Real Estate Legislative Update Outline

Real Estate Legislative Update

Catherine Hance

Davis Graham & Stubbs LLP

1550 17^th Street, Suite 500

Denver, CO 80202

2004 Legislation (in order of bills)

1.         HB 04-1046

Amendment to statutes (CRS Sections 13-40-111 and 112) regarding forcible entry and detainer actions (FED actions).

This act changes the initial hearing date in a FED action from occurring not less than five days nor more than ten days from the issuing of the summons for the action to not less than five business days nor more than ten calendar days.  It also requires that a plaintiff mail a copy of the summons and complaint to the defendant one business day (rather than one day) after filing.

2.         HB 04-1048 (COPY ATTACHED)

This act addresses and provides for beneficiary deeds.  The act creates CRS 15-15-401 et seq., which provide for the use of beneficiary deeds (deeds which are subject to revocation by an owner, which provide for the conveyance of an interest in real property to be effective upon death of the owner) as a method of effecting a transfer upon death of title to or an interest in real property.  Such deeds would be recorded prior to the death of such owner (and subject to revocation by such owner prior to death) designating the grantee-beneficiary of the deed.  The transfer contemplated by the deed is effective only upon the death of the owner (unless revoked prior to such death or unless disclaimed or refused by the beneficiary).  No consideration is required for the deed. 

The beneficiary is not obligated to execute the deed prior to the death of the grantor.  No interest in the land is transferred to the beneficiary prior to the death of the owner.  The act sets out the requirements for such a deed and also includes the suggested format for the deed.  Beneficiary deeds are bargain and sale deeds unless warranties are expressly designated in the deed.

An instrument describing the property and stating that it revokes the deed must be recorded in the real property records for the county or counties in which the property is located prior to the death of the owner to revoke the deed; no signature or consent of the beneficiary is required to make the revocation effective.  The suggested format for the revocation is set forth in the act. 

The recording of a subsequent beneficiary deed revokes all prior beneficiary designations by the owner for the entire property described in such subsequent deed (even if the subsequent deed does not convey all of the owner’s interest in the property). 

The most recently executed deed or revocation controls regardless of the order of recording.

A beneficiary deed requiring with the statute requirements cannot be revoked, altered or amended by provisions of the will of the owner.  

A beneficiary takes title subject to all matters of record at the time of the owner’s death and any maters of which the beneficiary has actual or constructive notice.  Persons having unrecorded interests in the property must record notice of such interest within 4 months after the death of the owner or they are barred from asserting an interest in the property against all persons who do not have notice of their claimed interest. 

Beneficiary deeds do not sever joint tenancy; they are effective as to property held in joint tenancy only if the grantor of such deeds is the last to die of the joint tenants of such interest in real property. 

Transfers by beneficiary deed are not effective against the estate of the owner to the extent such estate does not have adequate assets to pay all claims against the estate and statutory allowances to the deceased’s surviving spouse and children.   Beneficiaries must account to the personal representative for such estate for the fair market value of the equity interest in such property in such circumstances, subject to the procedures and requirements set forth in Section 15-15-409.

Bona fide purchasers or lenders for value are not subject to claimants or estate claims provided that they obtain their interest without notice of such claimants or estate obligations.

Section 15-15-411 sets forth statutes of limitation for claims against beneficiaries – 1 year for claims by creditors of the owner-grantor; earlier of 3 years after owner’s death or 1 year after recording of proof of death in real property records by other claimants, heirs or devises.    These statutes of limitations do not apply to fraud claims.

3.         HB 04-1069 (COPY ATTACHED)

This act amends existing statutes (CRS Sections 5-3.1-102 et seq.) relating to “payday” loans.

These amendments bar requiring minimum loan terms or finance charges, restrict the maximum duration of the loan, and specify that the due date of these loans will be the consumer’s next scheduled payday or other benefit disbursal date, unless otherwise requested by the consumer in writing.  The act provides that if a lender voluntarily holds the consumer’s check and delays completion of the transaction beyond the specified due date, the lender may not charge additional fees as a result.

It further provides that no individual lender may lend more than $500 to a consumer at any one time.  It allows the loan proceeds to be disbursed by stored value (debit) card, internet transfer or automated clearing house transaction.

These amendments also impose new compliance requirement son lenders, including cure periods for clerical or computer based violations of the applicable statutes.

Lastly, Section 5.3.1-122 was added, including a definition of unconscionability and the factors considered with respect to making the consumer loan.

4.         HB 04-1073

This act amends CRS Section 37-92-302 with respect to surface owner notifications by persons applying for water rights.  The act amended the definition of the water diversion or storage structures with respect to which such notices are required.  It also added a provision allowing applicants to rely upon the “real estate records of the county assessor” for the county or counties in which the land is located to determine who is the surface owner to be notified.

5.         HB 04-1080

This act repeals and reenacts part 2 of Article 22 of CRS Title 13, and amends certain other sections relating to arbitration and the enforcement and application of arbitration clauses.  The provisions created by the act should be reviewed and considered in connection with the drafting and enforcement of agreements including arbitration provisions.

 6.         HB 04-1084

This act amends CRS Section 13-40-122 regarding writs of restitution after entry of judgment in FED actions.

This act added language that the writ may be executed by a sheriff while on or off duty.

7.         HB 04-1129

This act amended provisions (CRS Sections 39-10-111 and 39-11-143) with respect to the taking of real and personal property by counties for delinquent taxes. 

Section 39-10-111(3) – Notice must be published by the county treasurer within 180 days of seizure of personal property – notice must specified a description of seized property, reason being offered for sale, and time and place of the sale.

Section 39-10-111(13) – If a county seizes property used in a business, the county is not allowed to continue to operate the business.

Section 39-11-143 – Counties have the power to retain seized real property for use for public project or to rent, lease or sell.  If a board of county commissioners retains real property for a present or future public project, it must pass a resolution describing the project for which the property is retained.  The county can rent or lease such property to an affiliated entity for no more than 5 years (affiliated entity means nonprofit entity with which county enters into a contract for delivery of goods or services to the county or to 3^rd parties on behalf of the county).   Any property that is not retained for such present or future use or lease must be sold within 1 year after it is conveyed to the county, except that the county may reject any bid that is less than the value of the property determined by the assessor.  Notices of sale of such property must include a statement with respect to historic property designation. 

8.         HB 04-1135

This act relates to wildlife sanctuaries.  It adds a licensing classification for wildlife sanctuaries and sets forth certain requirements and standards for licensure for operation as a wildlife sanctuary.

 9.         HB 04-1155 (COPY ATTACHED)

This act creates CRS Section 31-12-115 and relates to newly annexed land used as right-of-way by agricultural users.  This act provides that with respect to annexed land, a municipality cannot bar or restrict use by agricultural users of public rights-of-way within the annexed land during the period of time during which the land is devoted to agricultural use (regardless of zoning that may be adopted).  It further requires thirty days notice to land owners within the annexed area and persons who appear on an interested persons list maintained by the municipality prior to adoption of any ordinance or regulation affecting the right of way in an annexed area that is devoted to agricultural use.

10.       HB 04-1157 (COPY ATTACHED)

This act sets forth procedures for purging title to manufactured homes and amends portions of CRS article 29 of title 38. 

Lenders are required by this act to provide a copy of the certificate of title held by such entities within 14 days after a payoff request by a title insurance agent or company or other financial institution.  Such lenders, upon receipt of the applicable payoff funds, are then required to provide the original certificate to the title insurance agent within 45 days after payoff (or provide evidence within that period that the original certificate has been lost).  If the original certificate has been lost, the lender must obtain a duplicate certificate and then deliver it to the title agent within 5 business days after receipt.  Violation of the requirements subjects the lender to liability for any actual economic damages caused by the violation.

11.       HB 04-1182 (COPY ATTACHED)

The act creates Section 28-18.5-101 et seq., a new article regarding the cleanup of properties that have been the site of meth labs and the limitation of property owner’s liability with respect to such sites.  It provides for the establishment of acceptable standards for the cleanup of meth labs.  A property owner, once notified by a peace officer that “chemicals, equipment or supplies indicative of an illegal drug laboratory” are on such owner’s property, may either meet the adopted clean up standards or elect to demolish the property.  Once they have taken one of those options (clean up must be proven by testing with copies of the test results provided to the applicable municipal or county government), such compliance will provide the owner with immunity from civil suits by future owners, renters, or occupants of the property, or neighbors of the property, alleging injury or loss as a result of the existence of such lab on the property.  This immunity does not extend to any person who is convicted of production of methamphetamine.

 12.       HB 04-1190

This act amends certain provisions relating to low income housing developments and applicable tax credits.  It amends CRS Sections 10-3.5-102 and 108.  It provides for the modification of the Certified Capital Company Act to amend the method of calculating the internal rate of return of such entities and provides certain distribution and reporting requirements and restrictions depending on the internal rate of return applicable to such entities. 

 13.       HB 04-1203 (COPY ATTACHED)

This act limits the authority of governmental entities to transfer private property acquired through eminent domain to private parties.

This act provides that no private property so acquired by a governmental entity may be subsequently transferred to a private party unless:

                        (1) the owner consents in writing to the acquisition by eminent domain; or

(2) the governing body determines that the property is no longer needed for the purpose for which it was acquired and first offers it to the owner from whom it was acquired (at same price) and such owner declines the right of first refusal to buy it; or

(3) the property has been abandoned; or

(4) the owner of the property has plead that the property would otherwise have been an uneconomic remnant and plead that the authority acquire the property as a result.

If the private property doesn’t fall within one of these categories, it can then only be sold to a private party if it satisfies the following conditions:       

(1) the governing body determines that it is in a blighted area (as defined in the act) or is itself blighted and the urban renewal project for that land will be commenced within 7 years of the determination; and

(2) the governing body provides notice to and invites proposals for redevelopment from all property owners, residents and owners of businesses on the property acquired or to be acquired by eminent domain in the urban renewal area; and

(3) if there is an owner refusing or rejecting the transfer of property within an urban renewal project, redevelopment of the remaining property in the area would not be viable without such parcel.

An owner can challenge a blight determination within 30 days after the determination by filing an action in the district court for the count in which the property is located.  If the owner succeeds in challenging the blight determination, the applicable governing body is obligated to reimburse such owner’s reasonable attorneys fees.

Relocation assistance and compensation policies are required to be adopted by all governmental entities undertaking eminent domain to transfer land to private parties.  A business interruption payment of the lesser of $10,000 or ¼ of the average annual taxable income of the business is required as part of such compensation.

Reasonable effort to relocate displaced persons or businesses into the urban renewal area is required. 

14.       HBs 04-1236 and 04-1292

These acts relate to homeowners insurance and the criteria used in the evaluation of individuals with respect to the issuance of homeowners insurance and the cancellation or nonrenewal of insurance policies.  They amend certain portions of part 1 of article 4 of CRS title 10.  These acts require disclosures by insurers to customers with respect to underwriting criteria, including use of credit scoring information and claims experience for properties.  Underwriting methodologies are required to be filed with the Insurance Commissioner.  The acts also impose certain restrictions on the distribution of claims history information and cancellation of policies based upon inquiries rather than actual claims.  They also require provision of information to consumers with respect to how they can obtain loss history information reports for such consumers. 

15.       HB 04-1300

This act relates to the regulation of notaries and when notarization is not required for authentication purposes.  It affects CRS Sections 12-55-101 et seq. and 38-35-106. 

This act amends the criteria for becoming a notary as follows:

(1) Must be resident of Colorado at least 18 years of age (rather than a US Citizen that is a qualified elector in Colorado)

(2) Not be convicted of either a felony or a misdemeanor involving dishonesty in the last 5 years (misdemeanor provision is added)

(3) Provides for applicants to be able to use electronic signatures for applications and for the establishment by the secretary of state as soon as practicable of a system for electronic application. 

Notary appointment may be revoked if convicted of felony or misdemeanor involving dishonesty in prior 5 years; reapplication is barred if license is revoked (used to be able to reapply 7 years after revocation).

The secretary of state will issue document authentication numbers to notaries for use where the notary is signing electronically.  Notaries may not use electronic signatures unless they keep a log of notarized documents, include in that log the document authentication numbers and attach to the notarized document the applicable document authentication number.

Documents signed by public trustees, county treasurers, county sheriffs, or any deputies thereof, signed in their official capacities and containing the seal of such official are deemed properly acknowledged.

16.       HB 04-1356

This act amends CRS Section 39-3-106.5 by increasing the amount of income that an owner of tax exempt property may earn from the rental of such property from $10,000 to $25,000 per year.

17.       HBs 04-1398 and 04-1399

These acts amend portions of CRS Title 7 with respect to corporations, associations and limited liability companies.  Both acts make fairly significant changes with respect to such entities and should be reviewed and considered in connection with the formation, use and operation of entities engaged in real estate activities.

18.       HB 04-1413 and SB 04-219

These acts amend CRS Sections 30-10-421, 422, 423 and 424 with respect to surcharges collected by clerks and recorders for the purpose of defraying the cost of providing electronic filing capabilities.

Effective July 1, 2004, through June 30, 2007, each county clerk will collect a surcharge of $1.00 per document.  ½ of these funds are to be transmitted to the Secretary of State for crediting to the clerk and recorder technology fund.  The balance may, but is not required to be, retained by the clerk and recorded.  Any funds not so retained by the clerk and recorder must be submitted to the Secretary of State for the same purposes as the other funds sent to the Secretary of State.   Any surcharge monies retained by the county clerk are to be used to defray electronic filing system costs or for improvements to the clerk’s paper document filing system. These acts also deleted current language in Section 30-10-421(3)(a) regarding transmittal of unused funds to the state treasurer. 

The clerk and recorder technology fund monies will be disbursed by a technology panel to counties that otherwise lack sufficient resources to purchase technology necessary for electronic filings, to provide necessary training with respect to such technology, for assessment of existing filing systems for necessary improvements or training with respect to necessary improvements to existing filing systems.  These funds are also subject to annual appropriation to the Secretary of State for the administration of its obligations under Section 30-10-424.

The Secretary of State is granted powers under Section 30-10-124 to assist clerks in assessing existing filing systems and determine necessary improvements thereto, provide training on electronic filing systems or with respect to necessary improvements to existing filing systems, provide accounting services to the technology panel, establish a statewide purchasing network for electronic filing system components, promulgate rules with respect to standards for necessary improvements to existing filing systems, for electronic filing systems and for grants from the technology funds, and promulgate any other necessary rules to supervise the technology panel or to administer the provisions of Sections 30-10-421, 422, 423, and 424. 

19.       HB 04-1441 (COPY ATTACHED)

This act creates CRS Section 6-1-1001 and amends CRS 15-15-301. 

It bars persons from using trade names or trademarks of lenders or trade names or trademarks that are confusingly similar to those of existing lenders in solicitation materials without the consent of such lender unless the solicitation conspicuously reflects (i) the name, address and phone number of the person making the solicitation, (ii) that they are unaffiliated with such lender, (iii) that such solicitation is not authorized or sponsored by such lender, and (iv) that the loan information referenced in the solicitation was not provided by the lender.  The act further bars the use of non-public loan information in such solicitations or the use of public loan information without those 4 requirements being conspicuously reflected in such solicitations.  These requirements do not apply to communications between a lender or its affiliates with current or former customers.

The act goes on to bar inclusion of references to existing lenders (without such lenders’ consent) or loan information which is visible through the envelope, on an envelope, or on a postcard.  The act does not bar use of trade names of lenders in advertising for purposes of comparison of services or products. 

Lenders have a right to an injunction against entities violating this statute; actual damage is not required to be established by such lenders.  Actual damages (including lost profits) may also be recovered.  The prevailing party in any such action is entitled to its reasonable attorneys fees.

20.       SB 04-032

            This act relates to the loan of agricultural water rights; it amends CRS Section 37-83-105.

This act allows for loans of agricultural water rights between entities that hold such rights, but restricts such loans as follows:

(1) Loans may only be made to entities holding water rights on the same stream system;

(2) Loans may only be for agricultural irrigation purposes and may not lst for more than 180 days in any one calendar year without advance approval from the division engineer; and

(3) No loans can be made which cause injury to other decreed water rights.

 21.       SB 04-044

This act amends CRS Sections 12-47-411 and 414 and allows for owners of or others having a direct or indirect interest in retail gaming licenses to also own or have interests in hotel and restaurant licenses or establishments.

22.       SB 04-047 (COPY ATTACHED)

This act amends CRS Sections 30-10-407, 408 and 409.   This act specifies the time in which clerks and recorders must index documents presented to the clerk for recording and be able to make copies thereof upon request.

Clerks are required to enter recorded documents in grantor and grantee indices no later than 7 business days after recording.  It requires that any document that is received by 1:00 p.m. on a business day must be endorsed with the applicable document recording information by the end of that day (note that no time is specified for the end of the day) and that any document received after 1:00 p.m. on a business day must be so endorsed by 5:00 p.m. on the following business day. 

It also requires county clerks and recorders to provide legible size prints of recorded documents on demand for the applicable fees; it only allows clerks not to provide such prints within the first 3 business days after a document is recorded. 

These deadlines may be extended in the event of extenuating circumstances which prevent the clerk from meeting such deadlines.  An extenuating circumstance is a disaster (as defined in CRS Section 24-32-2103) or a “technical difficulty related to computer hardware or software that is outside the control of the clerk and recorder”.  No other events or occurrences constitute “extenuating circumstances”.  A clerk must make a written finding of extenuating circumstances to obtain an extension of the deadline – the written finding must be available to the public and state the deadline that is being extended, the reason for the extension, and the period of the extension.  An extension for “technical difficulties” cannot last for more than 7 days. 

23.       SB 04-059

This act deals with the valuation of possessory interests in agricultural land and amends CRS Section 39-1-103.

24.       SB 04-064

This act amends certain CRS provisions relating to child support and child support liens. CRS Section 14-10-122 is amended to provide that liens on real property for child support remain in effect for the earlier of 12 years or until all past-due amounts, including accrued costs and interest, are paid, without necessity of renewal.  The lien may be extended or renewed indefinitely by rerecording the lien every 12 years.

25.       SB 04-089

This act relates to affordable housing and allows for the certification of certain nonprofit entities as “local public procurement units” for purposes of procurement and collective purchasing activities pursuant to CRS Section 24-110-101 et seq.  These nonprofit entities include nonprofit entities engaged in the development or provision of low or moderate income housing, provided that any supplies, services or construction so procured is used in connection with such housing projects.

26.       SB 04-115

This act creates CRS Section 13-21-102.5(6), limiting the recovery of damages for non-economic losses or injuries or derivative non-economic losses or injuries.  Such damages may only be recovered if the contract that is the subject of the claim specifically authorizes such damages or, in the case of insurance contracts only, the plaintiff demonstrates that the defendant committed a willful and wanton breach of the contract.  To establish willful and wanton breach of an insurance contract, the plaintiff will have to prove, among other requirements, that the contract clearly indicated that such damages were within the contemplation or expectation of the parties.  The limitations of damages in Section 13-21-102.5(3) ($250,000 in non-medical malpractice cases unless clear and convincing evidence justifying greater amount; max of $500,000 in all cases) applies to damages awarded under this new provision.

27.       SB 04-120

This act deals with charitable trusts; in part it amends Section 39-3-106 to add a new subsection (3) providing that property owned by charitable trusts will be treated the same as property owned by other nonprofit organizations for the purposes of claiming religious purpose property tax exemptions. 

28.       SB 04-127

This act deals with notaries public; it amends CRS Section 12-55-110.3 to provide that notaries who are not attorneys may not state or imply that they are attorneys; solicit or accept compensation for preparation of documents for or represent parties in judicial or administrative proceedings; solicit or accept compensation to obtain relief for other persons from any officer, agency or employee of the state or the United States; or use the phrases “notario” or “notario publico” in any advertising (written or verbal).  Violation of these provisions constitute deceptive trade practices and official misconduct (which can result in rescinding of notary authorization). 

29.       SB 04-143

            This act amends requirements with respect to contractors for public projects. 

CRS Sections 24-91-103 and 105 are amended to change the thresholds for contracts entitled to partial payments and withdrawal by contractors of reserve funds (provided acceptable securities are provided to the public entity) from $80,000 to $150,000.  CRS Section 38-26-106 is amended to require performance bonds or other adequate surety from any contractor awarded a contract of more than $100,000 for any public works for the state.  

30.       SB 04-176

This act amends CRS Section 29-21-101 and creates Section 29-21-102.  It addresses the certification, monitoring and appropriation of funds from conservation trust funds.  Annual certification and/or reporting subject to Division of Local Government promulgated rules and the provisions of this act is required.  The act authorizes the Division to adopt certain enforcement procedures, including penalties for inappropriately expended conservation trust funds.   

31.       SB 04-185

This act amends portions of CRS Section 37-90-137 and relates to the issuance of permits for groundwater wells.  It provides that permits to construct wells outside of the boundaries of designated ground water basins expire 1 year after issuance unless the applicant to whom the permit was issued or the construction contractor provide to the state engineer either (i) evidence that the well has been built or (ii) showing of good cause as to why the well hasn’t been built, along with an estimate of the timeline for completion; an extension of an additional period, not to exceed 1 year is permitted (the duration limitation of the extension does not apply to federally authorized water projects).

32.       SB 04-186

This act relates to roadside memorials within highway easements.  CRS Section 43-2-149 is created by the act and allows for certain memorials on county roads and state highways.  It establishes an application procedure to the state department of transportation for state memorials by individuals and to a board of county commissioners for county memorials.  It further specifies the maximum size of county memorials, the types of materials of which they can be made and the location where such memorials can be placed within county rights-of-way and the information which may be contained on such memorials.  With respect to state memorials, the locations of and information which may be placed on such memorials is specified; the design, size and materials of which they can be made is left to the discretion of the state department of transportation.  The act further allows for the denial of monuments if they would result in safety hazards or maintenance impediments; the state department of transportation and the boards of county commissioners are respectively authorized to suggest alternative designs, may remove any memorials which do not comply with the applicable provisions of the statute and may deny or revoke any permit for false or misleading information in the application for such memorials.  Counties are required to adopt permitting processes in accordance with this statute to be able to prohibit or deny requests for roadside memorials on county roads. 

33.       SB 04-221

This act amends CRS Section 32-1-1004 with respect to metropolitan districts, giving such districts the following additional powers:

(i) permits such districts to provide security services within the special district, provided that the consent of the all local law enforcement agencies and any applicable master association or similar entity having authority to furnish security services in the area.  Law enforcement agencies and master associations or similar entities have the right to withdraw such consent subsequently upon prior notice to the board of the metropolitan district.

(ii) permits such districts to provide covenant enforcement and design review services within the district if (a) the governing body of the applicable master association or similar entity and the metro district have entered into an agreement specifying the duties and responsibilities of each party, including the covenants which are to be enforced by the district, and the enforcement services of the district do not exceed the powers granted by the applicable covenants, rules and regulations or other similar document or (b) the applicable covenants, rules and regulations or other similar document designate such district as the enforcement or design review entity.

34.       SB 04-222

This act amends CRS Section 37-92-501 and provides for the administration of underground water use by the state engineer in water division 3.

35.       SB 04-225

This act amends certain portions of article 90 of CRS title 37 with respect to the use of ground water, enforcement of orders with respect to well permits, and the creation and use of funds from a well enforcement cash fund.

36.       SB 04-229

This act amends portions of CRS Section 4-9.5-103 through 10 with respect to the filing of electronic financing statements; it also amends certain provisions with respect to the filing of partial terminations (increasing the penalty to for failure to file within 30 days).

37.       SB 04-231

This act creates CRS Section 24-21-111 with respect to electronic filing with the Colorado Secretary of State.  It allows the CSOS to require electronic filing and it provides for electronic access to be permitted to be the sole means of access to documents stored by the CSOS, provided that such filing or access will not require specialized or customized electronic hardware or software.