In summer 2023, Destiny DeNicola cleaned the Hampden apartment she and her partner had been living in for the past two years one last time. DeNicola just wanted to comply with the lease as she swept and vacuumed the floors, washed the kitchen, scrubbed the walls and moved out, proud of the work.
She couldn’t imagine that a few months later, she’d be the named plaintiff in a class-action lawsuit accusing her landlord of fraud. Why would she? DeNicola felt certain she and her partner would get their much-needed security deposit back soon.
But instead of sending a refund, their landlord, California-based corporate landlord MG Properties, sent a bill.
The company, which boasts online about turning dilapidated properties into profitable investments while providing housing for working people, would keep her $800 security deposit and charged her $2,866.44 for repairs — $2,485 for carpet replacement.
The company, with 750 employees, has invested more than $650 million into the Denver real estate market and leases nearly 2,000 units in the area, according to the lawsuit DeNicolas eventually filed.
MG Properties responded to Denverite's requests for comment by stating that the company does not comment on cases involving litigation.
DeNicola, working toward her doctorate in molecular biology, very much needed the deposit to afford living in Denver and was baffled.
She had spent the past two years taking her shoes off to walk through her home to keep the carpet in the same condition she found it. She had snapped photos from beginning to end that she says prove it was still in good shape.
The bill had to be a mistake, and she thought the company would listen to her.
So DeNicola called MG Properties to object to the charges. When nobody returned her call, she sent emails, outlining her case for why the charges were bogus. There was no reply. Eventually, MG Properties threatened to send her to collections for the money the corporation claimed she owed.
Was she being scammed? Surely, she thought, this practice couldn’t comply with state law.
That question loomed larger after DeNicola looked at photographs of the apartment in a rental listing posted after she moved out and learned that the carpet hadn’t been replaced at all. Instead, it had been stripped down to hardwood-like flooring and her place had been renovated and was being advertised as such.
She suspected the company was funding renovations with money they were attempting to scam from her.
Eventually, DeNicola connected with Justice for the People Legal Center, a nonprofit focusing on tenant rights.
Jason Legg, an attorney with the organization, looked at her situation and explained that landlords weren’t allowed to withhold deposits over normal wear and tear — and certainly weren’t allowed to charge old tenants to fund remodels for future tenants.
So why did her pleas with the company not work?
A loophole in Colorado’s security deposit law benefits landlords. Unless a tenant writes a formal letter that specifies in legal language — “Hey, I'm going to take you to court if you don't give me a refund within seven days” — the landlord has no legal obligation to take action, Legg explained.
Some, if not most, of the working people MG Properties claimed to serve don’t exactly have lawyers on retainer on money for cases.
Generally, renters may not understand their rights. Some may not speak English as a first language. And even if they do know when they’re being ripped off, hiring an attorney often requires connections or money.
DeNicola, who conducts research for a living, couldn’t figure out the law or how to represent herself and was grateful for Justice for the People Legal Center’s help drafting a proper letter that threatened to take MG Properties to court.
MG Properties responded by removing the hefty carpet replacement charge. But the company continued to hold her security deposit and said she would be sent to collections if she didn’t pay an additional outstanding $310.44.
The more the Justice for the People team, led by investigator Therese Kerr, researched the company and past tenants the more they realized DeNicola wasn´t alone in having her security deposit withheld and bogus charges being levied after the move-out date.
Now Justice for the People Legal Center is taking the company to court to prove it and win money for past tenants whom the organization believes have been scammed out of their money.
DeNicola is the named plaintiff in a class action lawsuit against MG Properties, filed by the Justice for the People Legal Center and co-counsel Woodrow & Peluso, LLC. The lawsuit argues the company illegally retained security deposit funds under Colorado’s Security Deposit Law and is systematically violating Colorado’s Consumer Protection Act.
MG Properties is facing a separate class action suit in California for fraudulently charging move-out expenses and refusing to pay back security deposits. In that state, the company manages more than 20,000 rental units.
Legg believes MG Properties is one of many massive landlords engaged in the practice of improperly withholding security deposits and charging bogus fees.
As he sees it, the seven-day payback period serves as a “Get Out of Jail Free” card for landlords systemically scamming former tenants. He would like to see the legislature impose fines of $50 to $200 on landlords who fail to give back money to tenants.
Such fees, as he explains it, would encourage landlords to comply with the law and disrupt the business model of “see what you can get away with.”
DeNicola has lived in two places since she left her MG Properties-owned apartment — and her experience with the company has made her cautious when dealing with landlords.
The house she moved into after the MG Properties apartment had a mouse infestation, squirrels in the attic and roaches. The landlord failed to address it.
Without the security deposit from the apartment, “We didn’t have the money to move out,” she explained, so they suffered through the infestation for months.
Eventually, they saved enough money to move out, using a warrant of habitability clause in their lease that stated if a landlord can’t meet the terms of the agreement, a tenant can break it without penalty. She was pleased that the landlord followed the law.
Again, the couple moved, and they like where they’re staying. They’re even painting the walls to make it more their own.
“We've met the people who lived there before,” DeNicola said. “They have a family. They seem really nice. We’ve been very assured there's no pests or anything like that. I'm hoping for the best.”
