Disclaimer
Online versions of these regulations are the most current versions available.  However, these are not the official versions.  For official publications of these and all State of Colorado regulations, please consult the Code of Colorado Regulations or contact the Colorado Journal at:

717 Seventeenth Street, Suite 1620
Denver, CO  80202
303-292-2575

Oct 00

GUIDELINES FOR COMPLETING A COLORADO SUBDIVISION DEVELOPERS APPLICATION

The following guidelines are intended to clarify some of the requirements and documentation necessary for certification as a Colorado subdivision developer. The requirements for subdivision certification are contained in :

• The Application form for Registration as a Subdivision Developer
• The Colorado Subdivision Act (12-61-Part 4 et seq. C.R.S.)
• The Colorado Real Estate Commission's Subdivision Rules

Please review the application form, subdivision act and rules and contact the education and licensing section of the Commission at (303) 894­2166 if you have questions.

APPLICATION

• 1.) The application fee is not refundable.
• 2.) If you do not complete the application process, or fail to provide all the compliance items required, or withdraw your application or are denied a certificate, the application fee is not refundable.
• 3.) The Commission can cancel an application if information is not submitted within 60 days of being requested. If an application is canceled by the Commission, the application fee is not refundable.

OWNERSHIP

• 1.) Please include with the application, a copy of a current title policy , endorsement brought to date or a TBD title commitment indicating that title to the property being registered is vested in the applicant and the condition of that title. Please restrict the title information to only those lots, units or interests that are being registered at this time.
• 2.) Please send copies of the documents listed in the title policy or commitment as exceptions to insurance against loss other then those associated with extraction of minerals or easements for utilities.
• 3.) If the purchaser's legal access to the subdivision is listed as an exception on the title policy or commitment, please provide an explanation of the cause for the lack of insurable legal access.
• 4.) If the title policy submitted with the application lists as an exception to insurance against loss to the purchaser, all unpaid taxes, assessments and unredeemed tax sales; please take the necessary action (endorsement) to have this exception deleted or modified to except only those taxes for the year of closing and thereafter; or include in the application a certificate of taxes due or other proof of payment of taxes.
• 5.) If the developer is doing business as an individual proprietor or partnership utilizing a tradename, please include a copy of the Trade Name Affidavit that indicates having been registered with the State Department of Revenue (if applicable) and recorded in the county in which the subdivision is located.
• 6. Please include with the application, evidence of certification that each subdivision offered for sale or lease is registered or will be registered in accordance with state or local requirements of the state in which each subdivision is located.

ENCUMBRANCES

• 1.) If the property is encumbered, and neither the promissory note nor the deed of trust encumbering the property contain any provisions for the purchaser's interest in the subdivision to be released from the underlying encumbrance; then, you will need to arrange for:
  • A.) a recorded letter of agreement referring to the mortgage or deed of trust stating the release provisions or,
  • B.) an amendment to the promissory note together with the recorded notice of such amendment to the promissory note.
• 2.) If the property is encumbered and the deed of trust or mortgage was recorded prior to the recording of an owner's association declaration and or plat (if applicable), please send recorded evidence that the lender has joined in and consented to the recording of the declaration and plat; and has released any common areas or road easements from the underlying encumbrance and has restricted their lien to only the lots, units or interests.

UNCOMPLETED PROJECTS, UTILITIES, ROADS OR AMENITIES

• 1.) Pursuant to Commission Rule S­20, if any of the improvements, utilities, roads or amenities that the developer is obligated, or promising to complete, are not complete at the time of application, the Commission will register such developer only after reviewing and approving an arrangement wherein:
  • A.) The developer establishes an escrow account and written agreement with an independent escrow agent whereby all funds received prior to completion of the promised amenities, accommodations, roads, utilities or facilities are held until completion, or,
  • B.) The developer obtains a letter of credit or a bond payable to an independent escrow agent or any other financial arrangement, the purpose of which is to ensure completion of the promised amenities, accommodations, roads, utilities or facilities and to protect the purchaser's interest.
• 2.) When a project is not complete at the time of registration and the developer wants final approval and certification in order to contract with the public for sales of the uncompleted project, then the Commission looks to see that there is a arrangement in place that assures the purchaser's interests are protected. (see number 3 below)
• 3.) Sometimes, the Commission can approve an application for registration as a subdivider and issue a certificate even though the owner's association has not been formed, the declaration creating the common interest community has not been recorded, the plat or map have not been approved or recorded, and the promised amenities, accommodations, roads, utilities or facilities are not complete and provisions for compliance with Rule S­20 have not been met.
  • A. In most instances Commission approval and issuance of a certificate given the above scenario would depend upon the contract indicating that :
    • i.) an independent agent is to perform the closing and,
    • ii.) all sums received from the purchasers prior to closing and completion of the promised amenities, accommodations, roads, utilities or facilities are to be held in trust by an independent agent and,
    • iii.) a date by which the promised improvements are to be completed, including contingencies and default provisions.
  • B.) The contract, or ancillary agreement with the independent agent, should be crafted to fit the circumstances and typically will contain:
    • i.) clear instructions that the agent is to perform the closing pursuant to the terms of the contract and that no closing is to be accomplished, and no funds disbursed, until:
      • a.) A plat map has been recorded containing the appropriate surveyor's certification, municipal or county authority's stamp and signatures of approval. A copy of which is to be sent to the Commission.
      • b.) The declaration * creating the common interest community has been recorded. A copy of which is to be sent to the Commission for review.
      • c.) The owner's association has been incorporated. A copy of the certificate is to be sent to the Commission.
      • d.) The project or promised improvements are complete and a certificate of occupancy, or certificate of completion as applicable has been issued for the promised amenities, accommodations, roads, utilities or facilities or there is a signed letter of credit or bond sufficient to assure the completion of the promised utilities, accommodations and roads.
        • note: A copy of the letter of credit or bond is to be reviewed by the Commission.
        • note: If the letter of credit is secured by a deed of trust on the property being registered, the Commission will want to review the documents for adequate release provisions.
      • e.) The escrow agent has received lien waivers from all those providing materials or labor; or there is a signed letter of credit or bond sufficient to assure payment.
      • f.) The lender * has consented to the recording of the declaration and plat and has released any common areas or road easements from the underlying encumbrance and has restricted their lien to only the lots.
        • * If the property is encumbered and the deed of trust or mortgage was recorded prior to the recording of an owner's association declaration and plat.
      • g.) The purchaser has received a deed to the property conveying title according to the terms of the contract, and the purchaser's deed is free and clear of the underlying blanket encumbrance.
    • ii.) The Commission must review and approve the escrow agreement and will want a written acknowledgment from the escrow agent that the independent agent has reviewed the agreement and will perform the duties of closing agent.

RESERVATIONS

• 1.) Upon approval by the Commission, a developer may utilize "Reservation Agreements" in order to offer the property before approval and during the pendency of the Application process.
  • The Reservation Agreement must be non­binding, fully refundable, and any fees paid by a purchaser must be held in trust by an independent third party agent.
  • There is no standard form of "Reservation Agreement", however, the licensing section at (303) 894­2166 can send you an example of this type of document.
• 2.) The Commission will want to review and approve the escrow arrangement and will want a written acknowledgment from the escrow agent that the escrow agent has reviewed the Reservation Agreement and agrees to perform the duties of escrow agent.
• 3.) By statute, the Commission may disapprove the form of the documents submitted, and may deny an application for registration until such time as the applicant submits such documents in a form that is satisfactory to the Commission.
• 4.) Please check with the county or municipality, if applicable, prior to the use of "Reservation Agreements". The county or municipality may have restrictions on the use of these instruments prior to planning approval and filing of the plat.

FORMS

• 1.) Include with the application, a copy of the warranty deed you intend to use to convey title to purchasers including:
  • A.) The intended language for describing the property and,
  • B.) The language used for any exceptions to free and clear title.
    • Please note that the Real Estate Commission does not have an approved and standard form of warranty deed.

CONTRACTS

Examples of various contract forms, disclosure documents and reservation agreements are available upon request. Contact the licensing section at 303-894-2166.

• 1.) The Commission may disapprove the form of the documents submitted, and may deny an application for registration until such time as the applicant submits such documents in a form that is satisfactory to the Commission.
• 2.) Include with the application, a sample copy of the contract instrument you intend to use for sales within the subdivision. The contract must include the statements and disclosures required by Rule S­32 and Rule S­23 (d), (g), (i), (j) and (k). (Please see page 6)
• 3.) The other disclosures required by Rule S­23 (a), (b), (c) (e), (f), (g), (l), (m), (n), (o), and (p) (Please see page 6) may be contained in a separate document appropriately titled (see S­23 (h)) or, all of the disclosures may be contained in the contract and/or in any contract addendum that is properly referred to in the contract, properly labeled as such, and attached to the contract.
• 4.) If you want to use the Colorado Real Estate Commission standard and approved contract form that was designed for use by Real Estate Brokers for "re-sales" of vacant land or condominiums, the form will have to be modified by using an addendum to the contract.
  • The standard form does not contain all of the various elements of disclosures required by Rule S­23. The standard form was not developed to conform to the Subdivision Act but rather for use by real estate brokers for re-sales after the property has been developed and title passed from the developer to the individual purchaser.
• 5.) If you use the standard Real Estate Commission approved vacant land contract form # CBS 3­9­95, you will need to add the mandatory rescission rights required by Rule S­23 (d) to paragraph 21 of the standard form. Also, the standard contract form does not address Rule S­23 (b), (c), (e), (h), (j), (m), (n) and the portion of (g) that states all sales will be made by brokers and sales persons licensed by the state of Colorado unless specifically exempt. All of these elements of Rule S­23 can be added to an expanded paragraph 21 of the standard form, or you could, in paragraph 21 of the contract, refer to an attached addendum that could list the various disclosures not specifically provided for in the standard vacant land contract.
• 6.) The contract must comply with Rule S­32, which states: All developers shall provide a title insurance commitment or other evidence of title approved by the commission within a reasonable time after execution of any contract to purchase. Any period of time in excess of ninety (90) days shall be deemed unreasonable for purposes of this rule. This requirement may be waived by the parties in writing if the waiver is made in a conspicuous manner and/or print. The presence of the waiver on the back of a contract shall not be deemed conspicuous.
• 7.) The contract instrument must contain provisions for:
  • A.) default of the parties and disposition of earnest money
  • B.) date of closing
  • C.) type of deed used to convey title to the purchaser
  • D.) date of completion of any promised facilities, utilities or accommodations
  • E.) description of the property to be conveyed
  • F.) exceptions to the title being conveyed to the purchaser
  • G.) reference to any addendum
  • H.) termination of the contract for lapse of time
  • I.) purchaser's examination of title documents
  • J.) risk of loss (for improved properties)
  • K.) apportionment or adjustment of assessments, taxes, fees,

DISCLOSURES

• 1.) 38–35.7­101 (1) Colorado Revised Statutes requires certain disclosure language about special districts to be in EVERY contract for the sale of residential land located in Colorado. The disclosure must be included in the contract regardless of whether or not the property is situated in a special district. The contract must include the following statement in bold face type in substantially the following form:
  • SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND EXCESSIVE TAX BURDENS TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. PURCHASERS SHOULD INVESTIGATE THE DEBT FINANCING REQUIREMENT OF THE AUTHORIZED GENERAL OBLIGATION INDEBTEDNESS OF SUCH DISTRICTS, EXISTING MILL LEVIES OF SUCH DISTRICT SERVICING SUCH INDEBTEDNESS, AND THE POTENTIAL FOR AN INCREASE IN SUCH MILL LEVIES.
• 2.) In addition, please add the following information regarding special districts to the disclosure document.
  • A.) State in the contract or disclosure document, whether or not there are any special districts (metropolitan or developer districts) existing or proposed to which the purchaser may be subject and if so,:
    • i.) State in the contract or disclosure document, whether or not the district has defaulted on any obligations or has filed for bankruptcy or if any such actions are pending. If so, explain and provide details.
    • ii.) State in the contract or disclosure document, whether or not the developer is in default on any obligations or payments to the special district. If so, explain and provide details.
    • iii.) State in the contract or disclosure document the developer's responsibility for payment of any special district's fees and taxes.
• 3.) Under a separate, and relatively new (1994), Colorado law (12-61-Part 8 et seq. C.R.S.), if the developer engages the services of a Colorado real estate broker, the broker is obligated to disclose in writing, to both the developer and to the potential buyers, the relationship the broker will have with the seller and buyer. The broker also must disclose the general duties and obligations that the broker has arising from the brokerage relationship.

In addition, should the seller, or buyer request information or ask questions concerning a brokerage relationship not offered by the broker pursuant to the broker's written office policy, the broker shall provide a written definition of the brokerage relationships which has been promulgated by the Colorado Real Estate Commission.

• A.) The contract should contain a confirmation of the broker's previous disclosure to the buyer regarding the broker's relationship with the parties and a reaffirmation to the buyer that different brokerage relationships are available which include buyer agency, or transaction­broker.

Example: Selling Company Broker Relationship: The Selling Broker, ABC Real Estate Company and its salespersons have been engaged as a single and limited agent for the seller. The Selling Broker Company has previously disclosed in writing to the Buyer that different relationships are available which include Buyer Agency, or Transaction-Broker.

4.)  The disclosure document needs to include information regarding the significance of any title exception for patented and unpatented mining claims, reservations or exceptions in patents for coal, oil, gas and mineral rights.  The disclosure should include the following or similar language pursuant to 12-61-406(3):

THE SURFACE ESTATE MAY BE OWNED SEPARATELY FROM THE UNDERLYING MINERAL ESTATE, AND TRANSFER OF THE SURFACE ESTATE DOES NOT NECESSARILY INCLUDE TRANSFER OF THE MINERAL RIGHTS.  THIRD PARTIES MAY HOLD INTERESTS IN OIL, GAS, OTHER MINERALS, GEOTHERMAL ENERGY OR WATER ON OR UNDER THE PROPERTY, WHICH INTERESTS MAY GIVE THEM RIGHTS TO ENTER AND USE THE PROPERTY..

5.)  Pursuant to 12-61-406(3) If you are developing a property that was built prior to 1978 you are required to make certain disclosures regarding lead-based paint.  The Commission has a disclosure form available the form number is LP45-1-97 the form needs to be referenced in your contract as an attachment if your project fits the description and you need to disclose.

RULE S­23 DISCLOSURES

The purpose of the Commission Rule S-23 disclosures as listed on the following pages, and the disclosures required by 12-61-406 (3) C.R.S., is to give the purchaser adequate information in order to make an informed decision regarding the purchase. The disclosures should be crafted to fit whatever is true regarding the offering.

• 1.) Some of the Real Estate Commission Rule S­23 disclosures are to be included in the sales contract. Some of the disclosures may be in a SINGLE separate written disclosure document. Each of the Rules will indicate whether or not the disclosure is to be in the contract or may be in a separate single document.
• 2.) The Rule S­23 disclosures are to be worded as though they are being made to a purchaser. Each topic of Rule S­23 is to be addressed as a complete thought that satisfies the area of disclosure.
• 3.) The disclosure cannot be silent regarding a particular topic and must address the topic in terms of whether or not it applies. For example, a subdivision may not have a property owner's association and recorded declaration. An example of the proper disclosure pursuant to Rule S­23 (n) for this scenario would be;

There is no recorded declaration nor has a property owner's association been formed . The developer does not contemplate creating an owner's association. There are however recorded covenants that you will be given prior to closing that pertain to the restrictions on the use of the property.

• 4.) Please note that the written disclosures required by Rule S­23 are part of, and are to be included in either the contract, contract addendum or single disclosure document. The written disclosures are to be included with the application and are to be approved by the Commission. After approval, the written disclosures are presented to the purchasers as part of the contracting instruments when negotiating a sale.
• 5.) The following is an itemized list of the elements of disclosure required by Rule S­23 and 12–61­406(3) C.R.S. The Commission licensing staff will be verifying that every element of the disclosures are addressed. Every element must be addressed or the document(s) will not be accepted and the application will not be approved until it is in compliance.

DEVELOPER

Rule S­23(a)

• 1.) Disclose in the contract or disclosure document the name and address of the developer.
• 2.) Disclose in the contract or disclosure document the name and address (location) of the subdivision lots or units.

example: The name of the subdivision is Rocky Mountain Estates. The subdivision is located in Pitkin County, and is approximately 25 miles south west of the city of Aspen, Colorado. There is no street address to which mail can be delivered. Post Office Boxes are available in Aspen.

TYPE OF OWNERSHIP

Rule S­23(b)

• Explain in the contract or disclosure document the type of ownership or occupancy rights being offered to the purchaser.

example: "You (the buyer) will get legal title to the property you are purchasing at closing according to the terms of the contract and your title will be subject to those items listed on the title commitment as "Exceptions" . The developer will deliver to you at closing, a general warranty deed giving you legal title (fee simple absolute) to the property. The developer will arrange to have your deed delivered to the County Clerk for recording immediately after the closing."

ACCOMMODATIONS AND AMENITIES

Rule S­23(c)

• 1.) Disclose in the contract or disclosure document whether or not there are any amenities.

An amenity includes such things as a swimming pool, clubhouse, sauna, tennis court, hot tub, greenbelts, riding stables and recreational facilities. Utilities such as water, sewer, electrical, etc. and roads are addressed in S­23(m).

Note: If any of the amenities such as common areas are to be owned by the association (such as in a planned community) and have not been conveyed to the association by the time of registration, the application will not be approved until the developer has deeded the common areas to the association free and clear of encumbrance.

• 2.) If there are any amenities, provide in the contract or disclosure document a general description of all amenities and accommodations.
• 3.) The description of the amenities in the contract or disclosure document must include the specific amenities promised.
• 4.) Disclose in the contract or disclosure document the purchasers ownership interest in such amenities.
• 5.) Disclose in the contract or disclosure document the projected completion date of any amenities yet to be constructed.
• 6.) If amenities or accommodations or site improvements are being promised, or are an obligation of the developer, but are not complete. Disclose in the contract or disclosure document the financial arrangements established to assure completion. (See RULE S­20 and UNCOMPLETED PROJECTS on page 2)

example: The developer is not offering any "amenities" within the subdivision. There are a variety of all season recreational facilities located within a 50 mile radius of the subdivision that are open to the public.An "amenity", for purposes of this disclosure, includes such things as swimming pools, tennis courts, riding stables, hiking and bicycle paths, winter snow skiing, lakes, rivers and national and state forests.

example: The amenities that are in place and included with the project are a Sauna and Jacuzzi. Upkeep and maintenance of the amenities are paid for out of the annual assessment made upon each unit owner. The Amenities are defined in the Declaration as "general common elements" of the project and are owned in common by all of the unit purchasers.

RIGHT OF RESCISSION

Rule S­23(d)

• 1.) Include in the contract, immediately prior to the purchaser's signature line, the purchasers right of rescission statement in BOLD PRINT as follows:

In accordance with C.R.S. 12–61–405(1)(i) the purchaser has the right to rescind the agreement with or without cause and at the purchaser's sole option, by telegram, mail or hand delivery at any time within five calendar days following the date of the signing of this agreement by both parties. Such request shall be considered made if by mail when postmarked, and if by telegram when filled for transmission, and if by hand delivery, when delivered to the seller's place of business. This right of rescission cannot be waived.

Upon such right of rescission having been exercised, the seller of time­shares shall refund the purchasers money within seven days after written notice has been delivered to the seller.

JUDGMENTS AND ADMINISTRATIVE ORDERS

Rule S­23(e)

• 1.) Disclose in the contract or disclosure document whether or not there are any judgments or administrative orders issued against the DEVELOPER, which are material to the subdivision plan and;
• 2.) Disclose in the contract or disclosure document whether or not there are any judgments or administrative orders issued against the HOMEOWNERS ASSOCIATION, which are material to the subdivision plan and;
• 3.) Disclose in the contract or disclosure document whether or not there are an judgments or administrative orders issued against the MANAGING ENTITY, which are material to the subdivision plan; if so provide a general description.

SPECIAL ASSESSMENTS

Rule S­23(f)

• 1.) Include in the contract or disclosure document a statement as to whether or not there are any taxes or special assessments, existing or proposed to which the purchaser may be subject or which are unpaid AT THE TIME OF CONTRACTING, including obligations to special taxing authorities and owner's associations.

LICENSED BROKERS

Rule S­23(g)

• 1.) Include in the disclosure document or contract a statement that:

All sales within Colorado will be made by brokers and salespersons licensed by the State of Colorado unless specifically exempted pursuant to C.R.S. 12–61–101(4).

• 2.) The sales contract must provide a place for disclosure of the name of the real estate brokerage firm and;
• 3.) Provide a place in the contract, for disclosure of the name of the sales agent acting for the developer.

DISCLAIMER

Rule S­23(h)

• 1.) When a document other than the contract or an addendum to the contract is used to make any of the disclosures required in Rule S­23, the following statement must appear in bold print on the first page of the document preceding the disclosure:

THE STATE OF COLORADO HAS NOT PREPARED OR ISSUED THIS DOCUMENT NOR HAS IT PASSED ON THE MERITS OF THE SUBDIVISION DESCRIBED HEREIN.

DEPOSITS AND PAYMENTS

Rule S­23(i)

• 1.) The contract must contain a statement that:

"All funds paid by the purchaser prior to delivery of deed will be held in trust by the licensed real estate broker named in the contract" or;

• 2.) If the funds are not held by a licensed real estate broker, then the contract must contain a clear statement specifically setting forth who such funds shall be delivered to, and;
• 3.) The contract must contain a clear statement specifically setting forth when such delivery will occur, and;
• 4.) The contract must contain a clear statement specifically setting forth the developer's use of said funds, and;
• 5.) The contract must contain a clear statement specifically setting forth whether or not there is any restriction on the use of such funds by the developer.

DELIVERY OF DEED

Rule S­23(j)

• 1.) The Contract must include a statement that:

"Immediately following the date of closing the purchaser's deed will be delivered to the County Clerk and Recorder's office for recording."

• 2.) OR, the contract may contain a clear statement specifically setting forth WHEN such delivery (to the clerk and recorder) will occur which shall be no later then sixty days after closing. For the purposes of this Rule, the date of closing is defined as the date the purchaser has either paid the full cash purchase price or has made partial cash payment and executed a promissory note or other evidence of indebtedness for the balance (See Rule S­30 below)

Rule S­30

• (a) Unless sale is by means of an installment contract the delivery of deed ( for recording ) shall be made within sixty days after closing. For the purposes of this Rule, the date of closing is defined as the date the purchaser has either paid the full cash purchase price or has made partial cash payment and executed a promissory note or other evidence of indebtedness for the balance (This must be disclosed in the contract).
• (b) If sale is by means of an installment contract, the delivery of deed (for recording) shall be made within sixty days after completion of payments. A contract which requires the execution of a promissory note or other evidence of indebtedness that accrues interest and/or requires payments prior to the recording of a deed shall be deemed to be an installment contract pursuant to 12–61–403(3)(g) C.R.S. and Commission Rule S­23.

TITLE POLICY

Rule S­23(k)

• 1.) The contract must contain a statement that:

"A title insurance policy, at no expense to the purchaser, will be delivered to the purchaser within sixty days following recording of the warranty deed",

• 2.) unless specifically agreed to the contrary in the contract. (See Rule S­31 below)

Rule S­31

• The contract should contain provisions for an abstract or title insurance policy to be delivered to the purchaser within a reasonable time (60 days) after closing. Any period of time exceeding sixty days shall be deemed unreasonable for purposes of this rule.
  • The parties may contract to eliminate this requirement, but such waiver must be in writing in the CONTRACT and in a CONSPICUOUS MANNER AND/OR PRINT. The presence of waiver on the back of a contract shall not be deemed conspicuous for purposes of this rule.

Rule S­32 and 12-61-406 (3) C.R.S.

• All developers shall provide in the contract. provisions for a title insurance commitment or other evidence of title approved by the Commission to be delivered to the purchaser within a reasonable time after execution of any contract to purchase. Any period of time in excess of ninety (90) days shall be deemed unreasonable for purposes of this rule. This requirement may be waived by the parties in writing if the waiver is made in a CONSPICUOUS manner, and/or print in the contract. The presence of the waiver on the back of a contract shall not be deemed conspicuous for purposes of this rule.

INSTALLMENT LAND CONTRACT (CONTRACT FOR DEED)

For purposes of Commission Rule S­23 (L), the Commission defines a "contract for deed" or "installment land contract" as a contract which requires the execution of a promissory note or other evidence of indebtedness that accrues interest and, or requires payments prior to the recording of a deed.

The following disclosures are to be made only when an installment land contract is used:

Rule S­23(L)(i)

• 1.) The contract must disclose whether or not the purchaser's deed is escrowed with an independent escrow agent, and if so the name and address of the escrow agent;

Rule S­23(L)(ii)

• 1.) The contract or disclosure document must list the amount of any existing encumbrance(s), and
• 2.) The contract or disclosure document must list the name and address of the encumbrancer(s),and;
• 3.) The conditions, if any, under which a purchaser may cure a default caused by non­payment;

Rule S­23(L)(iii)

• 1.) The contract or disclosure document must contain a clear statement that a default on any underlying encumbrance(s) could result in the loss of the purchaser's entire interest in the property; and

Rule S­23(L)(iv)

• 1.) The contract or disclosure document must contain a clear statement advising the purchaser to record the installment contract.

Rule S­23(L)(v)

• 1.) Pursuant to 12–61–403 (3)(e)C.R.S., the contract or disclosure document must set forth the terms of the agreement by which the owner of any blanket encumbrance against the project agrees that its rights and the rights of its successors or assigns in the project shall be subordinate to the rights of purchasers, or any other trust, escrow or release arrangement which fully protects the purchasers' interest in the project. (These agreements or other "escrow" arrangements must be submitted to the Commission for review)

38–35–126 C.R.S.

For purposes of 38–35–126 C.R.S., a contract for deed or installment land contract means a contract for the sale of real property which provides that the purchaser shall assume possession of the real property and the rights and responsibilities of ownership of the real property, but that the deed to such real property will not be delivered to the purchaser for at least one hundred and eighty days following the latest execution date on the contract for deed and not until the purchaser has met certain conditions such as payment of the full contract price or a specified portion thereof.

• 1.) Pursuant to 38–35–126 C.R.S. An installment land contract or contract for deed shall include provisions for:
  • A.) Designation of the public trustee of the county wherein the real property is located to act as escrow agent for the monthly payment by the purchaser of the monthly prorational property tax obligation on such property.
  • B.) The payment to the public trustee of the seller's tax obligation at closing for the current year's property taxes.
  • C.) The payment, by the purchaser, of the trustee's $75.00 fee once each year in April.
• 2.) These provisions shall continue until the deed to such property is delivered to the purchaser and recorded.
• 3.) 38–35–126 C.R.S. does allow for the trustee to designate an alternate escrow agent. Please review the statute and contact the county public trustee for information.
• 4.) In addition, the statute 38–35–126(2) C.R.S. requires a seller (developer) to file a written notice of transfer with the county treasurer and offers purchasers certain rights to void the sales contract. It states in part, that ..Within ninety days of executing and delivering a contract for deed to real property, the seller shall file with the county treasurer of the county wherein the real property is located a written notice of transfer by contract for deed to real property. Such notice shall include the name and legal address of the Seller, the name and legal address of the Purchaser, a legal description of the real property, the date upon which the contract for deed to real property was executed and delivered, and the date or conditions upon which the deed to the real property will be delivered to the purchaser, absent default. In addition, within ninety days of executing and delivering the contract for deed to real property, the seller shall file a real estate transfer declaration with the county assessor of the county wherein the property is located, pursuant to the provisions of section 39–14–102, C.R.S.
• 5.) The buyer shall have the option of voiding any contract for deed to real property which fails to designate the public trustee as escrow agent for deposit of property tax moneys or for which no written notice is filed with the county treasurer's office of the county assessor's office. Upon voidance of such contract, the buyer shall be entitled to the return of all payments made on the contract, with statutory interest as defined in section 5–12–102,C.R.S., and reasonable attorney fees and costs. This avoidance right shall expire on the date seven years after the latest execution date on the contract for deed to real property unless exercised prior to such date."
• 6.) 38–35–126 C.R.S. allows for exemption from most of the above provisions if:
  • A.) The subject property is not divided into parcels less then one acre.
  • B.) The developer (seller) pays the property tax or submits a bond or letter of credit within 30 days of the mailing of the notice of taxes due and prior to seeking reimbursement from the purchaser.
  • C.) The developer complies with the notice of transfer mentioned in 38–35–126(2)C.R.S.

• Please review the statutes and contact the county public treasurer for further information.

• The Real Estate Commission staff will review the contract for compliance with the provisions of 38–35–126 C.R.S.

UTILITIES , ACCESS AND USE

Rule S­23(m) and 12–61–406(3)

The purpose of Commission Rule S­23 (m), as the following examples indicate, is to give the purchaser adequate information in order to make an informed decision regarding the material facts pertaining to the use of the property. The disclosures should be crafted to fit whatever is true regarding the provisions for and availability of roads and utilities as well as the allowed use of the property. The disclosures must include a statement regarding whether or not the installation and maintenance of roads and utilities are to be an expense of the developer, the purchaser or a third party. Much of the information pertaining to county regulations and water rights can be acquired by contacting the county zoning, health, planning, and building departments and the Colorado Division of Water Resources.

• 1.) The contract or disclosure document must include a statement regarding the provisions for and availability of LEGAL access to the subdivision.

example: Legal Access to the southern boundary of the subdivision is by an easement for County Road #115.

• 2.) The contract or disclosure document must include a statement regarding the provisions for and availability of LEGAL access within the subdivision.

example: Legal Access within the subdivision is by easement described and granted on the recorded plat.

• 3.) The contract or disclosure document must include a statement regarding the PROVISIONS FOR and AVAILABILITY of ROADS to the subdivision .

example: County Road # XXX leads to the southern boundary of the subdivision and is a paved two lane road. The road is maintained by the county and is open year­round.

• 4.) The contract or disclosure document must include a statement regarding the PROVISIONS FOR and AVAILABILITY of ROADS within the subdivision as well as ownership of the roads and who is responsible for the road maintenance.

example: The roads within the subdivision are in place and are complete. The roads within the subdivision abut a portion of every lot. The roads are XX feet wide with a 6" compacted crushed granite surface. There is a culvert/ditch on each side of the road. The roads are private and are open year round. The roads are constructed on the recorded easements and are maintained, including snow removal, by the owner's association. You (the purchaser) are responsible for construction and maintenance of the driveway onto your lot. You will have to install a 24" culvert pipe and driveway reflector markers when you install a driveway.

Note: If the roads within the subdivision are to be owned by the association and have not been conveyed to the association by the time of registration, the application will not be approved until the developer has deeded the roads to the association free and clear of encumbrance.

• 5.) The contract or disclosure document must include a statement regarding the PROVISIONS FOR and AVAILABILITY of SEWAGE DISPOSAL.

example: The developer is not providing a sewage disposal system. If you (the purchaser) build a habitable structure on the property, you will be responsible for incurring the costs of obtaining a permit from the county and installing a sewage septic vault and leach system that meets the minimum standards of the County Health Department. The County Health Department generally will approve the use of septic vaults and leaching fields (dependent upon soil percolation tests) or aerobic systems within the subdivision. If your lot cannot pass the county percolation tests, the costs for a alternative sewage (aerobic) treatment plan will increase. The developer does not warrant the cost, county acceptance or results of soil tests associated with sewage treatment.

• 6.) The contract or disclosure document must include a statement regarding the PROVISIONS FOR and AVAILABILITY OF WATER.

example: The developer is not providing potable water. If you build a habitable structure and desire potable water, you (the purchaser) are responsible for incurring the cost of obtaining a water well permit from the Colorado Division of Water Resources (303-866-3587) and for drilling the well and installing all equipment necessary to remove the water. The cost will range based on a per foot charge by local companies to drill the well shaft and install pumps and piping depending on the depth of the well. The developer does not warrant the quantity or quality of water or the probability of successfully finding water or the associated costs.

• 7.) The contract or disclosure document must include a statement regarding PROVISIONS FOR and AVAILABILITY OF TELEPHONE.

example: Telephone service within the subdivision is not currently available and the developer is not responsible for providing telephone service. Telephone service cable is located along the west boundary of the subdivision and can be brought into the subdivision and to an individual lot at the expense of the lot owner(s). For information on expense and availability contact the XXX telephone company at (XXX)XXX­XXXX.

• 8.) The contract or disclosure document must include a statement regarding the PROVISIONS FOR and AVAILABILITY OF ELECTRICITY.

example: The developer has arranged for electrical service lines to be installed in an easement adjacent to each lot within the project. The electrical service lines are not in place at this time and will not be in place at the time of closing. The developer has signed an agreement with the rural electric association and has prepaid the costs for installation of a XXX Volt, single phase overhead power line extensions. All lines are to be completed by XXX x, 19xx unless delayed by any of the conditions that are contained in the written agreement with the rural electric association. The electrical service and distribution from the lot line to any habitable structure you build is your (the purchaser's) expense. The line extension will allow a maximum of XXX volts / XXX amp service to each lot.

• 9.) The contract or disclosure document must include a statement regarding PROVISIONS FOR and AVAILABILITY OF GAS.

example: A centralized system for piped natural gas service within the subdivision is not available and the developer is not responsible for providing such a gas service. Propane gas utilizing an individual tank storage system is available within the subdivision at your (the purchaser's) expense. For information on expense and availability of propane gas contact the XXX gas company at (XXX)XXX­XXXX.

• 10.) The contract or disclosure document must include a statement regarding PROVISIONS FOR and AVAILABILITY OF OTHER PROMISED FACILITIES.
• 11.) Pursuant to 12–61–406(3)C.R.S., include in the contract or the disclosure document a statement regarding the permissible use of the property based on the county ZONING REGULATIONS.

example: The county planning and zoning department has jurisdiction over the use of the property. The development is zoned "agricultural and other use" which includes residential use. Among other restrictions, this zoning does not allow the permanent use of mobile homes. You should contact the county for information regarding restrictions on the use of the land.

• 12.) Include in the contract or the disclosure document a statement regarding the permissible types of habitable structures that are allowed on the property based on the county zoning, fire and BUILDING REGULATIONS.

example: The county building department has jurisdiction over the construction of any building. If you want to build a habitable structure, or any structure, you will first have to apply for a building permit, satisfy code and building requirements and pay the fees.. The building permit application to the County may include, among other requirements, a soils investigation of the property. Varying soil conditions exist within the subdivision. Particular soil conditions require varying construction techniques. Seller has not caused preliminary soils reports to be prepared for the subdivision. You should contact the county building department for information pertaining to building structures.

• Note: The following are examples of disclosures relative to a developer who is providing roads and utilities.

(A) Roads and Utilities. Purchaser acknowledges and agrees that the utilities and roads are not yet built or in place in the planned community known as Dakota Subdivision. Seller agrees to use good faith reasonable efforts to substantially complete construction of (i) private roads over the easements as described on the recorded plat map as "Private Roads," or Dakota Court and Dakota Drive, on or about July 1, 1996; and, (ii) the installation to the lot lines of water lines and sewer lines for service from the Mid­Valley Metropolitan District, electric lines, phone lines, natural gas lines and cable TV lines, on or about May 1, 1995 with the exception of miscellaneous items, including the raw irrigation water delivery system, which Seller agrees to use good faith reasonable efforts to complete on or about August 1, 1995. Seller shall perform this work as set forth in the Subdivision Improvements Specifications. Purchaser acknowledges and agrees that Seller has reserved the right to place utility easements where necessary or advisable; however, in no event shall utility easements encroach upon any building envelopes, and that Seller shall have license to enter any parcel or lot as necessary for work on installation of all infrastructure. Seller, at its sole cost and expense, shall be responsible for building the roads, and for extending the utility lines as is provided herein. In the event, however, Seller is unable to complete this construction in a timely manner due to acts of God, defaults of contractors or subcontractors or materialsmen, or other causes beyond the control of Seller, the date for completion of such work shall be accordingly extended. ,After these utilities are actually constructed, Purchaser shall be responsible to pay for any costs of connection, tap fees or construction costs incurred by Purchaser in tapping into or connecting into these utilities. Seller shall maintain the right to store and stockpile dirt on any Lot within Dakota Subdivision during the construction of roads and utilities; provided, however, that if the owner of the Lot is building a house at the time of the construction of the road or utilities, the stockpiling will not be done in a manner which would interfere with the house construction. This right to stockpile and store dirt shall survive the closing, and shall be a burden which runs with the land until September 1, 1995, at which time said right shall expire.

(B) Water and Sewer Fees. Purchaser acknowledges that there will be a tap fee also known as a system development fee required by the Mid­Valley Metropolitan District for water and sewer hook­up or connection, as well as on­going service fees, which Purchaser shall pay.

(C) Special Taxing Districts. This notice is given in compliance with Colorado Senate Bill 143, Section 38–35.7–10, effective as of July 1, 1992. "Special taxing districts may be subject to general obligation indebtedness that is paid by revenues produced from annual tax levies on the taxable property within such districts. Property owners in such districts may be placed at risk for increased mill levies and excessive tax burdens to support the servicing of such debt where circumstances arise resulting in the inability of such a district to discharge such indebtedness without such an increase in mill levies. Purchasers should investigate the debt financing requirements of the authorized general obligation indebtedness of such districts servicing such indebtedness, and the potential for an increase in such mill levies." The Property is affected by the Mid­Valley Metropolitan District. This district has not default on any of its obligations, nor has it filed for bankruptcy, nor are any such actions pending. The Seller is not in default on any obligation or payments to the Rocky Mountain Metropolitan District.

(D) Garfield County. Purchaser acknowledges that Purchaser must obtain, at Purchaser's expense, a building permit from the Garfield County before Purchaser may build on the Property. Such permit may not be issued until on or about April 1, l995.

(E) Design Committee. Purchaser acknowledges that all construction on each lot shall be subject to approval by the Architectural Committee pursuant to the Master Declaration of Protective Covenants for Dakota Subdivision and Eagle Dakota Subdivision.

(F) Soil. The building permit application to Garfield County may include, among other requirements, a soils investigation of the Property. Varying soil conditions exist within the Property. Particular soil conditions require varying construction techniques. Seller has caused preliminary soils reports to be prepared for the subdivision by Great Western, Inc., consulting geo-technical engineers of which Purchaser has received a summary for its review and which Purchaser acknowledges is preliminary only, and cannot be relied upon by Purchaser for construction on the Property. Copies of such soils reports are available for Purchaser's inspection during regular business hours at the office of Seller.

• 13.) Include in the contract or the disclosure document a statement regarding whether or not a survey of each lot, site or tract offered for sale has been made and whether survey monuments are in place

example: The developer has had the subdivision surveyed and a subdivision plat map has been recorded. Each lot within the subdivision has been monumented at the corners and any angles.

OWNER'S ASSOCIATIONS

Rule S­23(n) & 12–61–406(3)C.R.S.

• The contract or disclosure document must include a statement indicating whether or not the subdivision is or will be a common interest community, and if not,
• Whether it is a limited expense planned community created pursuant to section 38-33.33-116 C.R.S.

Rule S­23(n)(i)

• The contract or disclosure document must include a statement indicating whether or not membership in a homeowner's association is mandatory.

Rule S­23(n)(ii) & 12–61–406(3)C.R.S.

• 1.) The contract or disclosure document must include a statement indicating an estimate of association dues and fees which are the responsibility of the PURCHASER.
• 2.) The contract or disclosure document must include a statement indicating whether or not the DEVELOPER is responsible for paying association dues and fees.

Rule S­23(n)(iii)

• The contract or disclosure document must include a description of the services provided by the association.

Rule S­23(n)(iv)

• 1.) The contract or disclosure document must include a statement indicating whether or not the developer has voting control of the association.
• 2.) The contract or disclosure document must include a statement indicating the manner in which the developer control can or will be transferred.

Rule S­23(n)(v) & 12–61–406(3)C.R.S.

• 1.) The contract or disclosure document must include a statement indicating whether or not the developer has any financial interest in, or will potentially derive any income or profit from such association,
• 2.) The contract or disclosure document must include a statement indicating whether or not the developer has a right to borrow or authorize borrowing from the association.
• 3.) The contract or disclosure document must include a statement indicating whether or not it is the developer, unit owner, Board of Directors or their employee, or an independent contractor that controls or disburses the funds of the association.
• 4.) The Colorado Common Interest Ownership Act became effective July 1, 1992 and establishes that any nonpayment of association dues or fees created after July 1, 1992 becomes a priority lien on the lot or unit that need not be recorded in order to be perfected and is not extinguished by the transfer of ownership from a seller to a buyer and is foreclosed in the same manner as a mortgage. This provision applies to all common interest ownership communities WHETHER OR NOT they were created before or after July 1, 1992.

The statute 38–33.3–316 (8) C.R.S., states, The association shall furnish to a unit owner or such unit owner's designee or to a holder of a security interest or its designee upon written request, delivered personally or by certified mail, first class postage prepaid, return receipt, to the association's registered agent, a written statement setting forth the amount of unpaid assessments currently levied against such owner's unit. The statement shall be furnished within fourteen calendar days after receipt of the request and is binding on the association, the executive board, and every unit owner. If no statement is furnished to the unit owner or holder of a security interest or their designee, delivered personally or by certified mail, first class postage prepaid, return receipt requested, to the inquiring party, then the association shall have no right to assert a priority lien upon the unit for unpaid assessments which were due as of the date of the request.

• A.) Unless exempt pursuant to title 38 article 33.3, of the Colorado Common Interest Ownership Act, please add the following or similar language to your disclosure document or contract:

The seller (developer), in every contract for sale, shall provide to the purchaser, the written statement of assessments pursuant to 38­33.3­316 (8) C.R.S.

TIMESHARES, CONDOMINIUM CONVERSIONS, UNDIVIDED INTERESTS

• No time share estates shall be created with respect to any condominium unit except pursuant to provisions in the project instruments expressly permitting the creation of such estates. 38–33–111 C.R.S.
• The purpose of Commission Rule S­23 as the following examples indicate, is to give the purchaser adequate information in order to make an informed decision. The disclosures should be crafted to fit whatever is true regarding the provisions for and availability of roads and utilities as well as the allowed use of the property.

The following are examples of disclosure language relative to timeshares and condominium conversions

• Rule S­23(m) and 12–61–406(3)

Example: Gas, electrical, phone, water and sewer service are complete and available within the project. These services are not separately metered for each unit. The cost for these services is an overall expense of the association and each purchaser pays a portion of the cost as part of the monthly dues. Each unit is separately wired for television "cable". The television "cable" service (if desired) and line maintenance is the expense and responsibility of the individual unit owner. There is an on-site laundry facility which is a common element in which each purchaser owns an undivided common interest. The laundry facility is leased to xyz company who provides the coin operated washing machines and clothes dryers.

• In addition, pursuant to 12-61-406 (3) C.R.S. Please include in the disclosure document a statement regarding whether or there is a central heating and air-conditioning systems or whether or not the units have individual heat and air-conditioning systems. Please include whether or not there has been an inspection of the heating and air-conditioning systems by a qualified engineer, the results of the inspection including the evaluation of useful life.

Example: The developer has had the central hot water heating system inspected by XYZ mechanical engineering company. The engineer's report concludes that the system is in adequate condition and that it has a useful remaining life of 30 years with routine maintenance and repairs. A copy of the inspection report is available for review upon request. The project does not have a central air-conditioning system.

Pursuant to 12-61-406 (3) C.R.S. In addition to the disclosures in Rule S­23 items (a) through (n), IF sales are to be made from a time share project as defined in 12–61–401(4), or a condominium conversion as defined in 12–61–401 (3)(b)(I)(A) the following disclosures need to be added to the contract or the disclosure document:.

Rule S­23(o)(i)

• 1.) The contract or disclosure document must include a statement indicating the quantity and identifying numbers of time share units, or condominium conversion units, or undivided interests in the project;

Example: There are 25 individual 2 bedroom condominium units in the project numbered 101 through 125 and, there are 10 one bedroom condominium units in the project numbered 210 through 220. The units numbered 101 through 125 are located in a two story building called Aspen I and units numbered 210 through 220 are located in a two story building called Aspen II.

• 2.) The contract or disclosure document must include a statement indicating the length of time share interests in each unit, or use periods for undivided interests,
• Example: The length of interest being offered is a Seven Consecutive Day period beginning 4:00 P.M. Saturday until 10:00 A.M. the following Saturday.
• 3.) The contract or disclosure document must include a statement indicating the number of time share interests in each unit, or use periods for undivided interests.

Example: Each condominium unit contains 50 Seven Consecutive Day use Periods and 2 seven day periods that are designated as common elements and are set aside for maintenance.

• 4.) The contract or disclosure document must include a statement explaining the time share periods constituting the time share plan; or undivided interests.

Example: The Seven Consecutive Day time share periods consist of Interval No. 1 which is the seven day period commencing on the 19th Saturday of each calendar Year. Interval No. 2 is the seven day period next succeeding in each such year. Additional intervals up to and including Interval No. 52 are computed in a like manner.

Rule S­23(o)(ii.)

• 1.) The contract or disclosure document must include a statement disclosing the name and business address of the managing entity under the time share plan, or the condominium conversion, or the offering of undivided interests.
• 2.) The contract or disclosure document must include a description of the services that the managing entity will provide.
• 3.) The contract or disclosure document must include a statement as to whether or not the developer has any financial interest in or will potentially derive any income or profit from such managing entity,
• 4.) The contract or disclosure document must include a statement disclosing the manner, if any, by which the PURCHASERS may change the managing entity.
• 5.) The contract or disclosure document must include a statement disclosing the manner, if any, by which the purchasers may transfer the control of the managing entity.
• 6.) The contract or disclosure document must include a statement disclosing the manner, if any, by which the DEVELOPER may change the managing entity.
• 7.) The contract or disclosure document must include a statement disclosing the manner, if any, by which the DEVELOPER may transfer the control of the managing entity.

Rule S­23(o)(iii.)

• 1.) The contract or disclosure document must include an estimate of the dues, which are the responsibility of the purchaser
• 2.) The contract or disclosure document must include an estimate of the maintenance fees which are the responsibility of the purchaser. see note
• 3.) The contract or disclosure document must include an estimate of the real property taxes which are the responsibility of the purchaser. see note
• 4.) The contract or disclosure document must include an estimate of other similar periodic expenses which are the responsibility of the purchaser. see note
• Note: The disclosure document can refer to a budget sheet as an exhibit and satisfy the above items.
• 5.) The contract or disclosure document must include a general statement of the conditions under which future changes or additions in the purchaser's dues and fees may be imposed.
• 6.) The contract or disclosure document must include a statement as to whether or not a maintenance reserve fund HAS BEEN established and if not;
• 7.) The contract or disclosure document must include a statement as to whether or not a maintenance reserve fund WILL BE established;
• 8.) The contract or disclosure document must include a statement disclosing the manner in which such reserve fund is financed if not cash funded;
• 9.) The contract or disclosure document must include a statement disclosing any outstanding obligations in favor of the reserve fund;
• 10.) The contract or disclosure document must include a statement disclosing any outstanding obligations against the reserve fund;
• 11.) The contract or disclosure document must include a statement disclosing whether or not the developer has a right to borrow from the fund;
• 12.) The contract or disclosure document must include a statement disclosing whether or not the developer can authorize borrowing from the fund;
• 13.) The contract or disclosure document must include a statement regarding the method of periodic accounting which will be provided to the purchaser;

Rule S­23(o)(iv.)

• The contract or disclosure document must include a description of any insurance coverage provided for the benefit of purchasers;

Rule S­23(o)(v.)

• The contract or disclosure document must include a statement that  Mechanic's Lien Law may authorize enforcement of a lien by selling the entire time share unit or undivided interest ownership of real property .
• Pursuant to 12-61-406 (3) C.R.S. please include in the disclosure document for a condominium conversion a statement regarding whether or not there is a central heating and air conditioning system for the project as a common element, or whether or not the units contain individual heating and air conditioning units. Please include whether or not there has been an inspection of the heating and air conditioning system by a qualified party, the results of the inspection including any evaluation of useful life and replacement costs.

TIME SHARE USE

In addition to the disclosures in items (a) through (o), of S­23 listed above, if sales are to be made from a time share USE project as defined in 12–62–401(4) C.R.S., the following needs to be added to the disclosure document or the contract.

Rule S–23(p) (i.)

• The specific term of the contract to use and what will happen to a purchaser's interest upon termination of said contract;

Rule S–23(p) (ii.)

• A statement as to the effect a voluntary sale, by the developer to a third party, will have on the contractual rights of time­share owners;

Rule S–23(p) (iii.)

• A statement that an involuntary transfer by bankruptcy of the developer may have a negative effect on the rights of the time­share owners; and

Rule S–23(p) (iv.)

• A statement that a Federal tax lien could be enforced against the developer by compelling the sale of the entire time share project.

Rule S–17(d)

• 1.) In compliance with 12–61–403(3)(e) C.R.S., a subdivision developer of time share USE projects shall submit to the Commission a "Non­disturbance Agreement" by which the holder of a blanket encumbrance against the project agrees that its rights in the time share USE project shall be subordinate to the rights of the purchasers.
• 2.) The non­disturbance agreement needs to reference and amend the blanket encumbrance and must be recorded. The non disturbance agreement must provide that, the holder of the note or blanket encumbrance as well as any successors and assigns, and any person who acquires the property through foreclosure or by deed in lieu of foreclosure of the blanket encumbrance, shall take the time share use project subject to the rights of purchasers.
• 3.) Every non­disturbance agreement shall contain the covenant of the holder of the blanket encumbrance that such person or any other person acquiring through such blanket encumbrance shall not use or cause the time share use project to be used in a manner which would prevent the purchasers from using and occupying the time share use project in a manner contemplated by the time share use plan.
• 4.) In lieu of a non­disturbance agreement, the Real Estate Commission will approve a trust or escrow arrangement which fully protects the purchasers' interest in the project as contemplated by 12–61–403 (3)(e)C.R.S..

VACATION CLUBS

Rule S–23(q) (effective January 1, 1996)

If time shares, as defined in 12-61-401(4), are to be sold from a subdivision which (1) contains two or more component sites situated at different geographic locations or governed by separate sets of declarations, by-laws or equivalent documents and (2) does not include, subject to agreed upon rules and conditions, a guaranteed, recurring right of use or occupancy at a single component site:

• (i.) For each component site, the information and disclosures required by rule S-23(a) through (p);
• (ii.) A general description of the subdivision;
• (iii.) For each term of usage or interest offered for sale, the total annual number of available daily use periods within the entire subdivision and within each component site for that term, regardless of whether such use periods are offered to a purchaser by days, weeks, points or otherwise, and a calculation represented on a chart or grid showing each component site's annual daily use periods as a percentage of the entire subdivision's annual daily use periods;
• (iv.) A clear description in the sales contract of the interest and term of usage being purchased and a definite date of termination of the purchaser's interest in the subdivision, which date will be not later than the termination date of the subdivision's interest in a specifically identified component site;
• (v.) A clear disclosure and description of any component site which is not legally guaranteed to be available for the purchaser's use, subject to the by-laws and rules of the subdivision, for the full term of the purchaser's usage interest;
• (vi.) The system and method in place to assure maintenance of no more than a one-to-one ratio of purchasers' use rights to the number of total use rights in the subdivision for each term of usage being offered for sale, including provisions for compensation to purchasers resulting from destruction of the component site or loss of use rights to any component site;
• (vii.) Whether the developer maintains any type of casualty insurance for the component sites in addition to that maintained by the site owners association or other interested parties, including the manner of disposition of any proceeds of such insurance resulting from the destruction or loss of use rights to any component site;
• (viii.) A description of the system or program by which a purchaser obtains a recurring right to use and occupy accommodations and facilities in any component site through use of a reservation system or otherwise, including any restrictions on such rights or any method by which a purchaser is denied an equal right with all other users to obtain the use of any accommodation in the subdivision;
• (ix.) A description of the management and ownership of such reservation system or program, whether through the developer, an owners association, a club or otherwise, including the purchaser's direct or indirect ownership interest or rights of control in such reservation system;
• (x.) Whether the developer, club or association which controls the reservation system or any other person has or is granted any interest in unsold, non-reserved or unused use rights and whether the developer, club, association or other person may employ such rights to compete with purchasers for use of accommodations in the subdivision or any component site and, if so, the nature and specifics of those rights, including the circumstance under which they may be employed;
• (xi.) The method and frequency of accounting for any income derived from unsold, non-reserved or unused use rights in which the purchaser, either directly or indirectly, has an interest;
• (xii.) The system and method in place, including business interruption insurance or bonding, to provide secure back-up or replacement of the reservation system in the event of interruption, discontinuance or failure;
• (xiii.) The amount and details of any component site, reservation system or other periodic expense required to be paid by a purchaser, the name of the person or entity to which such payments shall be made, and the method by which the purchaser shall receive a regular periodic accounting for such payments;
• (xiv.) If component site expenses are included in those periodic payments made by a purchaser, a statement for each component site from the owners association or other responsible agency acknowledging that payment of such expenses as taxes, insurance, dues and assessments are current and are being made in the name of the subdivision;
• (xv.) Evidence that an escrow system with an independent escrow agent is in place for receipt and disbursement of all moneys collected from purchasers that are necessary to pay such expenses as taxes, insurance and common expenses and assessments owing to component site owners associations or others or a clear description of the method by which such funds will be paid, collected, held, disbursed and accounted for;
• (xvi.) A clear statement in the sales contract as to whether a purchaser's rights, interests or terms of usage for any component site within the subdivision can subsequently be modified from those terms originally represented and a description of the method by which such modification may occur;
• (xvii.) If the subdivision documents allow additions or substitutions of accommodations or component sites, a clear description of the purchaser's rights and obligations concerning such additions or substitutions and the method by which such additions or substitutions will comply with the provisions of this rule;
• (xviii.) A clear description of any existing incidental benefits or amenities which are available to the purchaser at the time of sale but to which the purchaser has no guaranteed right of recurring use or enjoyment during the purchaser's full term of interest in the subdivision.

Rule S–17(d)

• 1.) In compliance with 12–61–403(3)(e) C.R.S., a subdivision developer of time share USE projects shall submit to the Commission a "Non­disturbance Agreement" by which the holder of a blanket encumbrance against the project agrees that its rights in the time share USE project shall be subordinate to the rights of the purchasers.
• 2.) The non­disturbance agreement needs to reference and amend the blanket encumbrance and must be recorded. The non disturbance agreement must provide that, the holder of the note or blanket encumbrance as well as any successors and assigns, and any person who acquires the property through foreclosure or by deed in lieu of foreclosure of the blanket encumbrance, shall take the time share use project subject to the rights of purchasers.
• 3.) Every non­disturbance agreement shall contain the covenant of the holder of the blanket encumbrance that such person or any other person acquiring through such blanket encumbrance shall not use or cause the time share use project to be used in a manner which would prevent the purchasers from using and occupying the time share use project in a manner contemplated by the time share use plan.
• 4.) In lieu of a non­disturbance agreement, the Real Estate Commission will approve a trust or escrow arrangement which fully protects the purchasers' interest in the project as contemplated by 12–61–403 (3)(e)C.R.S..

EXCHANGE PROGRAMS

• A time share developer shall disclose to the public WHETHER OR NOT A TIME SHARE PLAN INVOLVES AN EXCHANGE PROGRAM and if so, shall disclose and deliver to prospective purchasers, a separate written document containing the following items a through k of Rule S­24. Such document may be provided by the exchange company.

Rule S–24 (a)

• The name and the business address of the exchange company;

Rule S–24 (b)

• Whether the purchaser's contract with the exchange program is separate and distinct from the purchaser's contract with the time share developer;

Rule S–24 (c)

• Whether the purchaser's participation in the exchange program is dependent upon the developer's continued affiliation with the exchange program;

Rule S–24 (d)

• Whether or not the purchaser's participation in the exchange program is voluntary;

Rule S–24 (e)

• The specific terms and conditions of the purchaser's contractual relationship with the exchange program and the procedure by which changes, if any, may be made in the terms and conditions of such contractual relationship;

Rule S–24 (f)

• The procedure of applying for and affecting changes;

Rule S–24 (o)

• A complete description of all limitations, restrictions, accrual rights, or priorities employed in the operation of the exchange program, including but not limited to limitations on exchanges based on seasonability, unit size, or levels of occupancy; and if the limitations, restrictions or priorities are not applied uniformly by the exchange program, a complete description of the manner of their application;

Rule S–24 (h)

• Whether exchanges are arranged on a space­available basis or whether guarantees of fulfillment of specific requests for exchanges are made by the exchanging company;

Rule S–24 (i)

• Whether and under what conditions, a purchaser may, in dealing with the exchange program lose the use and occupancy of the time share period in any properly applied for exchange without being offered substitute accommodations by the exchange program;

Rule S–24 (j)

• The fees for participation in the exchange program, whether the fees may be altered and the method of any altering;

Rule S–24 (k)

• The name and location of each accommodation or facility, including the time sharing plans participating in the exchange program.

CONDOMINIUM CONVERSION

38–33–112. Notification to residential tenants.

• (1) A developer who converts an existing multiple­unit dwelling into condominium units upon recording of the declaration shall notify each residential tenant of the dwelling of such conversion.
• (2) Such notice shall be in writing and shall be sent by certified or registered mail, postage prepaid, and return receipt provided. Notice is complete upon mailing to the tenant at the tenant's last known address. Notice may also be made by delivery in person to the tenant of a copy of such written notice, in which event notice is complete upon such delivery.
• (3) Said notice constitutes the notice to terminate the tenancy as provided by section 13–40–107, C.R.S.; except that no residential tenancy shall be terminated prior to the expiration date of the existing lease agreement, if any, unless consented to by both the tenant and the developer. If the term of the lease has less than ninety days remaining when notification is mailed or delivered, as the case may be, or if there is no written lease agreement, residential tenancy may not be terminated by the developer less than ninety days after the date the notice is mailed or delivered, as the case may be, to the tenant unless consented to by both the tenant and the developer. The return receipt shall be prima facie evidence of receipt of notice. If the term of the lease has less than ninety days remaining when notification is mailed or delivered, as the case may be, the tenant may hold over for the remainder of said ninety­day period under the same terms and conditions of the lease agreement if the tenant makes timely rental payments and performs other conditions of the lease agreement.
• (4) The tenancy may be terminated within the ninety days prescribed in subsection (3) of this section upon agreement by the tenant in consideration of the payment of all moving expenses by the developer or for such other consideration as mutually agreed upon. Such tenancy may also be terminated within the ninety days prescribed in subsection (3) of this section upon failure by the tenant to make timely rental or lease payments.
• (5) Any person who applies for a residential tenancy after the recording of the declaration shall be informed of this recording at the time of application, and any leases executed after such recording may provide for termination within less than ninety days provided that the terms of the lease conspicuously disclose the intention to convert the property containing the leased premises to condominium ownership.

COLORADO COMMON INTEREST OWNERSHIP ACT

APPLICABILITY

• The Colorado Common Interest Ownership Act (CCIOA) applies to all "common interest communities" (see definitions) created within Colorado on or after July 1, 1992. (see Exceptions listed below)(Note: most states have adopted a similar law)

• Effective July 1, 1992 The Colorado Common Ownership Act supersedes the old Condominium Act in relationship to the creation of condominium regimes. The provisions of sections 38–33–110 to 38–33–113 C.R.S. pertaining to time share shall remain in effect for all common interest communities.

• The Colorado Common Interest Ownership Act (CCIOA) applies to any covenant, declaration or any recorded instruments including, but not limited to, plats and maps wherein a lot or unit owner has some aspect of common ownership of real property other then their own specific lot or unit.(see Exceptions listed below)

• The Colorado Common Interest Ownership Act is also applicable when a lot or unit owner is obligated to pay taxes or insurance or maintenance on any real property other then their own lot or unit.(see Exceptions listed below)

• The Commission licensing section staff can answer questions and provide clarification from the registration prospective however the staff is not qualified to give legal advice. Please contact an attorney for legal interpretations, opinions, construction and applicability of The Colorado Common Interest Ownership Act.

• The Real Estate Commission will review the association project documents for compliance with the partial provisions of the act listed after the sections on Exceptions and Definitions.

EXCEPTIONS

• If a "planned community" created in this state on or after July 1, 1992 contains no more than ten units and is not subject to any future development rights by the declarant, it is subject only to sections 38–33.3–105, 38–33.3–106, and 38–33.3–107 of CCIOA, unless the declaration provides that the entire article is applicable.

or;

• If a "planned community" provides, in its declaration, that the annual average common expense liability of each unit restricted to residential purposes, exclusive of optional user fees and any insurance premiums paid by the association, may not exceed three hundred dollars, it is subject only to sections 38–33.3–105, 38–33.3–106, and 38–33.3–107, unless the declaration provides that the entire article is applicable.

Note:

• These above exceptions apply only to "Planned Communities".

• A leasehold interest in a unit of less than forty years including renewal options does not meet the definition of "common interest community". The period of the leasehold interest, including renewal options, is measured from the date the initial term commences.

• The Colorado Common Interest Ownership Act does not apply to common interest communities located outside of Colorado. The state that the property exists in may have a similar law.

The Real Estate Commission staff will review the association project documents for compliance with the following partial provisions and prohibitions of the Colorado Common Interest Ownership Act as indicated by a box.

ASSESSMENTS AND BUDGETS

• 1.) Except as expressly provided, provisions of CCIOA may not be varied by agreement, and the rights conferred by CCIOA may not be waived. 38–33.3–104
• 2.) A declarant may not act under a power of attorney or use any other device to evade the limitations or prohibitions of CCIOA or the declaration.
• 3.) The declarant is treated as the owner of any unit to which allocated interests have been allocated pursuant to section 38–33.3–207 until that unit has been conveyed to another person, who may or may not be a declarant under this article.(see definition of "unit owner")
• 4.) The allocations may not discriminate in favor of units owned by the declarant or an affiliate of the declarant. 38–33.3–207
• 5.) Until the association makes a common expense assessment, the declarant shall pay all common expenses. 38–33.3–315
• 6.) Each unit owner is liable for assessments made against such owner's unit during the period of ownership of such unit. 38–33.3–315
• 7.) The declaration may not impose limitations on the power of the association to deal with the declarant that are more restrictive than the limitations imposed on the power of the association to deal with other persons. 38–33.3–302
• 8.) Except for minor variations due to the rounding of fractions or percentages, the sum of the common expense liabilities and, in a condominium, the sum of the undivided interests in the common elements allocated at any time to all the units shall each equal one if stated as fractions or one hundred percent if stated as percentages. 38–33.3–207
• 9.) In a condominium, the declaration must allocate to each unit a fraction or percentage of the common expenses of the association. 38–33.3–207(1)(a)
• 10.) In a condominium, the declaration must allocate to each unit a fraction or percentage of undivided interests in the common elements. 38–33.3–207
• 11.) In a condominium, the declaration must state the formulas used to establish the allocations of interests. 38–33.3–207
• 12.) In a planned community, the declaration must allocate to each unit a fraction or percentage of the common expenses of the association. 38–33.3–207
• 13.) In a planned community, the declaration must state the formulas used to establish the allocations of interests. 38–33.3–207
• 14.) In a cooperative, the declaration must state the ownership interest in the association, a fraction or percentage of the common expenses of the association and a portion of the votes in the association. 38–33.3–207

VOTING

• 1.) A declarant may not utilize cumulative or class voting for the purpose of evading any limitation imposed on declarant by CCIOA. 38–33.3–207
• 2.) Units may not constitute a class because they are owned by a declarant. 38–33.3–207
• 3.) In a condominium, the declaration or by­laws must allocate to each unit a fraction or percentage of a portion of the votes in the association. 38–33.3–207(1)(a)
• 4.) In a planned community, the declaration or by­laws must allocate to each unit a portion of the votes in the association. 38–33.3–207(1)(c)

CREATION OF COMMON INTEREST COMMUNITIES

A common interest community may be created pursuant to CCIOA only by;

• 1.) Recording a declaration executed in the same manner as a deed. 38–33.3–201
• 2.) In a cooperative, by conveying the real estate subject to that declaration to the association. 38–33.3–201
• 3.) The declaration must be recorded in every county in which any portion of the common interest community is located .38–33.3–201
• 4.) A special declarant right created or reserved under CCIOA may be transferred only by an instrument evidencing the transfer recorded in every county in which any portion of the common interest community is located. The instrument is not effective unless executed by the transferee. 38–33.3–304
• 5.) No common interest community is created until the plat or map for the common interest community is recorded. 38–33.3–201(1)
• 6.) In a common interest community with horizontal unit boundaries, a declaration, or an amendment to a declaration, creating or adding units shall include a certificate of completion executed by an independent licensed or registered engineer, surveyor, or architect stating that all structural components of all buildings containing or comprising any units thereby created are substantially completed. 38–33.3–201(2)

CONTENTS OF THE DECLARATION.

The declaration must contain:

• 1.) The name of the common interest community and the association. 38–33.3–205(1)(a)
• 2.) A statement that the common interest community is a condominium, cooperative, or planned community. 38–33.3–205(1)(a)
• 3.) The name of every county in which any part of the common interest community is situated. 38–33.3–205(1)(b)
• 4.) A legally sufficient description of the real estate included in the common interest community. 38–33.3–205(1)(c)
• 5.) A statement of the maximum number of units that the declarant reserves the right to create. 38–33.3–205
• 6.) A description of any development rights and other special declarant rights reserved by the declarant,38–33.3–205(1)(h)
  • A.) A legally sufficient description of the real estate to which each of those rights applies and
  • B.) a time limit within which each of those rights must be exercised. 38–33.3–205
• 7.) Provisions for a declarant's easement through the common elements as may be reasonably necessary for the purpose of discharging a declarant's obligations or exercising special declarant rights, whether arising under this article or reserved in the declaration. 38–33.3–205(1)(n) and 38–33.3–216(1)
• 8.) Reasonable provisions concerning the manner in which notice of matters affecting the common interest community may be given to unit owners by the association or other unit owners. 38–33.3–205(1)(o)
• 9.) A declarant may maintain sales offices, management offices, and models in the common interest community only if the declaration so provides and specifies the rights of a declarant with regard to the number, size, location, and relocation thereof. 38–33.3–215 and 38–33.3–205(1)(n)
• 10.) In a CONDOMINIUM, the declaration must allocate to each unit a fraction or percentage of the common expenses of the association. 38–33.3–207(1)(a)
• 11.) In a CONDOMINIUM, the declaration must allocate to each unit a fraction or percentage of undivided interests in the common elements. 38–33.3–207
• 12.) In a CONDOMINIUM, the declaration must state the formulas used to establish the allocations of interests. 38–33.3–207
• 13.) In a CONDOMINIUM, the declaration or by­laws must allocate to each unit a fraction or percentage of a portion of the votes in the association. 38–33.3–207(1)(a)
• 14.) In a PLANNED COMMUNITY, the declaration must allocate to each unit a fraction or percentage of the common expenses of the association. 38–33.3–207
• 15.) In a PLANNED COMMUNITY, the declaration must state the formulas used to establish the allocations of interests. 38–33.3–207
• 16.) In a PLANNED COMMUNITY. a description of any real estate that is or must become common elements. 38–33.3–205
• 17.) In a PLANNED COMMUNITY, subject to the provisions of the declaration and the ability of the association to regulate and convey or encumber the common elements as set forth in sections 38–33.3–302 (1) (f) and 38­33.3­312, the unit owners have an easement:
  • A.) In the common elements for the purpose of access to their units; and
  • B.) To use the common elements and all other real estate that must become common elements for all other purposes. 38–33.3–216
• 18.) In a PLANNED COMMUNITY, the declaration or by­laws must allocate to each unit a portion of the votes in the association. 38–33.3–207(1)(c)
• 19.) In a COOPERATIVE, the declaration must state the ownership interest in the association, a fraction or percentage of the common expenses of the association and a portion of the votes in the association. 38–33.3–207

LEASEHOLD COMMON INTEREST COMMUNITIES

• 1.) Any lease, the expiration or termination of which may terminate the common interest community or reduce its size, must be recorded. 38–33.3–206.
• 2.) In a leasehold condominium or leasehold planned community, the declaration must contain the signature of each lessor of any such lease in order for the provisions of this section to be effective. 38–33.3–206.
• 3.) The (leasehold interest) declaration must state:
  • A.) The recording data for the lease;
  • B.) The date on which the lease is scheduled to expire;
  • C.) A legally sufficient description of the real estate subject to the lease;
  • D.) Any rights of the unit owners to redeem the reversion and the manner whereby those rights may be exercised or state that they do not have those rights; 38­33.3­206.
  • E.) Any rights of the unit owners to remove any improvements within a reasonable time after the expiration or termination of the lease or state that they do not have those rights; and
  • F.) Any rights of the unit owners to renew the lease and the conditions of any renewal or state that they do not have those rights.

OWNERS' ASSOCIATIONS

• 1.) A unit owners' association shall be organized no later than the date the first unit in the common interest community is conveyed to a purchaser. 38–33.3–301
• 2.) The declaration may not impose limitations on the power of the association to deal with the declarant that are more restrictive than the limitations imposed on the power of the association to deal with other persons. 38–33.3–302(2)
• 3.) The executive board may not act on behalf of the association to amend the declaration,
  • A.) to terminate the common interest community, or
  • B.) to elect members of the executive board or
  • C.) determine the qualifications, powers and duties, or
  • D.) terms of office of executive board members, but the executive board may fill vacancies in its membership for the unexpired portion of any term. 38–33.3–303(3)
• 4.) Regardless of the period of declarant control provided in the declaration, a period of declarant control terminates no later than either;
  • A.) sixty days after conveyance of seventy­five percent of the units that may be created to unit owners other than a declarant;
  • B.) two years after the last conveyance of a unit by the declarant in the ordinary course of business, or
  • C.) two years after any right to add new units was last exercised. 38–33.3–303

BYLAWS

The bylaws of the association must provide:

• 1.) The number of members of the executive board and; 38–33.3–306
  • A.) The titles of the officers of the association. 38–33.3–306(1)(a)
• 2.) Election by the executive board of a president, a treasurer, a secretary, and any other officers of the association the bylaws specify. 38–33.3–306(1)(b)
• 3.) The qualifications, powers and duties, and terms of office of, and;
  • A.) manner of electing and removing, executive board members and officers,
  • B.) and the manner of filling vacancies. 38–33.3–306(1)(c)
• 4.) Which, if any, of its powers the executive board or officers may delegate to other persons or to a managing agent. 38–33.3–306(1)(d)
• 5.) Which of its officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association; and 38–33.3–306(1)(e)
• 6.) A method for amending the by­laws. 38–33.3–306(1)(f)
• 7.) The bylaws of the association shall require the following of an association with thirty or more units that delegates powers of the executive board of officers relating to collection, deposit, transfer, or disbursement of association funds to other persons or to a managing agent:
  • A.) That the other persons or managing agent maintain fidelity insurance coverage or a bond in an amount not less than fifty thousand dollars or such higher amount as the executive board may require;
  • B.) That the other persons or managing agent maintain all funds and accounts of the association separate from the funds and accounts of other associations managed by the other persons or managing agent and maintain all reserve accounts of each association so managed separate from prorational accounts of the association;
  • C.) That an annual accounting for association funds and a financial statement be prepared and presented to the association by the managing agent, a public accountant, or a certified public accountant. 38–33.3–306(3)(a)

INSURANCE

• 1.) If any unit owner or employee of an association with thirty or more units controls or disburses funds of the common interest community, the association must obtain and maintain, to the extent reasonably available, fidelity insurance. Coverage shall not be less in aggregate than two months' current assessments plus reserves, as calculated from the current budget of the association.
• 2.) Any person employed as an independent contractor by an association with thirty or more units for the purposes of managing a common interest community must obtain and maintain fidelity insurance in an amount not less than the amount specified in subsection (10) of 38–33.3–313, unless the association names such person as an insured employee in a contract of fidelity insurance, pursuant to subsection (10) of this section.

PLATS

• 1.) No common interest community is created until the plat and/or map for the common interest community is recorded. 38–33.3–201
• 2.) Plats and maps are a part of the declaration and are required for all "common interest communities" except cooperatives. 38–33.3–209
• 3.) Each plat and map must be clear and legible and contain a certification that the plat or map contains all the information required by CCIOA. 38–33.3–209
• 4.) In addition to meeting the requirements of a land survey plat as set forth in section 38–51–102, each plat must show:
  • A.) A legally sufficient description of any real estate subject to development rights, labeled to identify the rights applicable to each parcel;
  • B.) To the extent feasible, a legally sufficient description of all easements serving or burdening any portion of the common interest community;
  • C.) A legally sufficient description of any real estate in which the unit owners will own only an estate for years, labeled as "leasehold real estate";38–33.3–209
  • D.) Any certification of a plat or map required by CCIOA must be made by a registered land surveyor.

This page was last updated on 06/18/2004