Short-Term Rentals and Certificates of Taxes Due

A New Frontier for Colorado Title Companies

As Colorado’s real estate market continues to evolve, short-term rentals (STRs) have become a major force—especially in mountain towns and resort communities. But with this growth comes a new layer of complexity for title companies, particularly when it comes to Certificates of Taxes Due (CTDs) and property tax compliance.

🏠 STRs and Property Classification: Residential or Commercial?

One of the most pressing issues is how counties classify STR properties for tax purposes. In some jurisdictions, frequent short-term rental activity can trigger a reclassification from residential to commercial, significantly increasing the tax burden.

Why It Matters for Title Companies:

• A CTD may reflect residential rates, but the county may be in the process of reassessing the property as commercial.
• This can lead to retroactive tax bills or supplemental assessments that aren’t visible at closing.

Pro Tip: Always check with the county assessor if the property has been used as a short-term rental. Look for pending classification changes or appeals.

📄 Unfiled STR Taxes: A Hidden Lien Risk

Many Colorado municipalities require STR operators to collect and remit local lodging or occupancy taxes. Failure to do so can result in liens that may not appear on the county-issued CTD.

What to Watch For:

• City-level tax liens (e.g., Denver, Aspen, Breckenridge) that are recorded separately from county property taxes.
• Unregistered STRs that may have accrued back taxes or penalties.

Action Step: Search municipal lien records and verify STR licensing status with the local government.

🧾 CTDs and STR Transfers: Timing Is Everything

When an STR property changes hands, the new owner may inherit unresolved tax issues or face delays in obtaining a new STR license—especially if the previous owner was noncompliant.

Title Company Checklist:

• Confirm that all STR-related taxes are paid and licenses are current.
• Include STR compliance language in the title commitment or closing instructions.
• Consider escrowing funds for potential tax liabilities if there’s uncertainty.

🔄 Legislative Watch: STR Tax Reform on the Horizon

Colorado lawmakers have proposed several bills aimed at tightening STR tax enforcement and standardizing classification rules. These could impact:

• How CTDs are issued for STR properties.
• Whether STR tax compliance becomes a mandatory disclosure in real estate transactions.

Stay Ahead: Monitor legislative updates and educate your team on how these changes could affect title work.

✅ Conclusion: STRs Demand a New Level of Diligence

For title companies, the rise of short-term rentals means CTDs are no longer a simple checkbox. They require deeper investigation, broader record searches, and proactive communication with local authorities. By adapting your processes now, you’ll be better equipped to handle the next wave of Colorado real estate.