Should Anyone Still Own Rentals in CO?

I have written twice already about the damaging consequences of Senate Bill 21-173 the Residential Rental Agreements Bill. I did some more reading of the bill for you my loyal readers. Please send me red wine for my toils. LOL Here is what I read recently that I want to share with you straight from the Bill—

·        “When a landlord removes or excludes a tenant from a dwelling without resorting to proper court procedures, it is an unfair or deceptive trade practice for the purposes of the "Colorado Consumer Protection Act".” This means the tenant can sue the landlord for treble damages. Eeks!

·        “Repeals language requiring the defendant, in an appeal from a judgment of a county court, to deposit with the court the amount of rent found due.” This means it will be much harder for a landlord to collect past-due rent.

·        Allows a tenant to extend eviction procedures by claiming the property is not habitable. This will happen regularly I believe from my experience with bad tenants.

·        The attorney general may investigate and prosecute alleged violations made by the landlord. A violation that is not timely cured or that was committed by a landlord in bad faith is an unfair or deceptive trade practice for the purposes of the "Colorado Consumer Protection Act". Holy shit!!! Imagine you make a mistake on a contract and your client loses their earnest money and you being investigated and prosecuted by the State Attorney General for this. This could happen to landlords.

·        The Department of Local Affairs will provide sources for FREE legal aid for renters.

·        Let’s say your tenant owes you $2,000 in back rent. You take them to court to evict them. You win the trial. Defendant has 48 hours to make payment before you can evict them. Tenant could pay $1 to you and stall the eviction and force you as the landlord to take them to court again for $1999, and on and on and on.

·        Also, the tenant can ask for a 3-day jury trial. If your attorney charges $300 an hour x 24 hours that’s $7200 in legal fees for the trial plus thousands more to prepare for the trial. And I can see many citizen juries siding with the “poor” tenant and against the “rich” landlord.

So, who wants to be a landlord and own investment property in Colorado? Seriously. Anyone? Anyone? Anyone? I don’t. We are selling all of our investment RE in CO and buying property in Alabama.

So, what are some consequences that may happen? Here is what I am thinking—

·        If hundreds or thousands of landlords feel like I do we may have a welcome surge in SFRs, condos, and townhouses for sale.

·        This will cause the supply of rental housing to drop though and when supply drops rent will increase.

·        Plus, the remaining landlords will almost for sure raise their credit standards for renters and dramatically increase their security deposits. Thus, a renter with a Fico score < 680 may not find a place to live. Whoops!

·        I expect this bill if it becomes law will have the same CHILLING EFFECT on apartment construction as the Construction Defects Reform Bill from 2007 had on the construction of new condos. This means apartment construction STOPS!

·        This will cause housing supply to continue to SHRINK BIG-TIME!. Thus, prices and rents will continue to soar.

·        Thus, remaining landlords/investors may do really well as long as they have good tenants that pay the rent. But, I would advise them to have at a minimum $15k to $20k in the bank for each rental property they own in case they need to evict someone.