Dive Brief:

• Colorado Attorney General Phil Weiser announced a settlement with Four Star Realty after a state investigation found numerous instances of the Boulder-based property management company “illegally charging tenants for routine repairs and other services,” according to a Jan. 9 press release from the state.
• The Colorado Department of Law investigation found that Four Star regularly charged its tenants, primarily students, for damage they did not cause, billed them for unnecessary work and charged fees that were not in their leases, according to Weiser’s office.
• After the investigation, Four Star and the state of Colorado settled and agreed to the $1 million penalty, which will be earmarked for consumer restitution. The management company said the settlement “is not an admission of wrongdoing or violation of laws,” according to a statement it shared with Multifamily Dive. The company said it entered into the Final Consent Judgment to avoid the further inconvenience and costs of potential litigation.

Dive Insight:

In 2022, Colorado enacted a law that gives the attorney general authority to bring civil and criminal enforcement actions related to housing statutes. It also established a housing unit in the state’s Department of Law.

“Too often, landlords and property management companies nickel-and-dime tenants by deceiving them into paying for things like normal wear and tear or damage from previous tenants, or by charging fees not reflected in leases,” Weiser said in the release.

In its statement, Four Star Realty described the negotiated settlement as being for “over-allocation of painting and maintenance charges between property owners and tenants as well as how some types of fees are charged and disclosed.”

Four Star Realty CEO Caldwell Sullivan said the company, which operates approximately 5,000 units of rental properties in Boulder, Denver, Fort Collins and Greeley, was “committed to following industry standards” in the statement.

“However, in a time of progressive tenant advocacy that 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,” Sullivan said in the statement. “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.”

Though Four Star Realty maintained its innocence, it cooperated fully with the investigation, according to Michael Dougherty, district attorney for the 20th Judicial District.

“While the investigation was pending, Four Star took important steps to revise their business practices and implemented measures to better serve their tenants,” Dougherty said in the release. “Through those actions, as well as the measures required by the consent judgment, there is a roadmap and standard for other property management companies.”

Settlement terms

As part of the settlement, Four Star agreed to disclose all fees, rent and other costs to tenants clearly on lease documents, according to Colorado’s release. It will also comply with a new state law related to utility billing.

“In agreeing to this settlement, not only is Four Star choosing to do the right thing and reform its business practices, but it is also working with our department to set the standard for fairness and transparency in the industry that others must follow to comply with state law,” Weiser said in the state’s press release. 

Other settlement terms include: 

-Four Star will be required to maintain photos and records of property inspections and documentation of withholding of security deposits for three years. It will provide those records to tenants upon request. 

-Four Star cannot withhold any money from a security deposit unless the amount withheld is directly related to the tenant’s conduct.

-Four Star must minimize repainting costs related to filling nail holes and other minor damage to paint.

-Four Star is required to determine if any carpet cleaning is actually necessary before charging tenants.

-Four Star is prohibited from withholding rekeying costs from security deposits. It can only charge for rekeying if tenants choose to have it done and prices are disclosed in advance.

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