DENVER, CO, September 15, 2026 /24-7PressRelease/ -- Denver real estate firm Volpe Law LLC is alerting Colorado landlords, property managers, and investors to a new state law that carves out an exception to Colorado's cap on security deposits. The firm's landlord-tenant attorney emphasizes that the change is narrow but carries real implications for residential real estate transactions.

Governor Jared Polis signed Senate Bill 26-054 into law on April 20, 2026. The exception it creates takes effect on January 1, 2027.

Since August 2023, Colorado law has capped security deposits at two months' rent. The restriction was designed to reduce the upfront financial burden on tenants, but it ended up creating friction for one specific type of transaction: post-closing occupancy agreements.

In a post-closing occupancy arrangement, the seller of a residential property remains in the home after the sale closes. The buyer holds title, but the seller stays on as a temporary occupant. These property agreements are common when a seller needs additional time to relocate or is waiting on another closing. Because the buyer functions as a landlord and the seller as a tenant under these arrangements, the two-month deposit cap applied to the occupancy terms.

SB 26-054 removes that restriction. Starting January 1, 2027, when a buyer and seller execute a post-closing occupancy agreement in connection with the sale, the buyer may require a security deposit exceeding the two-month limit. The change recognizes that a buyer who has just closed on a property carries significant financial exposure when the seller remains in the home, and that a two-month deposit may not adequately cover the risk of property damage, a delayed move-out, or disputes over the condition of the residence at surrender.

"Post-closing occupancy agreements have always required careful drafting, but the security deposit cap created an additional challenge," said Ben Volpe, founding attorney at Volpe Law LLC. "Buyers were taking on real risk with limited protection. This law gives both sides more flexibility to negotiate terms that reflect the actual stakes of the arrangement."

The firm encourages landlords, property managers, and buyers to have their lease templates and transaction documents reviewed before January 2027 to account for the new rule. Sellers should also be aware that a higher deposit may now be a condition of remaining in the home after closing.

Landlords, property managers, and real estate investors with questions about how SB 26-054 affects their transactions can contact Volpe Law for a complimentary discovery call.

About the Firm:

Volpe Law LLC is a Denver-based litigation firm serving business owners, contractors, property owners, developers, and investors across Colorado. The firm handles construction litigation, real estate disputes, commercial litigation, breach of contract claims, mechanic's lien actions, and fractional outside general counsel services. Founded by Ben Volpe, a Super Lawyers Rising Stars honoree three years running (2023-2025), the firm practices in all Colorado state district courts and the U.S. District Court for the District of Colorado.

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