Very simply put: How should one return a security deposit to their tenant in such a way that there is proof I've fulfilled my responsibilities to do so?
It is Colorado in this case and I see no such laws governing the format of the deposit. What are the options and specifically some smart ways to do this? I'd like to avoid the excuse of - never got it at the address provided, didn't cash it etc.
Traditionally in my leases I specify that it will be returned within 30 days of move-out via check (and therefore they must provide forwarding address). I send via certified mail so that receipt is confirmed. Safe and easy. Now, for tenants that pay with Zelle I will offer to return it via Zelle, but I don't have that written into the lease because it's important to have a valid forwarding address.
I don't believe in CO there are any laws about how it is returned, timely return and detailed reason for any deductions are the main concerns.
Edit: As @DerKomissar noted, the law specifically approves of mailing, so that may be best practice in CO, but I am skeptical that it would be interpreted as the only proper method for return as @Kevin's answer suggests. I'm going to keep offering refund via Zelle if the deposit was made via Zelle, and will update if I ever run into issues or case examples where it is deemed unacceptable.
IANAL, but here are the relevant Colorado laws:
A landlord shall, within one month after the termination of a lease or surrender and acceptance of the premises, whichever occurs last, return to the tenant the full security deposit deposited with the landlord by the tenant, unless the lease agreement specifies a longer period of time, but not to exceed sixty days.
So, it must be returned within 30 days (unless the lease says more, up to 60 days).
The landlord is deemed to have complied with this section by mailing said statement and any payment required to the last known address of the tenant.
While it does not say you must mail, it lists that as a specific, acceptable example. It does not say check vs. cash either, but I would assume check would be the more preferred method. Finally, it doesn't say that you must accept a new forwarding address, the law states that the "last known address" is acceptable.
As a result, it looks like Colorado takes a pretty open stance on this: as long as the landlord can prove they acted in good faith, they have complied with the laws.
If I were you, I would send via "Certified Mail" as this comes with a receipt that it was received, but if you can prove a postmark date it seems that would be sufficient. In addition, if the Certified Mail is received, you can sometimes get the name of the person who signed for it. For the $10-15 it usually costs, it's a very good way to CYA without doing anything shady.
Colorado does have a state statute about requiring the security deposit to be returned via mail. There was a Colorado security deposit dispute case where the landlord returned the check in person, that fact alone lost him the case. While decisions like that really depends on the judge the important thing to remember is to read and be familiar with all of your state statutes regarding landlord tenant law.
Sorry, I think it's bad to promote the accepted low-tech answer. I'd instead recommend using Zelle (or Paypal) if the recipient can accept it. This avoids the certified mail fee, has the same level of proof, and is faster for everyone.
The only reason I see to mail a check when the recipient would have taken Zelle is because there's a chance then that they will not get it (or not cash it) and will simply forget about it. But, you said you'd then remit to State Unclaimed Property, so it doesn't sound like this reason applies to your care.
In general, your tenants pay you the rent in a way that they can prove they did. It seems natural to use the same way for you to return the deposit, because you need a similar level of proof and both parties are already familiar with the payment system.
If you run your landlord business like a business, then you have a checkbook which has at least one of several features for logging checks. You use those in the normal way, and that involves making a contemporaneous paper log of the check being written. "Contemporaneous" means at the time you write the check.
Such logs tend to be compelling evidence, presuming the checkbook also contains records of all sorts of other checks written in the ordinary running of a landlord business.
Even better if you also run an accounting system like Quickbooks, and there are all the normal journal entries including one for this check. Even better if the check is printed through the accounting system's software.
All this makes you come off as a dispassionate business doing business in the normal way. You have shown you wrote the check. Now the plaintiff needs to prove you didn't give it to him rather than him just losing it. It will certainly end with the judge ordering you to stop payment on the check and issue another; you then object that the plaintiff should have to pay reasonable stop-payment and reissue fees.
And best of all if the payment is made through a payment system like PayPal where you have an account. In that case, you have an uninvolved third party who can positively prove the transfer did occur, by subpoenaing from them. Because that is so easy and sure, you can usually just print out the transaction page and present that. Plaintiff can only argue you forged the document, and judges have little patience with that, since plaintiff is accusing you of falsifying court documents.
