long-term leases or is it short-term, too?
Anthony J. Lally:
This bill specifically deals with long-term leases defined as 30 days or more. The bill applies to the property owner that is offering the rental property. Whether it’s an apartment complex or a single family home, the bill applies to any long-term rental that’s residential. So that includes condominium units, apartment complexes, single row house units, multi-unit homes, all of those things.
I think the concern that the Denver City Council had was they wanted to impose a more uniform standard on the quality of rental units. The Denver City Council wants to deter the “slumlord” type complexes. Their hope is that this bill will remedy, or at least curtail, that practice, as well as provide more affordable rental options.
Dave Miller:
Is this happening in other states or is Colorado spearheading this?
Anthony J. Lally:
I know it’s certainly new for Colorado. I’m not aware of any other county or city that’s imposed a similar requirement. In general, most states have a base level of habitability requirements. Apartments or rental units have to be livable, so every state has that requirement. This bill specifically takes it a step further and tries to really ensure that people offering rental properties meet those requirements.
It’s Bill 210420, generally called the “landlord licensing bill.” It amends the Denver Municipal Code Chapter 27.
Dave Miller:
When does it become effective?
Anthony J. Lally:
There are two different effective dates, depending on whether the rental property in question offers a single rental unit, such as single family home, single condominium unit, or a multi-rental unit, like an apartment complex or a multi-unit home.
- For the properties offering multiple rental units, the effective date is January 1st, 2023.
- For single property rental units — single family homes, etc,, the effective date is January 1st, 2024.
Dave Miller:
I’m surprised that it’s that far out. Do you think that some of these issues will be fixed by then, or is this something we’re going to have for years to come?
Anthony J. Lally:
I think this is going to be a staple, at least within the city of Denver. My best guess is that the Denver City Council wanted to ensure that people that offer rental units or manage rental properties have sufficient time to comply with these new requirements.
Dave Miller:
What are the licensing requirements for landlords?
Anthony J. Lally:
In general, any property owner offering rental property must file an application with the city.
And in the application, they must also provide verification that the property in question passed a inspection performed by a home inspector. And this inspection looks to further the purpose of making sure that the offered rental property is habitable. The inspection looks for things like whether the appliances are functioning, whether there are leaks, does the property have working smoke detectors, those sorts of things.
Much like any law, there is an exception to this inspection requirement. Under the bill, newly constructed rental properties are exempt from the initial inspection, if that rental property owner submits a license application within four years after the date the property received either its permanent or temporary certificate of occupancy.
So, at each property you plan on offering as a long-term rental, you’ll have to apply for a license, and you will have to receive a government inspection and provide verification.
Dave Miller:
Those inspections can be $300 to $400. So let’s talk about the million dollar question. What’s the licensing going to cost the property owner?
Anthony J. Lally:
The cost of the inspections can vary dramatically depending on who’s performing the inspection.
For the applications, there’s a $50 application fee and then a yearly license fee, which depends on the number of rental units that the property offers.
- So, the lowest it can be is for one unit, which would be $50. And the largest value it could be is $500, which is for a rental property offering over 250 rental units.
In addition to those costs, every four years, property owners must renew their application. Meaning they’ll have to file a new application, get another home inspection, and go through that process again.
Aside from the fees, the other major costs would be whether there are additional repairs that the property needs to pass the inspection itself.
Dave Miller:
Can the license be transferred down the road?
Anthony J. Lally:
Unfortunately, the license cannot be transferred, and it’s property specific in addition to the renewal. So, any new home buyer who wants to provide long-term rental units with their property will need to file for a new license.
Dave Miller:
What’s the penalty for those property owners that don’t comply with the new bill?
Anthony J. Lally:
There’s the potential for fines. And let’s say you have a license, but maybe you’re not maintaining the property to the standard that’s expected. You could face some adverse action with respect to your license, getting it pulled or suspended. Since the law isn’t in effect yet, there’s still some gray area about what specifically the city will be looking to do to enforce or penalize people that don’t follow these regulations.
Dave Miller:
If I’m actually the owner of the properties, but I hire you as my property manager, who has to comply with the bill – property manager or owner?
Anthony J. Lally:
The property owner, as the owner of the property, is responsible. But they certainly can delegate and ask a property management company to meet these requirements.
Dave Miller:
Are there any other requirements for property managers or owners that we should know about with this bill?
Anthony J. Lally:
In line with the bill’s purpose to protect tenants, there’s also a requirement that a landlord provide the signed lease agreement and a tenant’s bill of rights form.
In addition to that, any time a landlord makes a demand for rental payment because rent is past due, they will also need to provide this tenant’s rights form. The city needs to approve the form.
To my knowledge, this tenant’s bill of rights form has not been created yet. However, this requirement to provide the tenant rights form and providing a copy of the signed lease goes into effect sooner. I believe January of 2022. So, those requirements will be before the licensing requirements.
Dave Miller:
What is this bill going to do for the Denver real estate market?
Anthony J. Lally:
My best guess is that costs for rentals in the Denver area will increase as landlords try to offset the costs and expenses that are incurred with complying with this new law.
As for the market more generally, I think that will depend, in large part, whether there’s a significant portion of buyers that are just looking for rental property. If there is a significant demand, you could see potentially the areas surrounding the Denver area, like Aurora, Lakewood, Inglewood, potentially seeing those values of property increase as people want rental property, but without having to necessarily deal with all of the regulations that come with a long-term rental property in Denver.
Dave Miller:
If any CRES E&O insurance clients have further questions about this bill, call the risk management division at CRES Insurance. They’ll put you in contact with Anthony and the firm to answer any specific questions.
Laura Prouse:
Thank you. Anthony, great content. This bill could potentially change the landscape for buyers who are looking for investment properties. And thank you all for watching.
