SELLER’S DISCLOSURE REQUIREMENTS UNDER COLORADO LAW
As a seller of residential real estate in Colorado, did you know that you have a positive obligation to disclose the good, the bad, and the ugly about your home? Our experienced Colorado Real Estate Lawyers can help you understand the requirements you must meet as a seller of real estate in Colorado.
Under Colorado law (generally see Colorado Revised Statute (or “C.R.S.”) 38-35.7-101 and the statutes that follow), the seller must:
a. Disclose the fact that your property is in a “Special Taxing District”. In the urbanized areas of Colorado, many neighborhoods, condominium projects, and subdivisions are in such districts. A Special Taxing District means that the owners of real estate in the district must pay not only the normal state and county real estate taxes, but must also pay “special taxes” for such things as improvements to the infrastructure (e.g. addition of roads), for being within a historic part of town (e.g. parts of downtown Denver), and for similar taxes that are special only to the particular area.
Here is the language that Colorado requires for every residential real estate contract:
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 TAX 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. BUYERS SHOULD INVESTIGATE THE SPECIAL TAXING DISTRICTS IN WHICH THE PROPERTY IS LOCATED BY CONTACTING THE COUNTY TREASURER, BY REVIEWING THE CERTIFICATE OF TAXES DUE FOR THE PROPERTY, AND BY OBTAINING FURTHER INFORMATION FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY CLERK AND RECORDER, OR THE COUNTY ASSESSOR.
b. Disclose whether the property was previously used as a methamphetamine laboratory. (C.R.S 38-35.7- 103). This is a Seller’s affirmative obligation. This same statute also permits the buyer to independently test the property to determine if there was such use.
c. Disclose whether the property is in a “Common Interest Community” (CIC). In Colorado, a CIC: “ means real estate described in a declaration with respect to which a person, by virtue of such person’s ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration. Ownership of a unit does not include holding a leasehold interest in a unit of less than forty years, including renewal options. The period of the leasehold interest, including renewal options, is measured from the date the initial term commences.” (C.R.S. 38-33.3-103). Often, a CIC is obvious – a condominium project is one such entity. In other cases, it is less clear. In all cases however, the seller must make this disclosure if the property is within such a community by stating exactly the following:
Common Interest Community Disclosure:
THE PROPERTY IS LOCATED WITHIN A COMMON INTEREST COMMUNITY AND IS SUBJECT TO THE DECLARATION FOR SUCH COMMUNITY. THE OWNER OF THE PROPERTY WILL BE REQUIRED TO BE A MEMBER OF THE OWNERS’ ASSOCIATION FOR THE COMMUNITY AND WILL BE SUBJECT TO THE BYLAWS AND RULES AND REGULATIONS OF THE ASSOCIATION. THE DECLARATION, BYLAWS, AND RULES AND REGULATIONS WILL IMPOSE FINANCIAL OBLIGATIONS UPON THE OWNER OF THE PROPERTY, INCLUDING AN OBLIGATION TO PAY ASSESSMENTS OF THE ASSOCIATION. IF THE OWNER DOES NOT PAY THESE ASSESSMENTS, THE ASSOCIATION COULD PLACE A LIEN ON THE PROPERTY AND POSSIBLY SELL IT TO PAY THE DEBT. THE DECLARATION, BYLAWS, AND RULES AND REGULATIONS OF THE COMMUNITY MAY PROHIBIT THE OWNER FROM MAKING CHANGES TO THE PROPERTY WITHOUT AN ARCHITECTURAL REVIEW BY THE ASSOCIATION (OR A COMMITTEE OF THE ASSOCIATION) AND THE APPROVAL OF THE ASSOCIATION.
PURCHASERS OF PROPERTY WITHIN THE COMMON INTEREST COMMUNITY SHOULD INVESTIGATE THE FINANCIAL OBLIGATIONS OF MEMBERS OF THE ASSOCIATION. PURCHASERS SHOULD CAREFULLY READ THE DECLARATION FOR THE COMMUNITY AND THE BYLAWS AND RULES AND REGULATIONS OF THE ASSOCIATION.
d. Disclose the source of potable water. In Colorado water is as precious as gold. As a result, the legislature requires sellers to disclose the source of household water. In the major metropolitan centers, water is typically delivered by a central water department. In rural or mountainous areas however, the source of water may be a well, may be through the ownership of rights to flow from a ditch, or it may be through the ownership of a privately owned water system. The following disclosure is a must (the following was drawn from the Colorado Real Estate Commission approved form (CBS1-18-13):
2.7. Water Rights, Well Rights, Water and Sewer Taps.
2.7.1. Deeded Water Rights. The following legally described water rights:
Any deeded water rights will be conveyed by a good and sufficient ___________ deed at Closing.
2.7.2. Other Rights Relating to Water. The following rights relating to water not included in §§ 2.7.1, 2.7.3 2.7.4 and 2.7.5, will be transferred to Buyer at Closing:
2.7.3. Well Rights. Seller agrees to supply required information to Buyer about the well. Buyer understands that if the well to be transferred is a “Small Capacity Well” or a “Domestic Exempt Water Well,” used for ordinary household purposes, Buyer must, prior to or at Closing, complete a Change in Ownership form for the well. If an existing well has not been registered with the Colorado Division of Water Resources in the Department of Natural Resources (Division), Buyer must complete a registration of existing well form for the well and pay the cost of registration. If no person will be providing a closing service in connection with the transaction, Buyer must file the form with the Division within sixty days after Closing. The Well Permit # is ________________________________
2.7.4. Water Stock Certificates. The water stock certificates to be transferred at Closing are as follows:
2.7.5. Water and Sewer Taps. Note: Buyer is advised to obtain, from the provider, written confirmation of the amount remaining to be paid, if any, time and other restrictions for transfer and use of the taps.
2.7.6. Conveyance. If Buyer is to receive any rights to water pursuant to § 2.7.2 (Other Rights Relating to Water),§ 2.7.3 (Well Rights), or § 2.7.4 (Water Stock Certificates), Seller agrees to convey such rights to Buyer by executing the applicable legal instrument at Closing.
e. Disclose the seller’s knowledge of any transportation projects. If the seller knows of the fact that a transportation project “affects” or is “expected to affect” the property, then seller must disclose. (C.R.S. 38-37.5-105). If this sounds “squishy” to you, it is. Contact us if this of concern.
f. Disclose the existence of lead paint. This requirement is taken care of through Colorado Real Estate Commission approved forms LP47 (Lead-Based Paint Obligations of Seller) and LP45-05-04 (Sales).
g. Seller must also deliver to the buyer a detailed disclosure form that covers most of the systems of the real property (e.g. plumbing; HVAC; electrical system; etc). This is found at Colorado Real Estate Commission approved form SPD29-10-11.
Sellers are NOT required to disclose that the property is a so-called “stigmatized property” which suffered from the occurrence of a homicide, suicide or similar problem. C.R.S. 12-61-804(2).
If you have questions, please call.
Corporon & Katz, LLC
Michael J. Katz