December 16, 2015-January 5, 2016 —
COLORADO REAL ESTATE JOURNAL
— Page 21
CRE Commission-Approved Contracts: Tips & Traps
T
his is the first of a series
of a dozen or so articles
that come from some
years of experience using the
Colorado Real Estate Com-
mission-approved Contracts
for Purchase and Sale of Real
Estate for commercial real
estate transactions.
One does not get very far into
the contract before facing the
first choice to be made. Who is
the buyer? Seems easy enough,
but consider the following.
Tip:
Exercising a little disci-
pline when naming the buyer
in the contract avoids problems
down the road.
For individuals,
the name as it appears on a
driver’s license or state-issued
identification card is a good
choice. The name in those doc-
uments is recognized under
the Uniform Commercial Code
for financing statements. See
C.R.S. § 4 9 503(a)(4)(C). It also
makes it easy for a notary pub-
lic when it asks for identifica-
tion for an acknowledgement.
The notary statute specifically
allows for a notary to use a
driver’s license or identifica-
tion card for determining a per-
son’s identity. See C.R.S. §12 55
110(4)(b)).
Tip:
For an entity that has a doc-
ument filed in the business records
of the Colorado Secretary of State
(or the similar office in another
jurisdiction), use the name exactly
as it appears in those records.
The Colorado business laws
refer to this name as the “true
name” [see
C.R.S. § 7-90-
1 0 2 ( 6 3 . 7 ] )
In Colora-
do, where a
“ o n e - k e y -
stroke dif-
ference” in a
name (with
a few excep-
tions) could
refer to a dif-
ferent entity,
using
the
exact name is
very important. See C.R.S. § 7
90 601(2). Thus, abbreviations
(“Co.” for “Company,” “Inc.”
for “Incorporated,” “LLC” for
“Limited Liability Company,”
etc.) should be used only if they
appear in the true name and
should not be used if they do
not. Although commas, periods,
apostrophes and capitalizations
are not as critical, you should
use them or not as occurs in the
true name.
Trap:
If the buyer is a trust,
plan on working with the lawyer
who represents the trust.
Trusts
are getting more common all
the time as baby boomers work
on their estate plans. When it
comes to real estate, a trust is
one of the most complicated
types of ownership. If the trust
has to buy the property, consid-
er using a limited liability com-
pany with the trust as its sole
member. Don’t get me started.
I only get to write about 900
words per issue.
Tip:
When the buyer is an enti-
ty, further identify it by the type
of entity and the state in which
it was organized (e.g., “a Colo-
rado limited liability company”
or “a Delaware corporation”).
It
is important to include that
information for a number of
reasons, not the least of which
is that there may be an ABC
Inc. in almost every state of the
union. So, which one owns the
property? Everything that has
been said about the name of
the entity also is true about the
description of the entity. The
best practice is to state the enti-
ty description in the contract
right after the buyer’s name.
It is very important to get the
entity description absolutely
right. And, of course, the name
and entity description used in
the beginning of the contract
should be the same as that
used in the signature block.
Trap:
The entity description of
the buyer, if it is a limited liability
entity, is important for another
reason – liability.
If the buyer
is not identified as a limited
liability entity, the person sign-
ing for it might not have the
limited liability he or she wants
to have. See
Water, Waste &
Land, Inc. v. Lanham,
955 P.2d
997 (Colo. 1998).
Tip:
If the buyer named in the
contract is an entity, make sure
the entity exists.
Checking the
records of the Secretary of State
is easy and can be done any-
time, day or night, via the Inter-
net:
co.us/biz/BusinessEntityCri-
teriaExt.do. How much does
it matter? If the entity is not
formed, is the contract enforce-
able? By whom? What is the
personal liability of the person
acting for the unformed entity?
All are open legal questions,
suggesting that you should not
sign a contract for a buyer that
does not yet exist.
Interestingly, every once in
a while, real property is con-
veyed to an entity that has not
been formed. That has occurred
often enough that Colorado
has a statute addressing the
problem. The statute provides
that title vests in the grantee
named in the deed when the
entity is formed. See C.R.S. §
38 34 105; Title Standard 3.4.1.
So, if the buyer does not exist
and you close the contract and
buy the property, the solution
is to form the entity.
Trap:
There
might be title issues relating to
the interim, before the entity is
formed,
but at least title to the
real property is no longer float-
ing in outer space.
Trap:
Using a nominee as the
buyer is a bit tricky from a legal
standpoint.
For example, the
law is pretty clear that an agent
for an undisclosed principal,
such as a nominee, is person-
ally liable for its actions. See
Water, Waste & Land, Inc. v. Lan-
ham,
955 P.2d 997 (Colo. 1998).
At the same time, a person who
allows a nominee to take title
to its real property is taking the
chance that the nominee will
mess up its title, as would hap-
pen if a judgment was entered
against the nominee. See C.R.S.
§ 38 30-108.
The next installment will
address issues related to the
seller’s name. Easy, you say?
Stand by for some surprises.
s
Beat U. Steiner
Partner, Holland &
Hart LLP, Boulder
Trusts are getting
more common all
the time as baby
boomers work on
their estate plans.
When it comes to
real estate, a trust
is one of the most
complicated types
of ownership.
If the trust has to
buy the property,
consider using a
limited liability
company with the
trust as its sole
member.
A Colorado Christmas
DEC 11-13
T
FRI 7:30
T
SAT 2:30 & 6:00
T
SUN 1:00
Andres Lopera, conductor
Colorado Symphony Chorus, Duain Wolfe, director
Colorado Children’s Chorale, Deborah DeSantis, artistic director
Jackie Evancho
Sings Holiday Hits & More
DEC 15
T
TUES 7:30
Christopher Dragon, conductor
Holiday Brass at Montview Boulevard
Presbyterian Church
DEC 18 & 20
T
FRI 7:30
T
SUN 5:00
Brian Buerkle, conductor
Colorado Symphony Brass & Percussion
Handel’s Messiah
DEC 18-19
T
FRI-SAT 7:30
DEC 20
T
SUN 1:00*
Duain Wolfe, conductor
Colorado Symphony Chorus, Duain Wolfe, director
*
Join us on Sunday for the return of the Messiah Sing-Along!
Sunday concert starts at $25 for adults and $10 for children.
Symphony at the Movies:
Home Alone
DEC 22
T
TUE 7:30
Andres Lopera, conductor
Colorado Symphony Chorus, Duain Wolfe, director
A Weekend of Star Wars
DEC 26-27
T
SAT 7:30
T
SUN 1:00
Christopher Dragon, conductor
A Night in Vienna
DEC 31
T
THU 6:30
Christopher Dragon, conductor
Please join us for these
Half
Notes
pre-concert family activities in Gallery 2.
Sounds of the Season
Jackie Evancho
