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Last Updated: May 1, 2008 REAL ESTATEBROKER ISSUES "Buyer's Subjective Discretion" The term "buyer's subjective discretion" in the Contract to Buy and Sell Real Estate does not permit the buyer to merely walk away from the contract at will. There is a duty of good faith and fair dealing, and any termination must be for reasons consistent with that duty. See, Albright v. McDermond, 14 P.3d 318 (Colo. 2000). Listing Price Adjustments We strongly advise against brokers participating in any transactions where the listing price is being increased as part of a sale, especially upward adjustments in the MLS. However if you do become involved in such transactions, we recommend full disclosure in the contract, in the settlement sheets and in the MLS, together with a written acknowledgment by the lender that the price was increased and that the lender fully understands and agrees with the disposition of all loan proceeds. Changing E & O Carriers If you change E & O insurance carriers, it is important that you notify the old carrier, during the reporting period for that policy, of any matters you are aware of that might lead to a claim. If you fail to do so, there exists a significant possibility that neither the old or new carrier will be obligated to defend you if a claim arises. You could find yourself without coverage for any such claim. Mortgage Broker Registration All nonexempt mortgage brokers are now required to register with the Colorado Real Estate Commission. The landscape for mortgage brokers is changing, and the Commission can be expected to take aggressive action against dishonest brokers. Transactions involving "straw buyers" and undisclosed payments to buyers or third parties are particularly problematic.Legislative Changes Regarding Homeowners Associations (HOA's), Meth Labs and Foreclosures The General Assembly in 2006 enacted major changes to the procedures and rules governing foreclosures and to the requirements regarding delivery of HOA documents to purchasers during the "due diligence" period. The new meth lab statute mandates stiff penalties for failure to disclose that a property has in the past been used as a meth lab, unless the property has been properly certified as having been remediated. The foreclosure process has been redefined, and there are stringent new rules regarding the sale of properties that may be in foreclosure. Brokers are advised to consult with their legal counsel regarding these issues.E & O Insurance We recommend to all brokers that the minimim insurance limits of $100,000/$300,000 required by the Colorado Real Estate Commission are not sufficient. Higher limits are normally available, as is excess insurance that may provide broader coverage. Even simple claims can easily exceed $100,000. E & O claims are stressful enough, but they cause even more concern if there is insufficient coverage available in the event of an adverse outcome.Broker Disclosures Listing brokers: Remember to complete the disclosure section after "End of Contract" on the purchase and sale agreement in order to disclose your relationship with seller. Don't forget to use the change of status form when that relationship changes. CONSUMER REAL ESTATE ISSUES Owner-Carries In owner-carry sales transactions, we strongly recommend that the seller consult legal counsel before signing the sales contract. There are serious risks inherent in owner-carries, especially if the seller's lien will be junior to a first lien, and especially if the first loan has a large default interest rate. We also recommend that before signing the sales contract, the seller should read and evaluate the documents that create the senior lien, in order that the seller may evaluate exactly what risks he or she is taking. Mediation and ArbitrationWith increasing frequency, the Courts are requiring Alternative Dispute Resolution in litigated matters. Two types of ADR are arbitration and mediation. In arbitration, the parties appear before one or more neutral persons who render a decision which resolves the dispute. Mediation is a process for resolving a dispute through negotiation. As in arbitration, the mediator is a neutral person selected by the parties. However, unlike an arbitrator, a mediator has no authority to make decisions or issue rulings. A mediator is simply a facilitator who tries to bring the parties together to resolve their dispute. While arbitration is a process for adjudicating a dispute without a judge or jury, mediation is a process for resolving disputes without the need for further litigation. While the terms mediation and settlement conference are often used interchangeably, an additional element of a settlement conference is that the facilitator normally has legal training and will informally assess the parties' positions and provide the facilitator's perceptions as to the strengths and weaknesses of each side's position. See C.R.S. Section 13-22-302(2.4) and (7). Review of DocumentsThe time to have an attorney review your real estate documents is before you sign them. The cost of hiring an attorney to identify possible problems ahead of time is far less than the cost of litigating a dispute after the fact. Broker Relationships When buying and selling real estate in Colorado, there are several different legal relationships you can enter into with your real estate broker. He or she will provide you with forms which explain these relationships. We suggest that you read the disclosures carefully and ask enough questions so that you can make an informed decision as to which relationship best suits your needs. DIVORCECommon Law Marriage Contrary to a popular misconception, two persons do not into a common law marriage merely by cohabitating for a fixed period of time. What is required is the intention by the parties to enter into a marriage. This intent is generally shown by the parties' own conduct, i.e. whether they hold themselves out to third parties as being married. As the Court stated in Whitenhill v. Kaiser Permanente, "A common law marriage is established by the mutual consent or agreement of the parties to be husband and wife, followed by a mutual and open assumption of a marital relationship... Absent an express agreement, the two factors considered the most reliable in determining whether an intent to be married has been established are cohabitation and a general reputation in the community that the parties hold themselves out as husband and wife." Removal of Children From ColoradoIn People v. Sorrendino, 37 P.3d 501, 503. (Colo. App. 2001), the Court of Appeals let stand both felony and misdemeanor convictions against a father who removed a child from the State of Colorado in violation of a custody order. We strongly discourage parents from removing the children from Colorado without an order from the applicable court.
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BALABAN & LEVINSON, P.C.
1745 Lafayette Street
Denver, Colorado 80218
Phone: (303) 571-1234
Fax: (303) 825-7520