DENVER — Four Star Realty, a property management company that rents mainly to college students in Boulder, Fort Collins, Greeley and Denver, has agreed to pay the state a $1 million settlement and will change its business practices related to security deposits and fees charged to tenants.
The settlement, announced Tuesday in Denver by Colorado Attorney General Philip Weiser and Boulder County District Attorney Michael Dougherty, was the result of months of investigation by the state and county that began after complaints about Four Star were received from University of Colorado students, parents and staff.
While the case was initiated in Boulder, the government claims that Four Star’s business practices — described in court documents as “deceptive,” “unlawful” and “unfair” — were in use across the property management company’s 5,000-home portfolio, which includes homes near the campuses of Colorado State University and the University of Northern Colorado.
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“Four Star strongly denies many of the factual allegations made by the state, including that it engaged in a course of conduct to improperly withhold security deposits,” the company said in a statement Tuesday morning.
“Nothing contained in this Consent Judgment shall be construed or deemed an admission by defendants of any wrongdoing or any violation of state or federal law or regulation,” the settlement documents filed this week in Boulder County District court said. “Defendants expressly deny any liability or wrongdoing and are entering into this Consent Judgment to avoid further inconvenience and costs of potential litigation.”
Four Star CEO Caldwell Sullivan blamed a climate of “progressive tenant advocacy” for increased “scrutiny … for practices that are widely used in the industry.”
Nearly all of the $1 million settlement, to be paid in installments over the next year, is earmarked for restitution payments to tenants of Four Star-managed properties, which are typically owned by third parties.
“To the property managers and landlords paying attention, this is a wake-up call,” Weiser said. “You need to look at your business practices.”
The settlement is a “clear mandate” sent from regulators to landlords across the state that tenant-rights must be respected.
Just how many tenants may have paid what the government has deemed illegally charged fees to Four Star remains to be seen as the state and county have just started trying to locate eligible renters.
It’s possible that the state discovers that more than $1 million in fees were improperly charged. That’s a risk government attorneys often run when negotiating settlements: the pool of restitution might be insufficient, but a court battle with a company is expensive and results in favor the plaintiffs are never guaranteed, said Weiser, who predicted that the Four Star settlement will not be the last of its kind that Colorado recovers on behalf of renters.
The Four Star case is the first to be brought by Weiser’s office after the 2022 passage of a Colorado law that gives the attorney general more authority to bring civil and criminal enforcement actions against housing statute violators.
“This is really a landmark settlement,” Dougherty said, “… and I agree with Attorney General Weiser that it will not be the last.”
While Four Star specifically denies that it “engaged in a course of conduct to improperly withhold security deposits,” it’s unclear what other government allegations — of which there are many — the company claims to be false.
“Instead of following the security deposit statute when a tenant moves out, Four Star places all expenses on the tenant’s ledger initially, only later going back to subtract (some) charges that should be borne by the property’s owner,” said the complaint filed jointly by Weiser and Doughter’s offices. “Four Stars’ processes are not designed to ensure that it retains only the correct amount of the tenant’s money.”
Furthermore, the complaint alleges that “some maintenance tasks, like painting, carpet cleaning, and cleaning, are scheduled months before a tenant moves out. Theoretically, if that work is not necessary when Four Star inspects the property, Four Star can cancel the vendor scheduled to perform the maintenance. But often, Four Star lets the vendor complete the work order as scheduled before determining whether the work is necessary. In fact, Four Star often lets its vendors decide how much painting or cleaning is ‘required’ at a property and does not review that decision until a tenant complains about the cost.”
This “process results in Four Star using tenants’ security deposits to pay for work that covers deterioration that occurs from expected, intended use of the property during a tenancy, or ‘normal wear and tear,’” the government claims.
In addition to the improper handling of security deposits and move-out processes, Weiser and Dougherty claim that Four Star parent company Populum Real Estate Holdings LLC and its affiliated entities, which include an apartment maintenance company that does much of the repair and turnover work at Four Star-managed properties, charge “tenants unfair, and misleading junk fees.”
Those junk fees include a “moveout coordination fee” that’s not disclosed to renters in their lease documents, the complaint claims, as well as “rekeying” fees even at properties with electronic locks.
As part of the settlement, Four Star agreed to update a number of business practices and processes, a move that Weiser applauded the company for making and one that he said is already underway.
“Defendants have fully cooperated with and acted in good faith during the state’s investigation,” the settlement agreement said. “During the investigation, the defendants proactively reviewed and revised their business practices and voluntarily implemented various remedial measures in advance of this Consent Judgment. The state acknowledges defendants’ responsible corporate citizenship in its responding to the investigation and in reaching this resolution.”
The court case is State of Colorado v. Populum Real Estate Holdings LLC, case number 2024CV30023, filed Jan. 8 in Boulder County District Court.