Four Star Realty First of State's Property Managers Attorney General May Hold Accountable

When Colorado Attorney General Phil Weiser announced the $1 million settlement that he and 20th Judicial District Attorney Michael Dougherty reached with property management company Four Star Realty, he had a message for other companies that might be illegally charging tenants fees or withholding security deposits: His office is coming for them, too.

In a 2022 state law spearheaded by former representative Edie Hooton, the Attorney General’s Office received authority to bring civil and criminal enforcement actions related to housing statutes and was instructed to set up a fair-housing unit within the office.

“In this case, for the first time, we are exercising that authority,” Weiser said at a press conference on Tuesday, January 9. “That makes this case a call to action. A call to action for landlords, for property management companies, and those who work with them and represent them."

Working together, Weiser and Dougherty filed a case against Four Star over its alleged practices of retaining security deposits for routine wear and tear, which is illegal in Colorado. The company is also accused of charging junk fees without disclosing them.

Four Star specializes in managing off-campus housing for students; most of its 4,600 managed properties are in Boulder, though it also oversees properties in Fort Collins, Greeley and Denver. Dougherty’s office was informed by students, parents, the University of Colorado and the City of Boulder about Four Star’s practice of not returning security deposits to tenants.

“It's not uncommon for [security deposits] to be between $5,000 and $10,000,” Dougherty said. “Those security deposits were withheld, in whole or in part, unfairly and unjustly. Also, there was a lack of transparency by Four Star Realty in charging unfair and deceptive fees for tenants.”

Rather than go to court, the parties settled on January 8. Most of the $1 million Four Star is set to pay to the state will go to restitution for tenants who were unfairly charged fees or did not have their security deposits returned.

According to the case filed against Four Star by Weiser and Dougherty, the company routinely charged tenants to repaint entire walls or deep-clean every carpet in a unit when there was only a small spot of damage that could have been addressed more narrowly. Such actions increase the value of a rental property “on the backs of tenants who have already left," Dougherty noted.

“It's important to remember that security deposits are the property of the tenant, not the property of the management company or the property owner,” the Boulder DA said. “It’s the property of the tenant that's held in trust by the property owner. Landlords are not permitted to use that unless there's actual cause to do something, and, under the law in the state of Colorado, normal wear and tear doesn't qualify as actual cause.”

Four Star also allegedly charges unfair and misleading fees like a "moveout coordination fee," which Dougherty said was charged to hundreds of residents but never disclosed on their leases. According to the case, Four Star was also illegally overcharging for utilities and billing tenants for a re-keying fee despite using an electronic system that made the cost of changing entry permissions negligible. Under the settlement, the company is no longer allowed to charge a re-keying fee.

“Colorado law is crystal clear,” Weiser said. “Landlords cannot charge tenants for ordinary wear and tear; landlords cannot charge fees that were not disclosed. If those principles are violated, our office stands ready to act.“

The Attorney General’s Office will now set out to find all those who are owed restitution and distribute as much of the $1 million settlement as possible; a small amount will be retained for the out-of-pocket costs the office incurs while doing so. Any Four Star tenant who moved out between January 2020 and December 1, 2023, is eligible and can go to stopfraudcolorado.gov to let the Attorney General's Office know they may have been impacted.

Some victims were already identified in the settlement process, and Four Star has given its records to the state so it can continue to identify more. Because so many Four Star tenants leave the state after graduating from college, that could prove difficult.

“I am concerned, given this population, how transient they are, that it will not be easy to locate everybody,” Weiser said.

Four Star also worked with the state over the past few months to improve its practices, Dougherty said. According to the settlement, it will now disclose all fees and costs to tenants in its leases and change its utilities billing system.

The company will maintain records of inspections and documentation of withheld security deposits, and will give those records to tenants upon request. It will also minimize repair costs such as filling in nail holes in walls, and won't withhold security deposits unless the amount is directly related to a tenant’s conduct.

Dougherty applauded Four Star for being willing to work with the state and committing to better business practices.

“Make no mistake about it, folks: Four Star could have fought this in court, and it would have been trench warfare for years,” he said.

In a statement, Four Star denies most of the alleged illegal activity described in the case filed by Weiser and Dougherty, including improperly withholding security deposits. It also disagrees with the state’s interpretation of legal requirements for the rental industry.

“Four Star Realty has always been committed to following industry standards,” said CEO Caldwell Sullivan 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.”

Still, the company noted, it has changed its practices and looks forward to others in the industry doing the same. On that, the parties agree: This case is about much more than one company.

“We are here to announce the settlement with a property management company, Four Star Realty. This case, however, is about renters,” Weiser said. “Too often, renters are nickeled-and-dimed and misled by property managers and landlords.”

Because college students are often entering a new rental market or hurriedly leaving it to get to their next adventure, they were particularly vulnerable to nickel-and-diming by Four Star, the officials said.

“Students are a vulnerable population because they lack some of the experience and sophistication to be able to know what their rights are and advocate,” Weiser added. “But I want to emphasize that there are lots of other vulnerable populations. Think about veterans; think about single parents who don't have the time or wherewithal to be their own advocates. The people who are most likely mistreated as tenants are often in categories involving vulnerable people.”

With its new housing unit, the Attorney General’s Office will provide tenants advocacy resources and look for other companies that require legal action to course-correct.

Weiser suspects that many other companies employ practices similar to those used by Four Star prior to this settlement.

“Other companies who made this mistake, they face a choice,” Weiser said. “Companies can say we made a mistake, we need to do better, take responsibility and make it right — that’s what Four Star did. I hope other companies come forward in that spirit. If they don’t and instead they want to do the hand-to-hand combat litigation, game on.”