Mountain Law: A guide to 2016 Colorado real estate form changes
December 9, 2015
Licensed real estate brokers in Colorado are required to use standard forms promulgated by the Colorado Real Estate Commission (unless an attorney drafts a different form). After a frustrating period for brokers where the forms changed frequently, the Commission placed a two-year moratorium on form changes in 2014. The moratorium ends this year and 2016 will bring changes to the form. Here are some changes to look for on the new CBS1 (residential) form:
Assignability: Under the current form, there are check boxes on the first page to indicate whether the contract is assignable by the buyer to a different buyer. The new form states a default that it is not assignable with no check boxes; it may then be made assignable by inserting specific language in the "additional provisions" later in the form. Brokers should anticipate whether the buyer may wish to assign the contract — e.g. the buyer may want to take title in the name of an LLC or trust — and draft additional provisions accordingly.
Inclusions and fixtures: The current form has places to list personal property and fixtures that are included in the transaction. There is often confusion about where to place certain inclusions on the form. For example, is a flat screen TV mounted on the wall personal property or a fixture? The new form no longer attempts to distinguish between personal property and fixtures. It contains lists of inclusions that are attached and inclusions that are not attached (many of which will be familiar from the current form) without labeling them as personal property or fixtures. It then has a single place for brokers to list all additional inclusions and exclusions without the need to categorize them as personal property or fixtures. While the new provisions are less technical, brokers will still need to make sure that the inclusions and exclusions are clear as to items that might be disputed between buyers and sellers.
Appraisal: Under the current form, buyers cannot terminate contracts based on appraisal if they do not have a copy of the appraisal. The new form gives buyers the option to terminate based on appraisal even if, and perhaps because of the fact that, they do not have the appraisal.
Also, under the current form, if the appraised value is objectionable, the buyer's only option is to terminate the contract. Under the new form, the buyer can object to appraisal and the contract will not terminate until a separate "Appraisal Resolution Deadline." That gives the buyer and seller time to come up with a solution (e.g. buyer brings more cash, seller lowers price, etc.) before the contract terminates. This is the same as objections to survey, inspection and title under the current form, all of which already have separate resolution deadlines.
Mineral disclosures: In 2014, the Colorado legislature passed a law requiring that new mineral disclosures be included in real estate contracts. The bill sponsor was kind enough to make the law effective after the aforementioned moratorium. The new disclosure generally warns buyers that they may not be purchasing the mineral rights to their properties (even if they obtain title insurance) and that their properties, and those of their neighbors, could be subject to mineral development. Brokers will need to be prepared to explain these issues to their clients as needed.
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There are copies of all the 2016 forms on the commission website showing redlined changes from the current form. Brokers, and others who work with the standard forms, should review the redlines to see other changes that have been made. The new forms are mandatory for brokers starting January 2016 and may not be used before then.
Noah Klug is the owner of The Klug Law Firm, LLC, in Summit County, Colorado. He may be reached at 970-468-4953 or email@example.com.
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