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Page 4 — Property Management Quarterly — October 2017
Legal
AS A PROPERTY OWNER ARE YOU CONCERNED?
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& Construction Costs
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to t their real estate needs.
Robert Miller,
Principal | Vice President of Operations
+1 303 283 4577
Colliers International | Denver O ce
4643 S. Ulster St. | Ste. 1000 | Denver, CO 80237
†‡+1 303 745 5800| ˆ‰Š+1 303 745 5888
For more information please contact:
I n the 2017 session, the Colo-
rado Legislature passed a law
specifically defining what
real-estate forms can and can-
not be used by brokers and
property managers. The law man-
dates only “standard” forms pro-
mulgated from “approved sources”
may now be used. As such, brokers
may not draft forms, create their
own forms or use forms that are
found on the internet. This rule
applies to all forms commonly
used in the business activities of a
broker for which there are legally
binding effects. The law went into
effect on June 30, and is reflected
in Colorado law as C.R.S. § 12-61-
803(2) (2017), titled “Relationships
between brokers and the public.”
Restrictions on the use of such
forms are nothing new. In fact,
laws to similar effects have been in
place for some time, however, they
were clearly a cause for confu-
sion considering that the drafting
of impromptu forms or obtain-
ing them from the web to provide
a “quick fix” has been common
practice in recent time. In recogni-
tion of the lack of awareness and
enforcement of these laws, the
Colorado Division of Real Estate
attempted to resolve this issue
through a proposed rule change as
recently as last summer. However,
due to administrative-policy dis-
agreements between the members
of the Real Estate Commission,
those efforts were postponed until
now. Specifically, the Commis-
sion differed as to what should be
included in the
proposed rule
change in both its
form and content.
As such, it came
as no surprise that
the legislature
felt it necessary
to provide explicit
clarity on this
issue. There is no
longer any cause
for confusion.
The law defines
a standard form
as one drafted
or issued by the
Colorado Real Estate Commission,
a broker’s attorney, the Colorado
Bar Association, a broker’s own cli-
ent (in limited circumstances) and
closing forms prescribed by a title
company in which the broker is
acting as a transaction-broker or
single-agent party to the transac-
tion. The law eliminates the ability
of brokers and corporate prop-
erty managers to draft their own
documents or go online to obtain a
form.
Importantly, this law applies
only to those who are licensed to
engage in real estate transactions.
The main parties to which this rule
will apply are property managers
who are also real estate brokers
and third-party fee managers, such
as property management com-
panies hired to manage privately
owned property. Accordingly, prop-
erty managers that both personally
own and manage their property do
not fall under the
purview of this
rule. This is known
as the “owner’s
exemption,” the
purpose of which
is to allow private
owners to sell
or manage their
properties with-
out needing a real
estate license.
Forms pro-
mulgated by the
Colorado Real
Estate Commis-
sion are referred to as “commission
approved forms.” Any noncommis-
sion approved form, even one com-
ing from another approved source,
must contain a disclosure that the
form is not commission approved.
For example, should a broker have
a Colorado licensed attorney draft
a lease on his behalf, language
must appear within the docu-
ment itself noting the name of the
attorney or law firm who drafted
or reviewed the document and the
name of the broker or brokerage
firm that commissioned it.
Forms approved for use by the
Colorado Bar Association are
defined in the statute as those
“issued with written approval of
the CBA or its successor organiza-
tion and specifically designated for
use by brokers in Colorado.” CBA
approved forms require that the
user comply with any condition
specified by the CBA in connection
with the use of the form.
A party to a transaction may pro-
vide its own form only when the
broker is acting as a single agent
to that party or as a transaction-
broker. Furthermore, the broker
must retain written confirmation
that a party to the transaction pro-
vided the form, and the broker’s
use of the form must be limited to
the insertion of transaction specific
information.
Although all of the sources
described above are “approved,”
the law states a broker “shall use a
commission approved form when
such a form exists and is appropri-
ate for the transaction.” Therefore,
when a commission-approved form
is directly applicable to the situa-
tion, that form must be used.
In all cases, a broker must advise
the parties that the real estate
forms have important legal conse-
quences and that in an ideal cir-
cumstance, the parties would con-
sult with legal counsel before sign-
ing. The legislature imposed this
condition to encourage that both
parties have a complete under-
standing of the rights and respon-
sibilities of each when entering
into a contractual relationship.
As noted above, but worth repeat-
ing, this law applies not only to
lease agreements and related docu-
ments, but to all forms regularly
used for carrying out the duties
of a broker. This includes leases,
property management agreements,
corresponding addendums and
formal offers to sell, exchange, buy,
list or auction real estate. s
Donald “Corky”
Eby
Attorney, Robinson
and Henry PC,
Castle Rock
Tucker Allen
Law clerk,
Robinson and
Henry PC, Castle
Rock