Real Estate Exam 2 Final

Colorado Real Estate Commission Rules

A. Overview The Real Estate Commission is delegated the authority to adopt rules governing the conduct of real estate licensees. The rules are all contained in Chapter 2 of the Colorado Real Estate Manual. There are 5 rules, lettered from "A" through "E" and Rule I. Each of these lettered headings is broken down into numbered rules. For example, rules under A would be identified as Rule A-1, A-2, A-3, etc. Some rules may not directly apply to you as a real estate broker. We will distill, paraphrase, and summarize the rules as we consider them individually. Some of the rules are self-explanatory. Others have some background or extension that requires further explanation. The actual rule language is in Chapter 2 of the Colorado Real Estate Manual. The actual text is considerably longer than what we present here, although not necessarily more essential to your licensure or practice of real estate. A gap in the rule numbering herein simply means that the particular rule(s) has minimal effect on your licensure, has been repealed, or is internal to the workings of the Commission. As with the license law, outline numbering within a rule below may not match the outline numbering/lettering in the actual rule. By the end of this unit, you will be able to: Recognize and list the Colorado Rules Explain license qualifications, application requirements, examinations and continuing education requirements Describe Errors and Omissions insurance purpose and requirements

Unit 2-4 Appraiser Licensing

APPRAISER LICENSING was covered in Unit 2-1 under Colorado license law Part 7, and in Unit 2-3 Commission Position Statements. Appraisers are administratively located with the Colorado Division of Real Estate, but have their own Board of Real Estate Appraisers that provides direct regulation of the industry.

12-61-110 License Renewal and Reinstatement.

An initial individual license is issued for three years. Failure to renew on time, (with E&O insurance in place) automatically renders a license inactive upon expiration. While no activities requiring a license may occur (and no commissions may be earned), the law permits reinstatement of an expired license within 31 days without penalty. From 31 days up to one year after expiration, a reinstatement penalty equal to one-half the regular 3-year license renewal fee is additionally charged. From one year and a day up to three years, the reinstatement penalty equal to the 3-year license renewal fee is added to the regular renewal fee. If the employing broker's license expires, is suspended, or revoked, all employed associate broker licenses automatically become inactive until the Commission is notified of resolution of the problem.

12-61-203 When Owner must Perfect Title.

An owner is not required to begin clearing up any title defect absent a written contract binding the buyer to close when title defects are cleared.

12-61-810 Compensation.

1. A brokerage firm may be paid (all or in part) by the seller, buyer, any third party or by splitting of the fee between brokerage firms. REALTORS®, through their Multiple Listing Service, offer to split the listing commission with selling or cooperating brokers. This allows the buyer to know at the time of writing a purchase offer how much the buyer agent/transaction-broker will receive from the transaction proceeds. Depending on buyer agreement, an adjustment can be made to the amount a buyer may be obligated to pay. The buyer could get a refund after closing if the "split" to the buyer broker is greater than that in the Exclusive Right-to-Buy Contract. You will learn how compensation obligations are set forth in the various contracts later in this course. 2. Compensation by itself never creates a brokerage relationship. 3. A seller, landlord, buyer or tenant may agree that their broker shares earned commissions with any other broker. 4. A buyer or tenant agent must first secure written approval of the principal before proposing to share in any compensation offered by the seller or landlord. 5. Before entering any brokerage or listing agreement or contract to buy, sell or lease, the identity paying any broker compensation shall be disclosed to all parties. 6. A broker may be compensated by more than one party in a single transaction provided the parties have agreed in writing prior to entering into a buy, sell, or lease contract.

12-61-117 Payment to Employed Licensees.

A broker associate may receive commission or payment for activities requiring a license only from his or her employing broker (firm). Commission disputes between an associate and an employing broker are resolved by legal action, not by CREC.

12-61-806.

A broker shall not establish dual agency (agent for both seller and buyer in the same transaction). Subagency: Subagency, a broker acting as agent for another broker, is also effectively outlawed since it is denied to both single agents and transaction brokers by the license law.

Unit 2-4 Uniform Statutory Power of Attorney Act

A broker, even though authorized by the client to buy or sell a property, may never sign any documents in place of the client without a written (and in Colorado real estate closings, a recorded) Power of Attorney. Colorado has codified a Power of Attorney in statute (C.R.S. 15-1-1302) that a client may use to delegate signature authority (for example to sit in for an absentee client at the closing). It should be patently obvious that taking on this kind of responsibility is highly loaded with negative potential - for both the client and for the broker if the transaction does not close smoothly. Some brokers will simply not permit associates to go so far in representing their clients. The statutory form (printed in the Forms chapter of the Real Estate Manual) gives the "agent the power to act for you without your consent in any way that you could act for yourself." Wow!

So, if every broker must live up to the above services and protect the above confidential information, what is the difference between transaction-brokerage and AGENCY? Glad you asked! In addition to the above levels of service expected of all brokers, an AGENT must:

S. Promote the interests of the client with the utmost good faith, loyalty and fidelity. These keywords represent the "fiduciary" duties inherent in agency. In practice it means that the broker is not neutral but is an advocate for the client. B. Seek price and terms most favorable and acceptable to his or her client. An agent must be more skilled as a negotiator, fighting for the optimum advantage for the client, whereas a transaction broker would simply convey offers/counteroffers between the parties. C. Counsel the client as to the material benefits or risks in the transaction. An agent must afford the client the full benefit of his or her experience, even suggesting possible outcomes. A transaction-broker remains steadfastly neutral, assisting the parties in complying with the obligations that the parties have independently arrived at via their own negotiations. D. Tell the client that he or she has no vicarious liability for broker actions not approved, directed or ratified. (This, too, is printed in the appropriate employment/listing agreements.)

12-61-103.5 Broker Transition

In 1993 when Colorado elected single licensure, they created a 24-hour "Broker Transition" course to qualify for upgrade from salesperson to (permanent) associate broker. Although the license law changed in 2008 (after 15 years) to require inactive salespersons to start over from the beginning, this course is still active for one-time use as continuing education.

12-61-103.6 Errors and Omissions (E&O) Insurance.

In 1998 the Commission mandated E&O insurance for every active individual and firm license, except attorney-brokers who maintain their own malpractice insurance. The Commission seeks bids and selects a group provider. Licensees may also obtain coverage independently, and must do so if the Commission is ever unable to secure a reasonable group policy. Unlike license renewals which occur every three years on the anniversary of initial issuance, E&O insurance policies run for one calendar year and must be renewed each January 1. Commission Rule D-14 implements this section of the license law.

12-61-109 Changes of license status.

Licensees must notify the commission of any change in business location or employment. The law stipulates that it is a joint duty of both the employing broker and associate to notify the commission of the severance of the employment, and requires the party giving notice to so state in writing to the other.

TITLE 38, ARTICLE 33 - CONDOMINIUM ACT.

Only select parts of this act remain in force, primarily defining timeshare terms, ownership provisions and notification to tenants prior to converting an apartment building to a condominium. No lease may be superseded or terminated by a conversion notice without tenant concurrence.

12-61-405 Violations

Subdivision developers are subject to the same type of violations laundry list as brokers with one important addition. A developer must honor a buyer's request to cancel a time-share or subdivision purchase contract if the request is made by telegram, mail or hand delivery within 5 days of signing the contract. As a broker, here are some Commission cautions concerning subdivisions and land use regulation: A. The sale of a portion of a seller's land divides it into two parcels and creates a subdivision. Even though it may not be subject to Commission registration, municipal or county oversight will most likely be required. B. A property within an area zoned for horses may not be large enough to actually maintain and water horses. Always check with municipal and county agencies when listing or offering to purchase "horse" property. C. Even though an area is zoned for home business, it may have covenant or ordinance prohibiting customer or employee traffic. Local government may impose restrictions on future availability of utilities such as water or electricity. A licensee must never represent future services, zoning, development, etc.

COMMISSION RULE B - CONTINUING EDUCATION

B-1. Your initial license will be valid for 3 years from the date of issuance. Before renewing your license on active status every 3 years, you must complete 24 hours of continuing education. You must also have your continuing education current before activating an inactive license or reinstating an expired license on active status. B-2. There are 4 ways of completing the 3-year continuing education requirement: A. Complete 3 versions (1 per year) of the 4-hour "Annual Commission Update" course, plus 12 hours of elective continuing education courses during the 3-year license period. (Any additional versions of the Annual Commission Update taken within the license period will count towards the required elective hours.) B. One-time-only, complete the 24-hour "Broker Reactivation" course in lieu of the entire renewal continuing education requirement. C. Pass the Colorado state portion of the licensing exam. D. Complete 72 total hours of pre-licensing education covering Contracts and Closings. B-3. The Commission is required to furnish a new "Annual Commission Update" course each year. This Rule B-3 requires a closed-book 70% passing score on the Annual Commission Update course exam developed by the commission. B-5. Continuing education is not acceptable for license renewal, activation or reinstatement credit in the following subjects: 1. Sales or marketing meetings in your brokerage. 2. Orientation, personal growth, self-improvement, self-promotion or marketing courses. 3. Motivational meetings or seminars. 4. Examination preparation or exam technique courses. B-8. Continuing education courses must be at least one hour in length and credit may not be earned for more than 8 hours in one day. You may not repeat a course for credit in the same calendar year, nor may you carry any excess hours forward into the next license period. You may not "test out" of a course by taking a "challenge" exam in lieu of completing the course requirements. Courses taken under a disciplinary stipulation from the commission do not count toward any continuing education requirement. B-10. YOU are responsible for obtaining proof of completion from your course provider. The document must show your licensed name, course title, course length, date(s) completed, and the provider's authentication/signature. Never send your course completion certificates to the commission unless specifically requested. Retain course completion certificates for 4 years from the date of the course. B-14. When you submit an application for license renewal, activation or reinstatement, you are automatically attesting that you are in compliance with any applicable continuing education requirement.

12-61-302 Limitation on Payments.

Payment could only be made for judgments based on negligence, fraud, willful misrepresentation or conversionof trust funds. Payment could only be made for direct out-of-pocket loss, court costs and post-judgment interest. Specifically prohibited were payment for pre-judgment interest, pain, suffering or mental anguish. At the time it was closed to new claims, the fund limited payouts to $50,000 per transaction and $150,000 per licensee. Attorney fees were limited to 25% of direct out-of-pocket losses paid in any claim. A payment from the Recovery Fund resulted in the automatic revocation of the real estate license involved. Reinstatement could only occur after one year and re-payment of the amount paid back to the fund, plus interest. This article was repealed in 2013.

12-61-119 Penalties for Acting without a License.

Performing acts requiring a license without holding a valid, active license is subject to a fine of $500 ($5,000 for corporations) and/or six months imprisonment. For a second offense the fine limit is $1,000 and six months imprisonment.

So, if every broker must live up to the above services and protect the above confidential information, what is the difference between transaction-brokerage and AGENCY? Glad you asked! In addition to the above levels of service expected of all brokers, an AGENT must:

Promote the interests of the client with the utmost good faith, loyalty and fidelity. These keywords represent the "fiduciary" duties inherent in agency. In practice it means that the broker is not neutral but is an advocate for the client. Seek price and terms most favorable and acceptable to his or her client. An agent must be more skilled as a negotiator, fighting for the optimum advantage for the client, whereas a transaction broker would simply convey offers/counteroffers between the parties. Counsel the client as to the material benefits or risks in the transaction. An agent must afford the client the full benefit of his or her experience, even suggesting possible outcomes. A transaction-broker remains steadfastly neutral, assisting the parties in complying with the obligations that the parties have independently arrived at via their own negotiations. Tell the client that he or she has no vicarious liability for broker actions not approved, directed or ratified. (This, too, is printed in the appropriate employment/listing agreements.)

12-61-702 Definitions.

Real Estate Appraiser means any person who provides for a fee or a salary an estimate of the nature, quality, value or utility of an interest in, or aspect of identified real estate, and includes one who estimates value and who possesses the necessary qualifications, ability and experience to execute or direct the appraisal of real property. Real Property Appraiser does NOT include a licensed real estate broker who provides an opinion of value that is not represented as an appraisal and is not used for purposes of obtaining financing (e.g. a competitive market analysis or CMA).

Unit 2 Section 4 Review of Colorado Contract Law

By the end of this unit, you will be able to: Describe the Conway-Bogue court case and summarize the ruling of the Colorado Supreme Court Compare and contrast the CO Fair Housing Act and the Federal Fair Housing Act Explain Common-Interest Ownership and it's requirements Describe CO Statutory Relationships There are several core case laws and statutes affecting the practice of real estate in Colorado. They are presented here in summary format along with the reference for further investigation. Click here to read the following section in the Colorado Revised Statutes: CRS 38-10-108

Unit 2-4 Colorado Fair Housing

COLORADO FAIR HOUSING ACT Colorado was the first state (1959) to enact laws protecting private property transactions from discrimination against protected classes. Federal Fair Housing law will prevail for most practical applications with the following distinctions: Colorado law adds four protected classes in addition to those in Federal law. They are: 1. Creed (This can be a belief system not necessarily related to religion, such as socialism.) 2. Ancestry (National origin is where a person comes from. Ancestry is who your parents are. For example, a violent, nationally-recognized death row inmate.) 3. Marital status (In Colorado, one may not discriminate against single, married or divorced persons except that municipalities or counties may do so by zoning.) 4. Sexual orientation. 2. Colorado law covers commercial property. 3. Unlike Title VIII, Colorado law does not exempt single-family homes or owner-occupied 1-4 unit homes. 4. Colorado Administrative Law Judges may levy fines for a larger scope of violations than their federal counterparts. 5. Colorado law permits restriction in the sale, rental or development of housing intended for persons with disabilities. Some local ordinances also protect age as a class. Consult your broker or city officials. Some local ordinances also protect age as a class. Consult your broker or city officials.

12-61-112 Record Retention

The commission is not required to preserve license history records for more than seven years.

12-61-113 Commission Investigative Authority and License Law Violations.

The commission may investigate the activities of any licensee, and must investigate complaints received from the public in writing. After a public hearing in front of an administrative law judge, the commission has the authority to: A. Assess a fine of up to $2,500 per offense. (Fines may be "stacked" for multiple occurrences of the same offense.) B.. Censure a license. (Publish the licensee's name publicly) C. Place a licensee on probation and set the terms. D. Temporarily suspend a license. E. Permanently revoke a license. (Licensee may not re-apply for one year and payment of any fines not yet paid.) F. Assess a fine in the amount of any improper payment under affiliated business arrangement law. G. Refer investigative results to other criminal justice or law enforcement authorities as implicated. Short of the above formal disciplinary actions, the commission may issue a letter of admonition, which a licensee may either accept, or reject in favor of formal disciplinary proceedings.

TITLE 12 ARTICLE 61 PART 3 - RECOVERY FUND

This part of the License Law is in the process of being phased out. For many decades the commission maintained a "Recovery Fund" to help natural persons who had obtained a court judgment resulting from being harmed by a licensee's actions, but was unable to collect on that judgment. The fund was replenished with a surcharge on license renewal fees whenever it dipped below $300,000. However, with the advent of errors and omissions insurance, the fund was not used and grew into a sum too large for the General Assembly to ignore. The fund was swept of approximately 1.5 million dollars in 2004, and is no longer open to new claims. The following few salient facts pertain to claims not yet settled. Upon payment of the last claim, the Director of the Division of Real Estate must notify the General Assembly and the account will be finally closed.

12-61-107 Non-resident Licensees.

A broker in another state doesn't have to maintain a residence in Colorado to hold a Colorado broker license, but must agree to jurisdiction of Colorado courts in any lawsuit brought in Colorado.

COMMISSION RULE A - QUALIFICATIONS, APPLICATIONS AND EXAMINATIONS

A-2. Pre-license education must be completed before taking the state exam or applying for a license. The part about schools electronically reporting evidence of candidate's having successfully completed the course has not yet been implemented by the Commission. A-5. The state broker-licensing exam has two parts, the national part and the state-specific part. You may pass the two parts on separate dates. If you fail one part, you only need to retake the failed part. You must submit passing grades for both parts dated less than one year prior to applying for your license. A-9. The Commission is to issue you a license within 10 days of receipt of your complete application and satisfactory criminal background (fingerprint) results. They will notify you of an incomplete or unsatisfactory application. If a license is approved pending the Commission receiving specified compliance items, you have 20 days to submit or your license may be issued on inactive status. A-11. If you have been licensed in another state, you must submit a "Certificate of License History" from the real estate commission in each state in which you are, or previously were, licensed. The certificate must be dated by the authenticating jurisdiction after the date any previous license expired, or if still active, within 90 days before the date you submit your Colorado application. (Instructor's Note: Send for this NOW if it applies to you. Some states are notoriously slow in providing these. Check to see if a certificate is available from the pertinent jurisdiction's website.) A-12(a). If within the last 10 years (more than 10 years, don't ask, don't tell for all crimes), you have a criminal background of ANY kind, NOT counting misdemeanor traffic violations, you must submit a: 1.Written, signed statement explaining each violation in detail. 2. Signed statement that "I have been charged with no other criminal violations either past or pending other than those I have stated on the application." 3.Completed Real Estate Commission Application addendum (REC-BAA), which requires results of court hearings, copies of charges, disposition documentation, pre-sentencing report, and your most recent probation or parole report. 4.Letter from the employing broker who has agreed to supervise you, if applicable, affirming that he or she is aware of any specific charges and/or convictions pertaining to you. A-15. For licenses issued prior to July 1, 2004, brokers intending to renew on active status or inactive salespersons or brokers intending to activate a license, must first submit fingerprints electronically or on an FD-258 Card Form to the Colorado Bureau of Investigation for a one-time-only criminal history record check. The rule provides for automatic license inactivation for failure to submit unless the applicant can prove a good-faith effort to comply and the fault lies with the readability of the fingerprints. A-16. New license applicants must submit fingerprints to the Colorado Bureau of Investigation, who will then forward them to the FBI, for the purposes of state and national criminal history record checks. A-17. The 72 hours of pre-license education other than Law and Practice (48 hours) and Colorado Contracts and Regulations (this 48 hour course) must be broken out in these specific courses. A. 24 hours of Real Estate Closings B. 8 hours of Trust Accounts and Recordkeeping C. 8 hours of Current Legal Issues D. 32 hours of Practical Applications A-20. If you are denied a license, you must be notified and given a reason. A-23. Pre-License and Brokerage Administration courses must be based on education principles acceptable to the Commission. A-25. If your application, renewal, or any other fee is paid for by a check that bounces, the application is cancelled. It may be reinstated at the Commission's discretion only if made good, plus payment of whatever penalty administrative fee that may be imposed. A-26. In addition to the requirements of C.R.S. 12-61-103(7) for issuance of a temporary license to prevent hardship, the person to be appointed temporary employing broker must show two years of active licensed experience in the Commission records. Only a vote of the commissioners may approve issuance of more than two temporary 90-day licenses to any firm in any 18-month period.

12-61-101 (4) identifies persons NOT needing a real estate license, including:

A. Any person or legal entity acting on its own behalf as a principal. (This includes regularly salaried employees and officers of corporations.) B. An uncompensated attorney-in-fact appointed under a recorded power of attorney. C. Public official performing official duties. D. Trustee, administrator, executor, guardian, etc., performing authorized duties. E. A person or legal entity dealing in oil and gas or other mineral leases or certain rights-of-way. F. A regularly-salaried on-site manager of an apartment or condominium building or complex. G. An attorney-at-law, but only when representing clients in the practice of law. H. A real estate broker licensed in another state who co-brokers a transaction with a Colorado broker.

Designated Broker

An employing or employed broker in a multiple-licensee firm required to be appointed in writing to serve each seller, buyer, landlord or tenant in each real estate transaction. Colorado is a designated brokerage state. This means that the required designation (appointment) of a broker in writing on every side of every transaction actually severs (cuts off) the employing broker and the firm from the brokerage relationship. It is useful to think of designated brokerage as an umbrella, or arch which overlies all broker real estate transactions in Colorado. It precedes and is NOT the same as a brokerage relationship of which there are only two allowed in Colorado, i.e. agency or transaction brokerage. Note that designated brokerage law does not apply to single person brokerage firms. 12-61-803 Relationships between Brokers and the Public. 1. The designated broker may be either an agent or a transaction-broker. The option is determined first by the employing broker's office policy as to which he or she prefers, and then by the desires of the seller, buyer, landlord or tenant. 2. The designated broker is a non-agent, transaction-broker by default, even absent any listing contract. In order to be an agent, there must be a written employment (listing) agreement. 3. A brokerage relationship must be independently established for each transaction side, for instance serving as a listing broker for a seller, and then serving as a buyer broker that same person who is now seeking a replacement property. 4. A broker may prepare approved printed forms without the assistance of an attorney. This is the statutory extension of Colorado's bedrock case law known as Conway-Bogue. In this 1959 case, the Colorado Supreme Court determined that brokers could prepare these forms even though they constitute the practice of law. The law requires the broker to advise the parties that the forms have important legal consequences, and that the parties should consult legal counsel before signing such forms. Although both of these admonitions are pre-printed in Commission-approved standard forms, they should also be emphasized in any dealings with the public. 5. A broker may contract (in writing) to perform additional duties beyond those contained in the Commission-approved forms. 6. a. This paragraph is the actual requirement, in every firm with more than one licensee, to appoint a designated broker in writing for every side of every transaction.More than one designated broker may be appointed to serve a single seller, buyer, landlord or tenant. The employing broker may appoint him or herself as a designated broker. In this case the employing broker may elect to supervise his or her own transaction or may delegate supervisory authority to an associate broker. b. The brokerage relationship does NOT extend to the employing broker, any other broker in the firm, or to the firm itself. This is the BIG difference between Colorado and common agency law in which the seller, buyer, landlord or tenant hires an agent as a package including their chosen broker, his or her firm and every licensee in the firm. Under common agency law, confidential knowledge is "imputed" to (legally presumed to be shared by) all of these persons whether or not they possess actual knowledge. In the Colorado model, only the specific designated broker is deemed to know, and is required to protect confidential client information. The brokerage relationship is only between the individual designated broker and the seller, buyer, tenant or landlord. The listing itself belongs to the employing broker/firm. Paragraph 1 of the listing contracts states: "Seller/Buyer/Landlord/Tenant and Brokerage Firm enter into this ..." Note also this part of the license law. This means that if you leave to work for another brokerage firm, or start up your own, the listings remain the property of your previous employing broker/company. c. An employing broker may designate one broker for a seller, and another broker for the buyer in the same transaction. d. When working for both sides of a transaction, one broker may establish a transaction-broker relationship with both sides, OR may work as agent for one side and treat the other as a "customer," but may never be an agent for both sides. e. A single broker may be designated to a seller/landlord in one transaction and a buyer/tenant in another. 7. The public is NOT liable for broker actions that they have not approved, directed, or ratified.

12-61-110.5 Continuing Education.

Before renewing every 3 years, activating or reinstating a broker license to active status, each broker requires 24 hours of continuing education. 12 of the required hours must be met by taking the 3 different annual versions of the 4-hour "Commission Update Course." (See also Commission Rule B-2a.) Continuing legal education real property law courses meet this update requirement. The law lists 21 subjects in which real estate continuing education may be taken.

COMMISSION RULE D - RENEWAL, TRANSFER, INACTIVE LICENSE, ERRORS AND OMISSIONS INSURANCE

D-2. A licensee may request inactive license status. D-3. A license on inactive status must still be renewed every 3 years. The renewal fee is the same as for active license renewal. D-4. Licenses may be renewed on-line or with the renewal application provided by the commission or other methods acceptable to the Real Estate Commission. D-6. Renewal notices for employed licensees will be sent to the electronic mailing address on file with the Commission. D-7. An employing broker may directly pay earned commissions to a previous associate who has transferred to another brokerage or changed to inactive license status. D-11. Initial license expires 3 years from the date of issuance. D-12. License renewal fees are non-refundable. D-14. Errors and Omissions (E&O) Insurance is required for every active license, including real estate companies. (This means that a one-person incorporated brokerage firm requires two E&O policies, whereas a one-person sole proprietor requires only one E&O policy.) The Commission will enter a competitive bid process for a group E&O policy from a Colorado-registered insurer having an A.M. Best (an insurance company rating organization) rating of "A" or better. The insurer will, at no expense to the State, collect all premiums, maintain records, and report names of insured and a record of claims to the Commission. The group policy must cover all acts requiring a license EXCLUDING illegal or fraudulent acts. It must insure loss from a licensee's use of lockboxes to a minimum of $25,000 per occurrence. The policy is individual and license specific, and transfers without additional premium if a licensee transfers to a new employing broker. It may be cancelled only for non-payment of premiums or denial, revocation, suspension or inactivation of your broker license. The policy must provide at least $100,000 coverage per license per covered claim, with a $300,000 annual aggregate limit per license. The policy may require a $1,000 deductible per claim, but no deductible is allowed for legal expense or defense. The insurer must defend all covered claims and the insured may select his or her own defense attorney subject to written permission of the carrier, which may not be unreasonably withheld. (Note: The current insurer relies heavily on in-house legal staff.) Premium is pro-rated for policies purchased after the beginning of the policy year (Jan. 1 - Dec. 31), but there is no refund of premium for a policy cancelled before the end of the policy year. For additional premium, a licensee may purchase higher, excess or additional coverage, or may purchase an extended reporting period of not less than 365 days. The policy must afford a "conformity endorsement" covering an active Colorado licensee with multiple licenses for licensed acts in another E&O group-mandated state(s) without having to purchase a separate policy for that state(s). Licensees may purchase E&O insurance from any independent insurance carrier as long as the carrier and the policy conform to essentially the same requirements as stated above. Talk to your employing broker and consult the actual text of Rule D-14(c) and (d) for details. The state's group policy vendor automatically reports your coverage to the Commission; whereas you and any independent carrier may have to fill out and deliver a certificate to the commission at each policy renewal. If your coverage lapses or certification of coverage is not maintained, the commission may change your license status to inactive. (Instructor's note: If this happens, any E&O coverage you may have actually had may be cancelled, meaning an interruption of any tail [past] coverage for prior transactions prior to the next effective date of coverage.)

12-61-106 The Division of Real Estate.

Do not confuse the 5-member appointed commission with the civil service Division of Real Estate. The Division is one of 10 in the Department of Regulatory Agencies and employs a director and several dozen staff members that administer the day-to-day activities and direction of the Commission.

12-61-903 Registration required.

Effective January 1, 2007, mortgage brokers are required to register with the Division of Real Estate. Registration must be renewed every three years. (Note: Registration is not as stringent as licensing. Registration does not require prescribed education or examination.)

12-61-114 Hearings for Denying, Suspending or Revoking a License.

Licensees faced with license denial, suspension, or revocation are entitled to a public hearing conducted by an administrative law judge (ALJ). The commission must notify employing brokers of such pending action against broker associates. After a hearing, and the issuance of a "finding of facts and initial decision" by the ALJ, a licensee has 30 days to appeal the findings. Whether appealed or not, the case goes back to the commission for a final vote on whether or not to uphold, modify or repeal the disciplinary action. Only the commission may deny, suspend or revoke a license.

12-61-203.5 Referral Fee Interference

No person may demand a referral fee from a broker absent "reasonable cause", meaning a pre-existing referral or cooperative brokerage agreement exists that led to an actual introduction of a client and a closed transaction.

Unit 2-4 Rule F

Rule F-1. Permitted Modifications Brokers may not modify Commission-approved forms except as allowed in this Rule F. A broker(age) may pre-print its firm name, address, telephone, e-mail address, trademark or other identifying information on forms. Initial lines may be added at the bottom of pages. Deletions or insertions amending commission-approved language must originate from negotiations or instructions of party(ies) to the transaction. Deletions must be struck through on the actual form in a manner that leaves the original language legible. Blank spaces may be lengthened or shortened as needed. (Instructor's note: Forms software programs do this automatically, expanding as you enter data.) Filled-in blanks or insertions must be in a typeface or font that is clearly recognizable as different from the font on the pre-printed form. Provisions of the Contract may be deleted but the provision's caption or heading must remain unaltered on the form followed by the word "omitted - not applicable." One or more pages may be added that contains the dates and deadlines set forth in Section 3, arranged in chronological date sequence. Dates and Deadlines table and Purchase Price and Terms of the Counterproposal and Amend/Extend may be deleted so long as the provision's caption or heading remains unaltered on the form followed by the word "omitted - not applicable." The term "Landlord" may be substituted for the term "Seller" and the term "Tenant" for the term "Buyer" in the Brokerage Disclosure To Buyer, Brokerage Disclosure to Seller and Definitions of Working Relationships forms. Signature lines may be added along with identifying labels for the parties signatures. Language may be modified, stricken or deleted as the Commission may from time to time so authorize. Rule F-1 (g). A broker may omit printing part or all of the following sections of the Contract to Buy and Sell Real Estate, (or corresponding sections of other forms) if they are not used. If omitted, the paragraph heading must remain pre-printed along with the word "OMITTED." Section 2.5, Inclusions Section 2.6 Exclusions Section 4.2, 4.4, Seller Concessions Section 4.5, New Loan Section 4.6, Assumption Section 4.7, Seller Financing (Instructor's note: Each of these sections is multiple paragraphs long. It is easy to see why leaving out the paragraphs for loan assumption and seller financing when not applicable makes for a much shorter, and therefore clearer, contract form.) Section 5, Financing Conditions and Obligations Section 6, Appraisal Provisions Section 7, Common Interest Community Governing Documents Section 8.5, Special Taxing Districts Section 8.6, Right of First Refusal or Approval Section 10.8, Source of Potable Water Section 10.6, Due Diligence Section 10.8 - 10.12, Existing Leases Section 11, Tenant Estoppel Section 15.3, Status and Transfer Letter Fees Section 15.4, Local Transfer Tax Section 15.5, Private Transfer Fee Section 15.7, Sales and Use Tax Section 16.2, Rents Section 16.3, Association Assessments Rule F-1 h. A broker may add a separate page duplicating the front page "Dates and Deadlines" information arranged in chronological order to the following three forms: Contract to Buy and Sell Real Estate Counterproposal Agreement to Amend/Extend Contract i. If not required: A broker may omit pre-printing the "Dates and Deadlines" table and "Purchase Price and Terms" on the Counterproposal form; and The "Dates and Deadlines" table on the Agreement to Amend/Extend Contract If omitted, the paragraph heading must remain pre-printed along with the word "OMITTED." i. A broker conducting a lease transaction may substitute "Landlord" for "Seller," and "Tenant for "Buyer" on the following three forms: Brokerage Disclosure to Buyer/Tenant Brokerage Disclosure to Seller Definitions of Working Relationships Rule F-2 Additional Provisions This section of the contract forms must contain only transaction-specific terms or acknowledgments that result from negotiations or instructions of the parties. (Instructor's note: Note that the broker IS a party to the listing/employment contract and may negotiate additional provision entries thereto.) A broker is not a party to a buy/sell or lease contract, and therefore may never insert self-serving personal provisions, disclaimers or exculpatory ("I'm not responsible") language. Rule F-3 Addenda A pre-printed, broker-developed addenda which modifies or adds to the terms of a Commission-approved contract form not resulting from negotiations of the parties must be prepared by:A principal to the contract.The broker's attorney.A principal party's attorney. Such addendum MAY NOT be prepared by the broker or brokers for the parties. Broker must retain the addendum for four (4) years from the last date the addendum was used. Broker must be able to provide the Commission with the name of the attorney or law firm that prepared the addendum upon request. If such an addendum is used, it must be attached to the contract - not inserted in "Additional Provisions" or any other part of the body of the contract. If a broker who is not a party to the contract uses such an addendum, it may not contain self-serving personal provisions, disclaimers or exculpatory ("I'm not responsible") language. If such an addendum is prepared by the broker's attorney, it must state on each page (in same type size as the addendum): "This addendum has not been approved by the Colorado Real Estate Commission. It was prepared by (insert licensed name of broker or brokerage firm's) legal counsel." If a broker(age)-developed addendum is attached to listing, tenant or right-to-buy contract, it must state on each page (in same type size as the addendum):"This addendum has not been approved by the Colorado Real Estate Commission. It was prepared by (insert licensed name of broker or brokerage firm)." Rule F-4 Prohibited Provisions. No contract provision or modification may override the license law or Commission rule. (Repeats Rule E-12) Any holdover provision applies only to persons or properties negotiated during the term of the contract and whose names (listings) or addresses (buyer/tenant agreements) were submitted to the client prior to the expiration of the agreement. Rule F-5 Explanation of Permitted Modifications. A broker must explain all modifications, deletions, omissions, insertions, additional provisions and addenda to the client or customer and must recommend the parties obtain expert advice on matters beyond the broker's expertise. Rule F-6 Commission Approved Form Reproduction. Forms and modifications must be legible. Forms software must protect against inadvertent alteration. Rule F-7 Forms Index. Since Commission-approved forms may be updated at any time, a current index here would tend to be always out-of-date. Remember that brokers are required to use a Commission-approved form when one has been developed/published that is pertinent to the intended use. When the Commission does not promulgate a needed form (e.g. installment land contract), an attorney or a party other than the broker should provide the form. The most current version of applicable forms are available at https://www.colorado.gov/pacific/dora/division-real-estate-contracts-and-forms Summary This concludes Chapter 4. Below is a brief summary which you can review before taking your quiz. Conway-Bogue - The Colorado Supreme Court ruled that brokers may prepare legal documents by filling in the blanks on standard, approved printed forms when they are the broker in the transaction and receive no compensation other than their commission. The title companies: Could prepare papers related to loans made from their own funds. Could not prepare/charge for legal documents for others. Could not mandate closing or escrow service as a requirement of selling title insurance. Colorado's Statute of Frauds is found in the Contracts Chapter of the Real Estate Manual. A broker may never sign any documents in place of the client without a written Power of Attorney. Transaction documents may be electronic if retrievable and all parties agree. A subdivision is any Colorado real property divided into 20 or more residential parcels. A subdivision is not campground memberships nor bulk sales or transfers between developers. The first step in subdivision development is registration. Subject to cancellation up to midnight of the 5th following day. Every licensee shall seek information from, or refer clients to, expert sources. Colorado Fair Housing Act Four protected classes: Creed Ancestry Marital status Sexual orientation Colorado law: Covers commercial property. Does not exempt single-family homes or owner-occupied 1-4 unit homes. Judges may levy fines for a larger scope of violations than their federal counterparts. Permits restriction in the sale, rental or development of housing intended for persons with disabilities. An aggrieved person may file a complaint with the state Civil Rights Commission or HUD up to one year after occurrence. Penalties for proven violations are virtually unlimited in dollar terms. Common interest community - owners are obligated to pay some fees for common areas. Subject to the payment of dues to a Homeowners Association (HOA). Colorado Statutory Relationships Single licensing stemmed from realization of changes in the public and the real estate market. Buyers and sellers don't differentiate between a salesperson and a broker. Complexity in real estate transactions is not reserved for those with two years of active licensed experience. Growth of the Internet and other technologies enabled salespersons to act more independently. Salespersons with years of experience would defend against disciplinary action. Designated Brokerage Requires the employing broker to appoint a designated broker in writing for every side of every transaction. Not a brokerage relationship. The individual designated broker is the only protector of confidential client information. The broker working with the buyer will be a broker, not a salesperson, and will never be your subagent. Rule F - Use of Commission-approved Forms A broker may pre-print its identifying information on forms. Deletions or insertions amending commission-approved language must originate from negotiations or instructions of parties to the transaction. Blank spaces may be lengthened or shortened as needed. Filled-in blanks or insertions must be in a typeface or font that is clearly recognizable as different from the font on the pre-printed form. A broker may add a separate page duplicating the front page "Dates and Deadlines" information arranged in chronological order to the following three forms: Contract to Buy and Sell Real Estate Counterproposal Agreement to Amend/Extend Contract If not required: A broker may omit pre-printing the "Dates and Deadlines" table and "Purchase Price and Terms" on the Counterproposal form; The "Dates and Deadlines" table on the Agreement to Amend/Extend Contract form. A broker may never insert self-serving personal provisions, disclaimers or exculpatory language. A pre-printed, broker-developed addenda must be prepared by: A principal to the contract. The broker's attorney. A principal party's attorney. It must be retained for four years. No contract provision or modification may override the license law or Commission rule. A broker must explain all modifications and addenda to the client and recommend the parties obtain expert advice on matters beyond the broker's expertise. Click here if you would like to open this summary as a pdf, which you can then print or save to your device: Chapter 4 Summary

Unit 2-4 Subdivisions

SUBDIVISIONS, CONVERSIONS, AND TIME SHARING Chapter 1 of this course covered Part 4 of the License law concerning Subdivision development. Here we will review briefly Commission Rule S, and some of the pertinent points of subdivision regulation. Since a developer must register with the Commission, but is not necessarily required to have a broker license, much of this section of the law and Commission rule will not apply. The material that is included here, however, is subject to testing on the broker licensing examination. Both Part 4 and Rule S are in a separate Chapter of the Real Estate Manual along with information on Common Interest Communities (those governed by Homeowners Associations). A subdivision is any Colorado real property divided into 20 or more residential parcels, including a building, time share, or cooperative housing corporation so divided. A subdivision is not: 1. Campground memberships. 2. Bulk sales or transfers between developers. 3. Sales that include the cost of an existing or planned building in the price of the property. 4. Lots which: -Are on improved streets. -Have approved plans for water and sewer. -Have telephone and electric in place on or adjacent to the lots. -Lots under the supervision/regulation of a regional, county or municipal planning authority. (Instructor's Note: This doesn't mean that these subdivisions are not regulated, it just means they are not under the regulation of the Real Estate Commission.) -Sales by public officials performing official duties. The first step in subdivision development is registration. This must be done before any negotiating, selling or transferring to the public takes place. Registration requires volumes of data on both the developer and the land to be subdivided. Registration certificates expire December 31 of the year in which issued and must be renewed annually. Sales of subdivision lots and time-shares are subject to cancellation by the purchaser for any reason up to midnight of the 5th day following execution of the contract. The Real Estate Commission realizes that subdivision expertise, including planning and zoning laws, etc., is likely beyond the realm of most licensee's expertise. Nonetheless, every licensee has the responsibility to seek information from, or refer clients to, expert sources. Some facts that should be known to a licensee through reading or logic include: The sale of a portion of a property divides the land into two parcels that may be subject to subdivision regulation by other than the real estate commission. Just because a building is suitable for conversion into a duplex or four-plex, does not mean that such a conversion does not violate the law. An area zoned as horse property does not automatically mean the parcel is large enough to keep horses. Even if an area is zoned for home business, there may be prohibitions against parking, employees, customer traffic or other.

12-61-402 Subdivision Registration.

Subdivision developers subject to registration are not required to hold real estate broker licenses. In fact, many hire brokers when the time comes to sell their lots. They must, however, hold developer certification before lots are reserved, negotiated for sale or sold by anyone, including a licensed broker.

Originate

Submit a loan application to the lender or loan underwriter.

Unit 2-4 Colorado Statutory Relationships

The Colorado Real Estate Commission Course Outline for this topic takes it through the entire Section 8 of Title 12, Article 61 of Colorado statute. We have covered that in exhaustive detail in Section 1, License Law of this Contracts and Regulations Course. Therefore, this section will review and try to distill Colorado's sometimes confusing Brokerage Relationships statutes from a more simple perspective without repeating Section 8 of the license law. In much of the rest of the United States, if you list a house for a seller, you are the seller's agent. As an agent, you owe fiduciary duties to your seller - meaning you will advocate getting the best price and terms for the seller. When a licensee from another company shows your listing and brings an offer for your seller, that licensee is on the same team as the listing agent. He or she acts as the listing broker's subagent - assisting the buyer, even though owing a fiduciary through the listing agent to the seller. In the same example above, the listing agent and the subagent were most likely salespersons - the vast majority of licensees still are - working for a single boss - their Broker. Finally, all of the players above were considered to have something called "imputed knowledge." This means that since all were on the same side, all knew, or should have known, all client confidential information. The brokerage relationship as agent extended to everyone - the firm as an entity, all licensed salespersons in the firm and the employing broker. They were all agents of the seller. Four basic changes have taken place since the late 1980s to make the above scenario completely obsolete. Three have been intentional changes enacted in Colorado license law, and one started out of a few brokers and has grown into a nationwide trend - buyer brokerage. While it is true that isolated pockets of buyer representation occurred earlier, the buyer brokerage movement was largely local until the 1980s. As buyers became more sophisticated they realized that they were not truly represented in a real estate transaction because everyone was aligned with the seller. Early buyer brokers elected to become agents and advocate for the interests of the buyers. This was not a congenial transition. Many brokers refused to accept offers from or denied commission splits to buyer agents. Over several years, this animosity lessened as traditional brokers realized that this kind of divisiveness was harmful to their ability to sell their listings, and therefore put them in violation of the fiduciary owed to the seller. The first recognition of buyer agency in Colorado's license law in 1993 also introduced the now familiar neutral, non-advocate assistant known as the Transaction-Broker (T-B). T-B also introduced much trepidation and confusion into the industry. This was such a radical concept that some brokers suggested it would collapse the industry, or would never last. To this day, the concept is often misunderstood by even some Colorado brokers to mean a lessening of liability for the risks in a transaction. This is not true, as we will discuss shortly, when considering universal duties. Those duties now enshrined in Colorado's commission-approved contract forms are owed to the client regardless of brokerage relationship. The second major statutory change came in 1997 in the form of single licensing. Single licensing is the concept of educating all new applicants - you - to the broker level from day one. Colorado had a multi-year transition to allow all then licensed salespersons to upgrade their licenses to those of a broker. Single licensing stemmed from realization of changes in the public and the real estate market. 1. Buyers and sellers don't differentiate (or even understand the difference) between a salesperson and a broker. All they want is a competent results-driven licensee. 2. Complexity in real estate transactions is not reserved for those with two years of active licensed experience. The most complex transaction of your career could occur in the first month of being licensed. 3. Growth of the Internet and other technologies enabled salespersons to act more independently. Licensees were less dependent on the computer and resources located in the main office. 4. Salespersons with years of experience would defend against disciplinary action by the Commission with the salesperson defense, i.e. "I've been a salesperson for a hundred years but I don't know anything about that since I'm not a broker." The final - and in some way the biggest change - came in 2003 in the form of Designated Brokerage. Designated Brokerage is the overarching method or infrastructure for every licensed real estate transaction in Colorado. It requires the employing broker to appoint a designated broker in writing for every side of every transaction. Every broker is a designated broker before, and in addition to, being either an agent or a transaction-broker. It is NOT a brokerage relationship. In fact, it precedes establishment of a brokerage relationship. It severs the individual "designated broker" who enters a brokerage relationship from any connection to the employing broker, the firm or any other licensees employed in the firm. To be sure, the employing broker and firm still own the listing or employment agreement as you will learn when we review the contracts, but there is nobody besides the client and the designated broker in the brokerage relationship. It eliminates the concept of "imputed knowledge" - meaning that the individual designated broker is the only protector or guardian of confidential client information. No longer is everyone in the firm assumed to know or expected to have access to all the details about each client or property in the firm. While the designation must be made in writing, Rule E-38 allows an employing broker to write an office policy establishing automatic designation for brokers who sign certain listing or disclosure forms. Later on, the Commission passed Rule E-45, and altered all the listing/employment contracts to provide client approval allowing a designated broker to share confidential information with a "supervising" broker without extending the agency or T-B brokerage relationship to that supervising broker or the firm. These changes recognized the need for inexperienced brokers to obtain assistance or counsel when necessary. Now, let's go back and consider the example sales scenario introduced at the beginning of this section with all four of the changes in place. In Colorado, when you list a seller's house for sale, the employing broker must first designate you to that seller. When you sign the listing agreement, you will enter an individual brokerage relationship as either the seller agent or transaction-broker, depending on the employing broker's office policy. If you are the seller's agent, you will advocate for that seller. If you are a transaction-broker, you are neutral and will assist the seller in marketing the home and putting the transaction together. If a broker from another firm shows your listing and brings an offer for your seller, he or she must advise you before the showing - whether acting as an agent or transaction-broker for the buyer - as permitted by his or her employing broker's written office policy. Neither of you will exchange confidential information about your respective clients. The broker working with the buyer will be a broker, not a salesperson, and will never be your subagent. There will be no imputed knowledge to the other associate brokers in your firm, or to the firm itself or the employing broker. Now that you have seen an illustration - however simplified - it is time to go back and review the Brokerage Relationships license law Section 12-61-801 to 12-61-810 in Chapter 1 of this course. Don't skip doing this because you think you've been there already. The complex Colorado structuring of brokerage designation and brokerage relationship sets the foundation for all of the transactions you will ever do. You must also master brokerage relationships in order to grasp the next section of the course that involves completing Commission-approved contract listing/employment agreements. The importance of understanding brokerage relationships is far greater than material needed to pass the broker-licensing exam. When you have finished your review of the brokerage relationships license law, come back here to learn about the Commission rule on forms.

12-61-105 The Real Estate Commission.

The Governor appoints five commissioners to 3-year terms to administer the license law and set the course for the practice of real estate state-wide. Three commissioners must be brokers with at least 5 year's experience. One commissioner is a non-real estate person representing the public. No broker license may be denied, suspended or revoked without a commission majority vote. The Commission has rule-making authority delegated by the Colorado General Assembly.

12-61-119 to 12-61-122 Commission Powers and Penalties.

The commission has the power to subpoena witnesses to attend hearings and to produce documents and records. They may also petition to the courts for injunction or restraining order to stop broker action that may be in violation of the license law. Criminal law (public wrongs) and Tort law (private wrongs) control the behavior of individuals for activities conducted outside the purview of the license law. CREC enforces only license law, NOT ethical behavior. A Code of Ethics is voluntarily adopted and imposed on members of professional organizations. Members of The National (and State and Local) Association of REALTORS® are subject to such a code.

Colorado Real Estate Commission Position Statements

The first two chapters of this Course covered 1.) License law and 2.) Commission rule. We will now review the third collection of policies known as Commission Position (CP) Statements. Chapter 3 of the CREM contains the position statements in full. They are abbreviated here with enough detail for you to understand their meaning. By the end of this unit, you will be able to: Explain how the CO Laws and the Position statements differ Describe the Broker responsibilities according to the CO Position Statements Recognize and express the Position Statement concerning Interest Bearing Accounts and refund of earnest money Note that while position statements indicate the desires of the real estate commission as to how certain policies are carried out; they do not carry the force of law. CP-1: Homebuilder's Exemption from Licensing: Salespersons working for new homebuilders are not required to be licensed. New home sales staff, however, must be regularly salaried. This means that money paid them is not a draw against future commissions, is paid on a regular cycle, must exceed minimum wage and must have normal payroll taxes withheld. CP-2: Referral Fees and Advertising Services: A broker may not pay commissions or referral fees to unlicensed persons for activities requiring a license. The Commission interprets this as anything involving negotiating. Negotiating is further defined as the act of bringing two parties together for the purpose of consummating a real estate transaction. Referral fees may be paid if: 1. An actual introduction of business has been made; 2. A contractual referral fee relationship exists; or 3. A contractual cooperative brokerage relationship exists. CP-3, CP-4, CP-5 CP-3: Commission Rule E-13 (sign crossing rule): Rule E-13 already holds that a broker may not contact a seller or buyer who is party to a current exclusive listing or employment agreement. Here the Commission explains the purpose of the rule is to: Prevent public detriment caused by interfering with an existing contract; and Protect the public from possibly owing two commissions on the same transaction. Brokers must always advise sellers or buyer to seek legal advice regarding the consequences of canceling an unexpired employment agreement. CP-4: Interest Bearing Trust Accounts: Except in the case of mobile home park management, any interest paid on trust accounts does not belong to the broker. Interest on earnest money would go to the seller at closing or forfeiture or be returned to the buyer if the transaction failed. Interest on an owner's property management escrow account belongs to the individual owners; security deposit interest goes to the tenant (unless owner claims exceed available security funds). With consent of the parties (and this consent is pre-printed in the Commission-approved buy/sell contract), interest from any escrow funds may be moved to the Colorado Association of REALTORS® Housing Opportunity Fund. CP-5: Advance Rentals and Security Deposits: Advance rent must be held in escrow until applied to the owner's credit. Deposits not subject to recall belong to the owner and may not be used by the broker. CP-6, CP-7 CP-6: Release of Earnest Money: A broker is not required to return disputed earnest money, but may await court instruction resulting from lawsuit between the parties, OR may turn the disputed funds over to a court for distribution. When disputed, it is wise to obtain both parties signatures on a commission-approved release form. When a transaction fails with no dispute, the broker must return earnest money to the appropriate party immediately. No signature of release or receipt is required. In the rare case when a broker is unable to locate a party due earnest money, a broker may be required to deposit the money as unclaimed property with the State Treasurer under the Great Colorado Payback program. If not claimed after a certain period, the money is advertised and thereafter escheats to the state. CP-7: Closing Costs: Nothing in this position statement adds to the context of Commission Rule E-37. CP-8: Assignment of Contracts and Escrowed Funds: When a real estate company is sold, merged or goes out of business, all interested parties must be notified and permission obtained to transfer any listing/employment agreements or assign any escrowed funds. Escrowed money transferred to a new broker makes the new broker liable for its safeguarding and accounting even without new agreements being signed. Earnest money may not be released to any party, except the closing entity, just prior to closing. CP-9: Recordkeeping by Brokers: The loan payoff statement should be retained by the listing broker; the new loan statement should be retained by the broker working with the buyer. The final sales agreement and settlement statement delivered at closing for that party's tax reporting, or future use, shall bear duplicate signatures as authorized. Remainder of text is verbatim from Rule E-5. CP-10: Compensation Agreements between Employing and Employed Brokers: The Commission will not get involved in compensation disputes between employing brokers and their licensees. Both parties should have an (oral or) written employment contract covering compensation; disputes must be settled internally or through the courts. (Instructor's note: It is prudent to include compensation from referrals and costs associated with purchase and sale of broker-owned properties before entering an employment contract.) CP-11: Assignments of Broker's Rights to a Commission: An employed broker must place any funds from any source with the employing broker, and may not accept a commission or any valuable consideration from anyone other than the employing broker. An employing broker may assign a commission to any person after title has transferred (closing). CP-12: Broker's Payment or Rebating a Portion of an Earned Commission: Although brokers are forbidden from paying fees to unlicensed persons, brokers may generally add a sum of money to, or rebate a portion of, the earned commission from the brokerage services offered in the contract to their own clients without violating the license law. Listing brokers who intend to offer a rebate of earned commission to the buyer must first obtain the seller's authorization because: Such a rebate may adversely affect the buyer's financial qualifying and thus harm the broker's fiduciary to the seller; and If the expected payment is not made, the buyer may include the seller in any lawsuit to recover the promised rebate. Gratuitous true gifts (not offered as inducements to purchase) of nominal value are okay and do not interfere with a listing broker's fiduciary to the seller. CP-13: Single-Party Listings: Listing a property for sale to a specified single purchaser is unfair to the seller, possibly putting an unaware seller, who also signs a normal exclusive listing, in jeopardy of owing two commissions. Therefore, when seeking a single-party listing, the broker should include one, two or all of these provisions: 1. This listing contract shall apply only to the sale of the property to (______). 2. The termination date shall not be extended by the "holdover period of this listing contract. 3. If a sale is made to any other party than the single party named above by the seller or the seller's broker, this listing contract is void. CP-14: Sale of Modular Homes by Licensees: A licensee may sell a modular home and not be subject to the license law restrictions on delivering all money to, or receiving commissions, only by the employing broker. Likewise, none of the recordkeeping or money-handling provisions of Rules E-1 or E-5 apply. But if the sale includes land, or is tied to a pre-arranged parcel of land, then license law and Commission rule apply and all money must be processed through the employing broker with appropriate recordkeeping. (Instructor's Note: Federal RESPA law treats referral fees more stringently than this Statement. Consult your employing broker and seek competent legal counsel.) Payment for general promotion of your real estate business is not prohibited. CP-15: Sale of Items Other than Real Estate: If items or services are sold under a property management agreement, or a contract for sale of the real property, a broker must disclose to both buyer and seller (or landlord and tenant) that the licensee is being compensated by a vendor or contractor. All money must be processed through the employing broker. If the sale is under a separate contract without reference to real property, the vendor or contractor may pay an employed licensee without going through the employing broker. However, if a listing broker makes the sale to a buyer during a listing agreement with the seller, the employed licensee must disclose to both the seller and buyer the vendor or contractor is paying that to him or her. The employment contract between the employing and employed brokers will take priority as to any restrictions or prohibitions against such activity. CP-16: Access to Properties Offered for Sale: The listing broker is primarily responsible for safeguarding access instructions to property listed for sale. Broker working with sellers must also safeguard access information and not distribute it to appraisers, inspectors or buyers without the listing broker's authorization. (Instructor's note: This means discussing any seller access preferences during the listing presentation and insuring they are followed.) CP-18: Payments to Wholly Owned Employee's Corporation. An employed broker must be licensed in his or her own personal name, and may not use a corporate name in the practice of real estate or to circumvent Commission rules on broker supervision. However, brokers may choose to establish a corporate veil for IRS or state tax purposes and the Commission will then allow commission checks to be paid to the name of the associate broker's corporate entity. CP-19: Short-Term Occupancy Agreements. Resort or hotel-type agreements are not leases and are exempt from the definition of real estate brokerage. However, a licensed broker conducting such activity must still escrow and account for any held money belonging to others. CP-20: Unlicensed Personal Assistants. Unlicensed persons may not perform activity requiring a license. This means they may not independently draft legal documents (contracts), offer opinions, advice or interpretation. They may, however, prepare contracts and forms as directed by the licensee, and distribute information on listed properties prepared by the licensee. Unlicensed assistants may: Perform clerical duties including gathering listing information. Provide access to properties, as long as no negotiating, selling, offering or contracting occurs. Distribute pre-printed objective information at an open house as long as no negotiating, selling, offering or contracting occurs. Distribute pre-printed objective information on listed properties prepared by licensees. Deliver paperwork to other brokers. Deliver paperwork to sellers/buyers after review by licensee. Deliver lender-prepared paperwork to obtain signatures. Independently prepare CMA's for sellers/buyers, as long as their name is included thereon as preparer and the CMA is actually presented by the licensee. Written office policy should detail the duties, responsibilities and limitations of personal assistants. Assistants should be paid in some manner other than sharing in sales commissions. When compensation is based on success of the closing, unlicensed assistants may face increased pressure to cross over into activities requiring a license. CP-21 Office Policy Manuals should contain procedures for at least: Typical real estate transactions (contract review, earnest money handling, back-up contracts, closings). Non-qualifying assumptions and owner financing. Guaranteed buyouts. Investor purchases (and brokerage relationships less than "arms-length (CP-31). Brokerage relationships offered to the public. (Instructor's note: This is the only policy required by statute C.R.S. 12-61-808(1)(a) for every brokerage, including both single- and multiple-person firms.) Broker designation in firms of more than one person when the broker elects to take advantage of Rule E-38 to avoid writing a letter of appointment for every side of every transaction. Maintenance and protection of confidential information (Rule E-39). Licensee purchase and sale of property. Monitoring of license renewals and transfers. Delegation of authority (When employing broker is absent, acts as a designated broker in a transaction, or in certain cases of administrative or supervisory practice. (Instructor's note: Remember a broker may delegate authority, but not responsibility.) Property Management (Instructor's note: A firm intending to engage in property management is well advised to develop an entire separate office policy manual for such activity. The level of detail is far too broad to be addressed in a policy topic. Chapter 20 of the CREM offers additional guidance/options for property management.) - Property listing/ release/termination procedures. - Training (Including dissemination of information and office meetings). 3. Personal Assistants. 4. Fair Housing. 5. Listing syndication 6. Broker price opinions (This policy should not simply restate Federal and state law, nor list protected classes for which associates are already responsible, but should have YOUR personal affirmation of this subject, including policy on broker behavior and reporting/dealing with fair housing issues should they arise.) CP-22: Handling of Confidential Information in Real Estate Brokerage. This CP statement addresses the requirement for written policies to safeguard files, phone conversations, sales meetings, etc. Remember that the designated broker is the only guardian of the client's confidential information unless assistance is needed in accordance with Commission Rule E-45 as authorized by paragraph 4c of the Commission-approved listing/employment agreements. CP-23: Use of Licensee Buyout Addendum: This addendum is required only when a licensee contracts to purchase a property: Concurrent with listing the property for sale. As an inducement to, or to facilitate the owner's purchase of, another property. But continues to market the property under an existing listing agreement. If a licensee intends to purchase for his or her own account, he or she must: Sever the brokerage relationship. Renounce any right to a commission. Advise the owner to seek other real estate or legal representation. (Instructor's note: This position statement pre-dates designated brokerage. This severance applies only to the licensee purchaser's personal brokerage relationships, and not to properties listed by other brokers in the firm.) Resale to a buyer with whom the licensee had negotiated during the listing violates the license law absent written disclosure and seller acknowledgment. CP-24: Preparation of CMA's/Evaluations Used for Loan Purposes. A broker may use a CMA in court testimony or for tax considerations. Brokers may also prepare value estimates under contract to federally regulated lending institutions provided they are competent to the assignment, reach a value estimate below the federal mandated amount requiring an appraisal, and include the "I am not an appraiser" disclaimer in Section 7 of the license law. CP-25: Recording Listing Contracts. A licensee may not file a mechanic's lien, lis pendens, record a listing contract, or otherwise attempt to cloud title on a property to enforce a perceived earned commission. The only appropriate courses of action are: mediation, arbitration, or civil action. CP-26: Auctioning. Real estate auctions must be conducted under the license law with a licensed broker listing, advertising, showing and preparing contracts on the property, although the actual "crier" (auctioneer) of the auction may be unlicensed. CP-27: Performance of Residential Leasing and Property Management Functions. Specifies the minimum inclusions of a written management agreement. (Instructor's note: There is no commission-approved management agreement form. The commission requires both an "Exclusive Right-to-Lease Listing Contract" and a Management Agreement - preferably reviewed by broker's legal counsel.) CP28: Showing Properties: Brokers must advise clients, and include in listing/employment contracts on the methods, advantages and limitations of controlling access to the property. Different kind of lockboxes, seller desires for advance appointment showings or listing broker presence may reduce the number of property showings. A broker must never unilaterally refuse a showing absent seller's explicit written authorization. CP-29: Megan's Law: A licensee should inform potential buyers to contact local law enforcement officials for information if the presence of registered sex offenders is of concern to the buyer. (Instructor's note: Certainly the broker may assist in locating the appropriate law enforcement agency or on-line source, but must refrain from any determination as to whether certain neighborhood residents are, in fact, sex offenders.) CP-30: Seller Assisted Down Payments (Joint with Board of Real Estate Appraisers). Brokers have a responsibility to safeguard the representation of accurate sold data. Such data is often later used for appraisals on other properties and may result in inflated values if sales concessions are not accurately reported. Accordingly, brokers should: Note all seller concessions or costs in the Buy/Sell contract, Settlement Statement and Real Property Transfer Declaration. Accurately and completely reflect seller contributions, inducements and seller-assisted down payments in the MLS - including updating after closing as required. Advise sellers/buyers to seek competent tax counsel on the effect of such contributions and inducement. Cooperate with appraisers seeking information on real costs of prior sales. CP-31: Acting as an Agent or Transaction Broker in Particular Transactions. Agents advocate. Transaction-Brokers assist as neutral consultants. No judge will ever determine that a licensee was a neutral third-party advisor when selling Mom's house, or buying/selling on one's account. Therefore, regardless of the firm's brokerage relationship policy, representing oneself, a relative or close personal friend, or a repeat client/investor should not be done as an agent. CP-32: Brokerage Disclosures. Where a buyer (tenant) declines to enter an agency employment agreement, a broker should enter the appropriate contract as a transaction-broker. The broker and client MUST enter an employment agreement with the "Buyer Agency" or "Tenant Agency" box checked at the top of the form BEFORE advocating for the client. CP-33: Application of Good Funds Laws. In Colorado, title actually transfers from seller to buyer at closing. Therefore all funds going into the closing must be what are known as "Good Funds." This means the funds must be readily available for withdrawal, and includes completed wire transfers, certified, cashiers or teller's checks. The title company doing the closing must have such Good Funds in hand before disbursing any moneys at closing. CP-34: Settlement Service Provider Selection, Closing Instructions and Earnest Money Deposits: This position covers how settlement service providers are selected, when closing instructions must be completed by a real estate broker ("broker") and how earnest money is to be handled. CP-35: Position on Brokers as Principals: The Commission regularly receives complaints stating that a licensed broker acting as a principal in a transaction failed to do one of the following: failed to disclose adverse material fact; failed to disclose brokerage relationships; failed to ensure that contract document and/or settlement statements reflect terms of the transaction; has filed a document that unlawfully clouds title to the property; fails to disclose broker's licensed status; mismanages funds belonging to others ; and/or falsifies information used for purposes of obtaining financing. The Commission reminds licensees that the Commission may investigate and discipline a licensee acting in the capacity of a principal in the transaction. (See Seibel v. Colorado Real Estate Commission, 34 Colo. App. 415, 530 P.2d 1290) CP-36: CP-36 Commission Position on Minimum Service Requirements: The Commission has received numerous inquiries regarding the minimum services that brokers must provide to buyers or sellers of real property. §12-61-803, C.R.S. requires that any broker performing the activities requiring a real estate broker's license as set forth in §12-61-101(2), C.R.S., act in the capacity of either a transaction broker or a single agent in the transaction. The minimum duties required to be performed by a real estate broker acting in the capacity of a single agent are set forth in: §12-61-804 and 12-61-805, C.R.S. §12-61-804, C.R.S. Single agent engaged by seller or landlord states, in part: (1) A broker engaged by a seller or landlord to act as a seller's agent or a landlord's agent is a limited agent with the following duties and obligation: (a) To perform the terms of the written agreement made with the seller or landlord; (b) To exercise reasonable skill and care for the seller or landlord; (c) To promote the interests of the seller or landlord with the utmost good faith, loyalty, and fidelity, including, but not limited to: (I) Seeking a price and terms which are acceptable to the seller or landlord; except that the broker shall not be obligated to seek additional offers to purchase the property while the property is subject to a contract for sale or to seek additional offers to lease the property while the property is subject to a lease or letter of intent to lease: (II) Presenting all offers to and from the seller or landlord in a timely manner regardless of whether the property is subject to a contract for sale or a lease or letter of intent to lease; (III) Disclosing to the seller or landlord adverse material facts actually known by the broker; (IV) Counseling the seller or landlord as to any material benefits or risks of a transaction which are actually known by the broker; (V) Advising the seller or landlord to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of such broker; (VI) Accounting in a timely manner for all money and property received; and (VII) Informing the seller or landlord that such seller or landlord shall not be vicariously liable for the acts of such seller's or landlord's agent that are not approved, directed or ratified by such seller or landlord. (d) To comply with all requirements of this article and any rules promulgated pursuant to this article; and (e) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations. 12-61-805, C.R.S. Single agent engaged by buyer or tenant states, in part: (1) A broker engaged by a buyer or tenant to act as a buyer's or tenant's agent shall be a limited agent with the following duties and obligations: (a) To perform the terms of the written agreement made with the buyer or tenant; (b) To exercise reasonable skill and care for the buyer or tenant; (c) To promote the interests of the buyer or tenant with the utmost good faith, loyalty, and fidelity, including but not limited to: (I) Seeking a price and terms which are acceptable to the buyer or tenant; except that the broker shall not be obligated to seek other properties while the buyer is a party to a contract to purchase property or while the tenant is a party to a lease or letter of intent to lease; (II) Presenting all offers to and from the buyer or tenant in a timely manner regardless of whether the buyer is already a party to a contract to purchase property or the tenant is already a party to a contract or a letter of intent to lease; (III) Disclosing to the buyer or tenant adverse material facts actually known by the broker; (IV) Counseling the buyer or tenant as to any material benefits or risks of a transaction which are actually known by the broker; (V) Advising the buyer or tenant to obtain expert advice as to material matters about which the broker knows but the specifics of which are beyond the expertise of such broker; (VI) Accounting in a timely manner for all money and property received; and (VII) Informing the buyer or tenant that such buyer or tenant shall not be vicariously liable for the acts of such buyer's or tenant's agent that are not approved, directed, or ratified by such buyer or tenant; (d) To comply with all requirements of this article and any rules promulgated pursuant to this article; and (e) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations. The minimum duties required to be performed by a real estate broker acting in the capacity of a transaction broker are set forth in §12-61-807, C.R.S. which states, in part: (1) A broker engaged as a transaction-broker is not an agent for either party; (2) A transaction-broker shall have the following obligations and responsibilities: (a) To perform the terms of any written or oral agreement made with any party to the transaction; (b) To exercise reasonable skill and care as a transaction-broker, including, but not limited to: (I) Presenting all offers and counteroffers in a timely manner regardless of whether the property is subject to a contract for sale or lease or letter of intent; (II) Advising the parties regarding the transaction and suggesting that such parties obtain expert advice as to material matters about which the transaction-broker knows but the specifics of which are beyond the expertise of such broker; (III) Accounting in a timely manner for all money and property received; (IV) Keeping parties fully informed regarding the transaction; (V) Assisting the parties in complying with the terms and conditions of any contract including closing the transaction; (VI) Disclosing to prospective buyers or tenants any adverse material facts actually known by the broker including but not limited to adverse material facts pertaining to the title, the physical condition of the property, any defects in the property, and any environmental hazards affecting the property required by law to be disclosed; (VII) Disclosing to any prospective seller or landlord all adverse material facts actually known by the broker including but not limited to adverse material facts pertaining to the buyer's or tenant's financial ability to perform the terms of the transaction and the buyer's intent to occupy the property as a principal residence; and (VIII) Informing the parties that as a seller and buyer or as landlord and tenant they shall not be vicariously liable for any acts of the transaction-broker; (c) To comply with all requirements of this article and any rules promulgated pursuant to this article; and (d) To comply with any applicable federal, state, or local laws, rules, regulations, or ordinances including fair housing and civil rights statutes or regulations. §12-61-803, C.R.S. allows real estate brokers to perform duties in addition to those established in §§12-61-804, 12-61-805 and 12-61-807, C.R.S. The additional duties may include, but are not limited to, holding open houses, property showings, providing a lockbox, use of multiple listing services or other information exchanges, etc. Additional services that brokers agree to provide their clients must be documented in writing. A broker is not allowed to solely perform "additional" services which require a real estate broker's license, i.e. offering the real property of another for sale through advertisements, without providing the minimum duties required by single agency or transaction brokerage. The Commission does not regulate the fees or commissions charged by brokers for minimum or additional services provided. Fees and commissions are negotiable between the broker and the principal. Please be advised that since 2011 the Colorado Real Estate Commission issued several new position statements. The new position statements are as follows: Position Statement CP37 - Survey and Lease Objections Position Statement CP38 - AFBA Disclosures and Conflicts of Interest Position Statement CP39 - Lease Options, Lease Purchase Agreements & Installment Land Contracts Position Statement CP40 - Teams Position Statement CP41- Competency Position Statement CP42 - Apartment Building or Complex Management Position Statement CP43 - Property Inspection Resolutions Position Statement CP44 - Coming Soon Listings Position Statement CP45 - Defined Terms Position Statement CP46 - Broker Disclosure of Adverse Material Facts A list of all the Real Estate Commissions' positions statements can be found at: https://www.colorado.gov/pacific/dora/division-real-estate-rule-making-and-position-statements Summary This concludes Chapter 3. Below is a brief summary which you can review before taking your quiz. Homebuilder's Exemption from Licensing: Salespersons working for new homebuilders are not required to be licensed. Referral Fees and Advertising Services: A broker may not pay commissions or referral fees to unlicensed persons for activities requiring a license. Sign Crossing Rule: a broker may not contact a seller or buyer who is party to a current exclusive listing or employment agreement. Interest Bearing Trust Accounts: Except in the case of mobile home park management, any interest paid on trust accounts does not belong to the broker. Advance Rentals and Security Deposits: Advance rent must be held in escrow until applied to the owner's credit. Release of Earnest Money: A broker is not required to return disputed earnest money, but may await court instruction resulting from lawsuit between the parties or may turn the disputed funds over to a court for distribution. Assignment of Contracts and Escrowed Funds: When a real estate company is sold, merged or goes out of business, all interested parties must be notified and permission obtained to transfer any listing/employment agreements or assign any escrowed funds. Recordkeeping by Brokers: The loan payoff statement should be retained by the listing broker; the new loan statement should be retained by the broker working with the buyer. Compensation Agreements between Employing and Employed Brokers: The Commission will not get involved in compensation disputes between employing brokers and their licensees. Assignments of Broker's Rights to a Commission: An employed broker must place any funds from any source with the employing broker, and may not accept a commission or any valuable consideration from anyone other than the employing broker. Broker's Payment or Rebating a Portion of an Earned Commission: brokers may generally add a sum of money to the earned commission from the brokerage services. Single-Party Listings: Listing a property for sale to a specified single purchaser is unfair to the seller, possibly putting an unaware seller, who also signs a normal exclusive listing, in jeopardy of owing two commissions. Sale of Modular Homes by Licensees: A licensee may sell a modular home and not be subject to the license law restrictions on delivering all money to, or receiving commissions, only by the employing broker. Sale of Items Other than Real Estate: If items or services are sold under a property management agreement a broker must disclose to both buyer and seller that the licensee is being compensated by a vendor or contractor. Access to Properties Offered for Sale: The listing broker is primarily responsible for safeguarding access instructions to property listed for sale. Payments to Wholly Owned Employee's Corporation. An employed broker must be licensed in his own personal name, and may not use a corporate name in the practice of real estate. Short-Term Occupancy Agreements: Resort or hotel-type agreements are not leases and are exempt from the definition of real estate brokerage. A licensed broker conducting such activity must still escrow and account for any held money belonging to others. Unlicensed Personal Assistants: Unlicensed persons may not perform activity requiring a license. Written office policy should detail the duties, responsibilities and limitations of personal assistants. Assistants should be paid in some manner other than sharing in sales commissions. Office Policy Manuals should contain procedures for at least: Typical real estate transactions Non-qualifying assumptions and owner financing. Guaranteed buyouts. Investor purchases. Handling of Confidential Information in Real Estate Brokerage: requirement for written policies to safeguard files. Use of Licensee Buyout Addendum is required only when a licensee contracts to purchase a property: Concurrent with listing the property for sale. As an inducement to, or to facilitate the owner's purchase of, another property. But continues to market the property under an existing listing agreement. A broker may use a CMA in court testimony or for tax considerations. Recording Listing Contracts: The only appropriate courses of action are: mediation, arbitration, or civil action. Showing Properties: Brokers must advise clients, and include in listing/employment contracts on the methods, advantages and limitations of controlling access to the property. Megan's Law: A licensee should inform potential buyers to contact local law enforcement officials for information if the presence of registered sex offenders is of concern to the buyer. Seller Assisted Down Payments: Brokers have a responsibility to safeguard the representation of accurate sold data. Such data is often later used for appraisals on other properties and may result in inflated values if sales concessions are not accurately reported. Agents advocate. Transaction-Brokers assist as neutral consultants. Where a buyer (tenant) declines to enter an agency employment agreement, a broker should enter the appropriate contract as a transaction-broker. Application of Good Funds Laws: The title company doing the closing must have such Good Funds in hand before disbursing any moneys at closing. The Commission has received numerous inquiries regarding the minimum services that brokers must provide to buyers or sellers of real property. Click here if you would like to open this summary as a pdf, which you can then print or save to your device: Chapter 3 Summary Congratulations - you have completed Chapter Three! Pass the following quiz with a score of 80% or better to continue onto Chapter Four. Good Luck!

12-61-706 Levels of Appraisers

There are four appraiser levels rising in complexity of qualifications and experience from: Licensed - An appraiser possessing additional education and 2,000 hours of experience over at least one year. Certified Residential - An appraiser possessing substantial education, 2,500 hours of experience over at least two years; can appraise "complex" residential properties. Certified General - An appraiser possessing extensive education, 3,000 hours of experience over at least 2 1/2 years, including 1,500 hours of non-residential appraisal; may perform appraisal of one-of-a-kind properties such as a church or golf course, etc. Licensed ad valorem - for county assessor or taxation employees.

TITLE 38, ARTICLE 33.3 - COLORADO COMMON INTEREST OWNERSHIP ACT.

This act is commonly referred to as CCIOA, (pronounced ki-o-wa). It became effective July 1, 1992, was updated in 2006 and 2007 and superseded most of the Condominium Act above. The act covers approximately 63 pages of text in the real estate manual and covers in extreme detail the types, creation, management, meetings, lien authority of common interest communities - even down to the size of political signs that may be displayed in a unit, for example. Since common interest communities include both multi-family and single family developments with by-laws and homeowner associations, (perhaps as much as 50% of all residential properties) this law may cover the majority of Colorado urban dwelling residents. A more thorough reading of this statute should be a prerequisite to selling property in a common interest community - or perhaps before even residing in one.

Customer

a party to a real estate transaction who has not hired or engaged a broker and is therefore NOT a party to a brokerage relationship.

Mortgage Broker

an individual who, on behalf of a borrower, negotiates or originates a residential loan that will be funded by a mortgage lender. Mortgage brokers often "shop" loans among various lenders to secure the best terms for the borrower.

broker

as one who on behalf of another person, for any form of compensation, does, or tries to do (or even thinks of) negotiating, listing, selling, exchanging, buying, renting, leasing, auctioning or dealing in options in, real estate or any interest therein. This includes a business opportunity involving an interest in real estate; or provides available rental information to prospective tenants. This includes performing any of these acts as a paid employee. This definition pretty much covers the waterfront. Most of these actions requiring a license are self-explanatory except perhaps for dealing in options.

option

is a speculative, unilateral contract in which one person, (the optionee) offers money now for the future right to buy a certain property. The optionee may elect to "exercise" or carry out the purchase, or may choose to let the option expire, but the landowner (the optionor) must sell if the option is exercised by the contract end date.

Mortgage Lender

the payee on the promissory note for the loan, the person or entity whose money actually funds the loan.

Unit 2-4 Colorado Common-Interest Ownership

COLORADO COMMON-INTEREST OWNERSHIP ACT (CCIOA) A common interest community is defined as one in which owners are obligated to pay some fees for common areas, such as taxes, insurance, maintenance or improvement. It is a condominium, townhouse, subdivision or co-op community subject to the payment of dues to a Homeowners Association (HOA). An entire chapter in the 2018 Colorado Real Estate Manual has been devoted to Common Interest Communities and Community Association Manager Licensing Program. CCIOA was originally passed to provide HOA's with an effective means of organizational transfer of control from the developer to owners' administration. It gave HOA's the power to file liens to collect delinquent dues and fees from homeowners. In 2006, in response to HOA over restriction, the Colorado legislature updated CCIOA to even the balance of power and rights between unit owners and the HOA. Unit owners, for instance, must be given notice of HOA meetings, Board member changes, and may even collectively force audits of HOA funds in some situations.

Unit 2-4 Conway-Bogue

Conway-Bogue is the shortened name of one of the parties to a major case law opinion by the Colorado Supreme Court in 1957. The lawyers in the Denver Bar Association sued the Conway-Bogue Realty Investment Company to prevent what the lawyers considered real estate broker infringement on their practice of law. The Supreme Court determined that many of the acts performed by real estate brokers do constitute the practice of law. This includes preparing deeds, leases, completing standard and approved contract forms, etc., and giving explanation or advice as to the legal effect of these forms. It also concluded that licensed real estate brokers may prepare these sale, loan, and leasing documents (that normally only attorneys-at-law may prepare) only for their own customers in transactions in which they are acting as a real estate broker. The courts said it reached its decision based on: 1. A scarcity of lawyers in many parts of the state. (Remember, this was in the 1950's.) 2. A 50+-year history of the public seeking brokers rather than lawyers to conduct real estate transactions. 3. No record of any public or lawyer harm from the (then) current practice. 4. No move by the legislature to stop this "alleged evil" practice. The Court found that to prohibit brokers from this limited practice of law would "not be in the public interest." The Colorado Association of REALTORS® legal counsel cautioned its members that the broker's activity must be limited as to: Brokers must be connected to the transaction as broker. Brokers may not charge for legal document preparation. Brokers may only prepare "commonly used, printed, standard and approved forms." (Instructor's Note: This is the precursor to Rule F-7 and the Commission-approved forms in required use today.) Clearly, brokers must NOT prepare: Legal documents as a business, courtesy or favor, whether paid or not, when not connected to the transaction as a broker. Documents that are not on standard and approved printed forms. Wills or other legal documents beyond those customary in a real estate transaction. C.A.R.'s attorney also warned that it would appear in the best interests of the public and also in conformity with the Court's opinion for brokers to: Always recommend that title be examined. Inform the parties of their right to have legal documents prepared by their own choice of lawyers. Advise the parties of their right to have a lawyer represent them at closing. Seek attorney assistance when legal complications are beyond the broker's knowledge. SUMMARY: The Colorado Supreme Court ruled that real estate brokers may prepare certain legal documents by filling in the blanks on standard, approved printed forms when they are the broker in the transaction and receive no compensation other than their commission. The legal summary issued by C.A.R.'s legal counsel in 1957 ended with the following caution: "It is to the interest OF EVERY BROKER (emphasis added) that these limitations be properly recognized and followed so that the Supreme Court would not have reason to change its opinion at a later date." Those words are as true today as when they were first written. "Standard and Approved" Forms were not defined in the court opinion, and were not given over to the Real Estate Commission with the adoption of Rule F until 1971. (Instructor's note: Rule F will be covered along with the forms themselves in a following section of this course.) The authority to complete standard forms was not codified into the license law (C.R.S. 12-61-803(4)) until 1993. Unit 2-4 On the same day that Conway-Bogue was decided, the Supreme Court also settled two related cases in which the Denver and Colorado Bar Associations had sued to stop two title companies from preparing legal documents and performing other acts which, the lawyers claimed, also constituted the unauthorized practice of law. The Court issued one decision from the cases taken together. It held that the title companies: Could prepare papers related to loans made from their own funds. Could not prepare/charge for legal documents for others. Could not mandate closing or escrow service as a requirement of selling title insurance. Today, title companies close most real estate transactions - instead of brokers. It is important to remember, however, that the closing service is separate from the issuance of title insurance. While the title company may charge the buyer and seller for this closing service (Rule E-37), the buyer and seller may not pay for preparation of legal documents. The title company prepares legal documents (deeds, etc.) as the broker's "scrivener" (writer), and the broker normally pays this nominal fee. Finally, even though title companies routinely conduct closings, Commission Rule E-5 holds the broker responsible for the proper closing of a Colorado real estate transaction.

Parallel Brokerage Activities Allowed:

A listing broker may list properties other than owned by the seller for sale or lease, and may show competing properties to buyer/tenant prospects. A selling or cooperating broker is the one who brings the buyer to the transaction - as opposed to the listing broker. Statewide, in very few instances does the listing broker also find the buyer, and therefore also become the selling broker. A selling broker may show the same property to multiple buyer/tenant prospects with no conflict of interest. A broker may serve as a designated broker for the same or a different party in another real estate transaction.

TITLE 12, ARTICLE 61, PART 7 - REAL ESTATE APPRAISERS.

(Note: Most of the appraiser part of the license law will not apply to your practice of real estate. The following few salient points are important. The entire Part 7 may be found in Chapter 11 of the Colorado Real Estate Manual.)

COMMISSION RULE E - SEPARATE ACCOUNTS - RECORDS - ACCOUNTINGS - INVESTIGATIONS

(This E Rule is more likely than the preceding rules to have a direct impact on your day-to-day real estate practice. The previous rules focused on getting and keeping your license. Rule E is the rule that deals with administration of your real estate brokerage and the actual practice of real estate.) Rule E-1. Other people's money, e.g. earnest money, rent due to a landlord or tenant security deposits, must be held in an account labeled "trust" or "escrow", and labeled by the type of money held in the account. This means you may deposit earnest money for all different sales in a "sales trust account," but must keep homeowners' association dues (for example) in a separate, appropriately labeled trust account. Rule E-1(a). Trust accounts must be in the name of the licensed individual broker, or if the brokerage is licensed as an entity, in the name of the individual employing broker AND the entity. The individual broker must always be able to withdraw money from the account, and may authorize any other person (with or without a license) to co-sign on the account. In spite of such co-signers, the individual broker always remains responsible for trust account management. Rule E-1(c). Trust accounts may not restrict withdrawals to a fixed maturity date, or impose penalties for early withdrawal unless all parties to the transaction consent in advance in writing. This typically makes it difficult to use CD's or other sophisticated financial instruments as trust account depositories. Rule E-1(f). Trust account funds (other people's money) may not be commingled (mixed) with money belonging to the broker or company, except that a small amount of broker funds may be deposited to keep the account from ever reaching a negative balance and to keep from using any other people's money to cover any incidental bank charges (such as purchasing checks). - When money in a trust account may be earned by the broker, it must be withdrawn promptly from the trust account (and moved to the company operating account). - Money owed to, or held for, employed licensees, including for payment of insurance premiums or potential IRS withholding, must not be held in a trust account (except that portion of earnest money which may become earned commissions upon closing). - A broker may advance his or her own money for the benefit of another and keep it in the trust account. However, once advanced, the broker has no right to withdraw the money for other than the original purpose for which it was identified and advanced. - If a broker owns an interest in a partnership, joint venture or syndication, any funds connected to such an enterprise where the broker may also earn a commission, must be maintained in a discrete trust account. - Trust fund moneys are "earned" only after all contracted services are performed and no person holds any right of recall on the money. Brokers must maintain an accounting system consisting of a journal and individual property/client ledgers and account for moneys deposited into, and withdrawn from, trust accounts. Unit 2-2 Rule E-1 Rule E-1(g)A broker/builder must hold earnest money deposits for new construction in a trust account and may not use the deposit for construction purposes. Rule E-1(h)A brokerage dealing primarily in sales may deposit/disburse property management rent and security funds into/out of the company sales escrow account until 7 or more properties are under management. Rule E-1(j)Money received under an installment land contract must be held in an escrow account until the land contract is signed by the seller and a copy of the signed contract is delivered to the buyer. Rule E-1(k).If a buyer borrows money using the property as collateral before the seller delivers the deed to the buyer, all payments received by the broker must be held in an escrow account until the deed is delivered, unless all parties agree otherwise in writing. Rule E-1(l).The form of earnest money (e.g. check, cash, promissory note, gold bullion, etc.) must be identified in the contract. If it is a promissory note, the broker must specify in the contract the due date of the note or attach a copy of the note to the contract. The broker must present any promissory note for payment when due, and if not paid, must immediately inform the seller. Rule E-1(m).Property management funds must be deposited within 5 business days following receipt. Rule E-1(n).Earnest money in any form must be payable to or assigned/endorsed to and delivered to the listing broker who must hold it until due in the case of a promissory note, or deposit it into the broker's escrow account within 3 business days of the broker receiving notice of contract acceptance. The parties may instruct the broker in writing (usually via the contract) to deliver the earnest money to a third party (e.g. title company). If so, the broker must retain a copy of the earnest money instrument along with the endorsement to the third party, and obtain and keep a dated and signed receipt upon delivery to the third party. Rule E-1(o). Recordkeeping Requirements. Brokers must maintain a recordkeeping system consisting of: 1. Journal, (similar to a checkbook register) a chronological log of all deposits into, or disbursements from, the account. 1. Ledger, a chronological log of all deposits/disbursements made on behalf of each beneficiary (seller, buyer, tenant or landlord) to a transaction. Each ledger entry must contain the same information as above for journal entries. No individual ledger may EVER have a negative (less than zero dollars) balance. 2. Bank Reconciliation Worksheet, Brokers must reconcile each escrow account monthly (unless no banking activity occurred in the account). Reconciliation is satisfactory when the journal cash balance exactly matches the sum of all ledgers and then exactly matches the balance on the monthly statement from the bank. Sample forms for journal, ledger and bank reconciliation worksheets, as well as sample accounting transactions are available in Chapter 19 of the CREM. Even if the broker reports only summary amounts for managed property, each ledger entry must be linked to supporting detailed documentation for every cash receipt/payment. Property managers must account to each owner for each property within 30 days after the end of any month in which funds were either received or disbursed, unless otherwise agreed to in the written management agreement. We mentioned that a broker could deposit a small amount of personal funds in each escrow account as a protection from entering a negative balance because of bank charges or similar. If this is the case (and it is a good practice) then the money must be entered on a separate "Broker's Ledger," and must also be entered in the account journal. Documentation of deposits and disbursements also includes electronic funds transfers, and telephone transfers, etc. Detailed notes with information similar to the journal entries shown previously are required. All such confirmations, front/back copies of checks, etc. must be available for Commission inspection upon request. Escrow accounting must be on a cash basis. A beneficiary of an escrow account may request "accrual basis" accounting in writing, which, if agreed to, requires the broker to maintain a separate recordkeeping system (journal, ledgers and bank account) for each beneficiary. A broker must secure and maintain written client approval prior to charging or receiving markups, service fees, oversight fees or any compensation above amounts charged by any third party vendor or affiliated business entity. The broker must also keep record showing the amount or percentages of each such receipt of funds. Rule E-1(p). Money belonging to one beneficiary of an escrow account may never be used for the benefit of another beneficiary. (Such a "borrowing," even accidentally, is a likely cause of a negative ledger balance.) Rule E-1(q). Anything of value received in lieu of cash shall be held by the broker unless otherwise agreed. (So try not to accept a sailboat as earnest money. It's not only costly to store, but frustrating to not be able to enjoy it on the water.) Rule E-1(r). If a firm has branch office(s),each branch may either use the main office escrow account and recordkeeping system, or set up a separate account(s) and system(s) for the branch. An escrow account must always be linked to a recordkeeping system in the same office. Rule E-1(t). There is no limit to the number of escrow accounts a broker may maintain. If a broker doesn't maintain other people's money (e.g. uses a title company for all earnest money), there is no need to even maintain an escrow account. Rule E-2. When a client pays for some repair or advertising or service ordered by the broker before the service is completed, the broker must deposit the money in an escrow account until it is earned by full performance. Brokers must account to each beneficiary within 30 days of any withdrawal(s) from an escrow account. (NOTE: This is important to remember when a closing will not take place for an extended time. An interim accounting may be necessary.) Money agreed to in writing by the payer and broker as being a nonrefundable retainer may be received and spent as the broker determines, and is not subject to escrow accounting. Rule E-3. Every licensee must produce documents or records as requested for audit or investigation by the real estate commission. Homeowners Association (HOA) records and documentation belong to the HOA, must be delivered to them by the broker upon terminating any HOA management contract. A broker may retain copies of these original records at the broker's expense. Rule E-4. A broker must deliver a duplicate of any broker-prepared document that pertains to the employment agreement or property transaction, and must retain a copy of such duplicate for inspection by the real estate commission. If such documents are finance-related (e.g. note, deed of trust, etc.) they should be unsigned or prominently marked "Copy", as the originals are negotiable as real money. Brokers working with buyers have the same duplicate delivery and record retention requirements as above. A buyer broker is not required to maintain a copy of the listing contract nor of the seller's settlement statement. A broker is not required to maintain copies of: 1. Public records 2. Title commitments 3.Loan applications 4. Lender required disclosures 5. Third-party affirmations after settlement There is a useful index of required sales and management transaction file contents in Chapter 19 of the real estate manual for reference when building your first real-world transaction files. Many brokers will also have transaction file checklists available, and some may require file inventory before paying associate commission splits. Rule E-5. A broker must sign and provide an accurate, complete and detailed settlement statement at the time of closing to his or her client or customer. If signed by the employed licensee, settlement statements must be delivered to the employing broker immediately after closing. This rule places the closing responsibility on the designated broker, but does not relieve the employing broker's supervisory responsibilities. The employing or independent broker must retain a signed copy of all settlement statements for future use or inspection by the real estate commission. Settlement statement(s) must show: Date of closing. Purchase price. Itemization of adjustments, money or things of value debited or credited to the pertinent party. Date of adjustments, if not the same as closing date. Balance(s) due from respective parties to the contract. Payees, Makers and Assignees of any notes paid, made or assumed. Debit and Credit of any pre-owned home warranty service contract. The seller and buyer need only receive their respective debit/credit itemization on their settlement statement - not debits and credits of the other party. Settlement statements shall be delivered at the time of delivery and acceptance of title, whether by bill of sale, deed or installment land contract for a later deed. If the employing or independent broker's company prepares the settlement statements and documents and conducts the closing, such broker is primarily responsible for the accuracy and completeness of the statements and documents. If the designated broker is unable to attend a closing, or review closing documents, another licensee may agree, or the employing broker may designate another licensee to review and sign a closing statement and will assume joint responsibility with the absent licensee for its accuracy, completeness and delivery. (Instructor's note: Even though the substitute licensee was blindsided and knows nothing of the parties or transaction! My free risk reduction advice: if offered this substitute "opportunity," go back home and call in sick until after the closing.) A broker may transfer closing funds from the escrow account to the closing entity "at or before" closing, must obtain a dated/signed receipt therefore in the transaction file, and the settlement statement must contain the names of both the licensee who signs the statement and the employing broker, if applicable. If the buyer obtains a new loan and the lender deducts costs from the total loan amount before disbursing loan proceeds prior to closing, the loan proceeds must be reconciled with buyer and seller settlement totals. A copy of this reconciliation must be retained in the transaction file and be made available for future real estate commission audit. Rule E-6. Electronic or paperless transactions are permitted, provided the record may be produced upon request by the commission in a format capable of retrieval, or being legibly printed. Either principal in a transaction may request, and must be provided, print copies of closing documents. Rule E-8. Advertising must be done in the name of the employing broker unless it is property owned by the licensee and not listed with the employing broker (Note: most brokers will require you to list through them.) Advertising of general sales activity must cite the source of the data, must disclaim that all advertised sales intend only to show trends and were not necessarily sold by the advertising licensee, or shall separately identify the sales for which the advertising licensee was directly responsible. Rule E-10. Licenses are non-transferable, and an employed licensee may never represent him- or herself as an independent or employing broker. Rule E-11. Every listing agreement must contain a definite termination date. ule E-12. When a listing or right-to-buy agreement contains a "holdover agreement" the right to a commission applies only to those persons or properties actually negotiated during the agreement and for which the broker submitted names or addresses to the principal in writing at the end of the agreement. (Instructor's note: All Commission-approved employment agreements contain a pre-printed holdover agreement - whereby the broker has the right to an earned commission if the seller sells to that buyer [or the buyer purchases that particular property] after the expiration of the employment. This is to prevent the seller or buyer from end-running the broker in an attempt to avoid paying a commission. It is a good practice to submit the name of everyone who views your listed property [or every property the buyer client viewed] during the term of the employment.) Rule E-13. (Known as the "sign-crossing rule") A licensee may not initiate communication if a seller or buyer is party to an exclusive right or exclusive agency contract with another brokerage. However, if the seller or buyer initiates the contact, the licensee may negotiate terms on which a future employment contract might be based, or actually enter into an employment agreement to be effective after the current agreement expires. (Instructor's note: These situations are extremely dangerous. The seller is usually upset that the property didn't sell. The buyer is usually upset at not finding the right property. Either way, you may be jumping into the middle of a nasty situation. Remember that if the current employment failure upset the client, just think how upset he/she will be if/when yours expires without a sale! Be especially careful to never speak badly of theprevious licensee or agree with the seller/buyer on complaints about which you have no first-hand knowledge.) Rule E-14. In every transaction, before closing the licensee must recommend a.) Examination of title and b.) Use of legal counsel. (Instructor's Note: Every Commission-approved real estate employment agreement and buy/sell contract has these advisories pre-printed. This rule would seem to require verbal counsel as well. Remember that in Colorado we are privileged to conduct real estate transactions without having an attorney at law involved. But advising the client of the right to consult legal experts is prudent and indeed absolutely necessary when matters are beyond your level of expertise.) Rule E-15. A broker may not claim any portion of earnest money if the seller fails to close for whatever reason and the failure is not due to the buyer. While it is true that you will have earned your commission upon performing your part of the employment agreement (finding a ready, willing and able buyer), the earnest money must be returned to the buyer and you must demand from, or sue, the seller for your commission. Rule E-16. Security deposits may not be turned over to the owner unless the tenant agrees, knows where the money will be, and how to get it returned. If given over to the owner, the management agreement must clearly make the owner responsible for its return and authorize the release of the owner's name and address to the tenant in the event of a dispute. A broker may never contract to use a tenant security deposit for the broker's own benefit. Rule E-18. In a transaction in which a licensee will earn a commission, informed, written consent from the client/customer must be obtained prior to receiving any fee or incentive from a mortgage lender. The federal Real Estate Settlement and Procedures Act (RESPA), however, may be stronger than this and prohibits payment of any money to a settlement service provider (e.g. real estate broker) for services not actually provided. Rule E-19. In a transaction in which a licensee will earn a commission, a licensee may never accept a fee or incentive of any kind from a title insurance company. Rule E-20. Only the seller sets or changes the asking price for a property. (Never undertake this on your own without written or witnessed seller authorization.) Rule E-21. If the commission sends written notice of a complaint against you, or that you have been selected for an audit, or that recordkeeping problems were discovered in an audit, you must respond in writing within the time allowed, including: 1. Full response to the allegation or complaint. 2. Full response to any additional questions in the notice. 3. Any requested documents or records. 4. Any additional pertinent explanation or material. Rule E-22. This rule passed in 2006, is nearly six pages long! It incorporates, by reference, the federal Real Estate Settlement and Procedures (RESPA) law. Although far too complex to summarize, Rule E-22 may be reduced ad absurdum to the single premise that a broker may not pay or receive anything of value to or from anybody in connection with transaction except for "services actually rendered." Rule E-23. A Colorado broker may pay a finder's fee or share a commission with an out-of-state broker if: 1. The out-of-state licensed broker must have a domicile and office elsewhere. 2. All advertising, negotiating, contracting and conveyance done in Colorado must be in the name of the Colorado broker. All pre-closing funds are deposited in the Colorado broker's name according to Colorado Commission rules. Rule E-24. If you lie or misstate fact on your broker application, you are subject to discipline. Rule E-25. A licensee must always disclose personal conflicts of interest to clients/customers. A licensee must always disclose that he/she is licensed when selling, buying or leasing for self. Rule E-27. A licensee must never predict future availability or cost of services, utilities, or the character or possible future use of a property or any nearby property. Rule E-29. An employing broker has authority, direction and control over licensee conformance with licensee law and Commission rule. In every complaint against a licensee, the Commission shall look at whether proper supervision was in place. Broker supervision applies to licensees and all broker employees including secretaries, bookkeepers and unlicensed assistants. Rule E-30. Employing Broker Duties are: Maintain all trust accounts and trust account records. Maintain all transaction records. Develop office policy manual and review it periodically with all employees. Provide a HIGH level of supervision for all licensees with less than 2 years active licensed experience. Provide REASONABLE supervision for experienced licensees. Try to prevent and preclude recurrence of violations of license law, rule and office policy. Adequately supervise main and branch offices, regardless of delegation to licensed/unlicensed managers. Rule E-31. REASONABLE Supervision of experienced licensees means: Maintain written office policy detailing licensed employee duties and responsibilities. Such policies shall be given to, read and signed by each licensee and be available for Commission inspection. Review all executed contracts to ensure competent preparation. Review transaction files to ensure inclusion of all pertinent documents. Employed broker may delegate supervisory authority to other experienced licensees provided:Delegated licensee bears joint responsibility with Employing Broker for compliance.Delegation must be in writing, signed by the delegate and available for Commission inspection.Employing broker may never contract to delegate responsibility for broker supervision. Rule E-32. HIGH Level of Supervision for licensees with less than 2 years of active licensed experience, in addition to the above, means: Provide specific training in office policy and procedures. Be reasonable and available for consultation. Provide assistance in preparing contracts. Monitor transactions from contract to closing. Review documents in preparation for closing. Ensure employing broker or experienced licensee attends closings or is available for assistance. Employed broker may delegate supervisory authority to other experienced licensees provided:Delegated licensee bears joint responsibility with Employing Broker for compliance.Delegation must be in writing, signed by the delegate and available for Commission inspection. Rule E-33. Ministerial Tasks. With proper disclosure, a licensee acting as agent may assist the other party (customer) without either violating the agency relationship or creating a new brokerage relationship with the customer. Such tasks include: Showing property. Preparing and delivering offers and counteroffers. Revealing available financing alternatives. Providing information on services contributing to a successful closing and fulfillment of the agency. Rule E-34. All offers to buy or lease must be presented to the listing broker if the listing is current and exclusive. Rule E-35. Written brokerage relationship disclosures must be made before a licensee elicits or accepts confidential information concerning a buyer or tenant's need, motivation or financial qualifications. No disclosure is required for bona-fide open houses, preliminary conversations or "small talk" concerning price range, location or property styles, or responding to general factual questions concerning advertised properties. Rule E-36. A broker who provides closing service may not disburse funds until they are available for immediate withdrawal from the institution holding the funds, either as a matter of right or under a contingency-free agreement with the financial institution. Rule E-37. A licensee is not required to prepare any legal documents, but if a licensee (or his or her agent) does so, the licensee or agent may not charge the client or customer a separate fee. Attorneys for buyer or seller may charge document preparation fees to the public and these are not the responsibility of the broker. The buyer, seller, licensee or any other party, may pay any other closing costs. A broker who charges fees for conducting closings must specify the costs and obtain the written consent of the parties to be charged. Rule E-38. Broker Designation. An employing broker must designate a broker in writing for every side of every transaction (C.R.S. 12-61-803(6)(a)). Instead of writing a separate letter or memo each time, a broker may write an office policy that ties automatic designation to the broker or team who signs any one of the six Commission-approved listing/employment contracts, or a Broker Disclosure to Buyer in the case of working as a transaction broker by disclosure. The employing broker has the right to substitute or add designated brokers and must disclose any such designation to the buyer or seller. Rule E-39. Every employing or independent broker (including single-broker practitioners) must write a policy identifying and describing the brokerage relationships that the firm and its employed licensees offer the public. (Instructor's note: since there are only two brokerage relationships, agency and transaction, most firms allow both and leave it up to whatever the prospective client desires, or understands better.) The policy must: Apply to all licensees in the office. Be read, agreed to, and signed by each licensee. Identify the procedure for broker designation (in multiple licensee firms only). Provide adequate protection of confidential client information such as:Seller or landlord is willing to take less.Buyer or tenant is willing to pay more.Information about either party's motivating factors.Information that either party may agree to other financing.Material information about a party not required to be disclosed by law.Facts or suspicions that may psychologically stigmatize a property.Any other confidential information. An office policy may authorize an employing broker acting as a designated broker to retain supervisory oversight of that transaction. Rule E-40. A broker may work with buyer and seller in the same transaction as a transaction broker for both sides, or a single agent for one party treating the other as a customer. These options must be disclosed and made a part of each the listing/employment agreement. (Instructor's Note: The options are pre-printed in the appropriate Commission-approved forms.) A broker may never work as an agent for both sides. Remember dual agency is illegal in Colorado. A broker also may not act as an agent for one party and a transaction-broker for the other. Rule E-41. A broker agent for either party, who then secures the other party, must switch to transaction broker for both parties (assuming the original party checked the appropriate box in the listing agreement allowing a future change to transaction broker to occur. If they did not, you must quit any brokerage relationship with the second party and treat them as a customer or advise them to get their own broker.) You must provide a "Change of Status (Transaction Broker Disclosure)" form to the party to whom the change applies as soon as you become a transaction broker. If such a situation arises at the time a written offer is imminent, you may use the notice at the end of the Commission-approved "Contract to Buy and Sell Real Estate" by checking the box marked "transaction broker" and the box that says "This is a Change of Status." Rule E-44. When a license is suspended, revoked, expired or inactivated, the licensee must immediately: Cease any licensed activity. Return the pocket card to the Commission. Cease all advertising. Inform all clients, and release all listings, management agreements or other contracts requiring a license. Account for all trust funds and complete all pending closings (employing or independent brokers only). Refuse any commission unless earned prior to the loss of license. Rule E-45. Every listing/employment agreement gives the designated broker consent to share client confidential information with a supervising broker (Rules E-30, E-31 and E-32) without making the supervising broker a party to the brokerage relationship. Rule E-46. (Instructor's note: This rule pertains to Affiliated Business Arrangements. Like Rule E-22 it was adopted in 2006. It is over two pages long. It is heavily abbreviated and paraphrased here to give its basic meaning. We believe this shortened version will suffice for earning your license.) A licensee or employing broker must provide a written HUD Affiliated Business Arrangement Disclosure Statement to any buyer or seller prior to referring to any settlement service provider with whom an affiliated business arrangement exists (for example, a broker-owned title company). You must also keep a copy of the signed disclosure statement in the transaction file. Sham business arrangements are forbidden. These type of scams exact junk fees from buyers and sellers charged by non-existent companies for settlement services existing only in "smoke and mirrors." Rule E-46 requires an individual licensee to disclose to the Commission the names and physical location of any affiliated business arrangements to which the licensee is a party upon: New application for active licensure. Re-activation of an inactive license. Transfer of an active license to another brokerage firm. Employing and independent brokers must annually disclose the name and physical location of any party with whom an affiliated business arrangement exists. forbidden. These type of scams exact junk fees from buyers and sellers charged by non-existent companies for settlement services existing only in "smoke and mirrors." Rule E-46 requires an individual licensee to disclose to the Commission the names and physical location of any affiliated business arrangements to which the licensee is a party upon: New application for active licensure. Re-activation of an inactive license. Transfer of an active license to another brokerage firm. Employing and independent brokers must annually disclose the name and physical location of any party with whom an affiliated business arrangement exists. Rule E-49. A licensee shall make written notification to the Commission within 30 calendar days of any of the following: A plea of guilt, a plea of nolo contendere or a conviction of any crime identified by 12-61-113(1)(m), C.R.S. A violation or aiding and abetting in the violation of the Colorado or federal fair housing laws. Any disciplinary action taken against a licensee in any other jurisdiction, if the licensee's action(s) would constitute a violation of the real estate license law in Colorado. A suspension or revocation of a license, registration, or certification by Colorado or another state, within the last five years, for fraud, deceit, material misrepresentation, theft, or the breach of a fiduciary duty that denied the licensee the authorization to practice as a mortgage broker, a real estate broker or salesperson, a real estate appraiser, an insurance producer, an attorney, a securities broker-dealer, a securities sales representative, an investment advisor, or an investment advisor representative. "F" stands for Forms. Colorado real estate brokers are allowed to fill in the blanks on standardized, Commission-approved forms. We will cover Rule F and all the required contract forms in another section of this course. Commission Rule G is the implementation of the license law C.R.S. 12-61-101(2)(j) for brokers dealing in Rental Referral business. Rule G-2. Brokers must provide each prospective tenant a receipt for any advance fees. Such a receipt may be contained in a written contract. The receipt or contract must have the following verbatim warning in all capital letters and bold face: IF THE INFORMATION CONCERNING RENTAL FURNISHED BY THE BROKER IS SHOWN TO BE NOT CURRENT OR ACCURATE IN REGARD TO THE TYPE OF RENTAL DESIRED, THE FULL FEE SHALL BE REPAID OR REFUNDED TO THE PROSPECTIVE TENANT UPON WRITTEN DEMAND. CURRENT RENTALS HAVE BEEN VERIFIED AS TO AVAILABILITY WITHIN THE LAST FOUR BUSINESS DAYS. Unit 2-2 Rule G, I, K, & S Rule G3. A broker must retain the original (copy to the prospective tenant) of any rental referral list for 90 days. Rule G-5. When referrals are made by any method other than in-person, the broker must retain for 1 year a copy of the addresses furnished, including the name of the broker or employee who provided the address(es). Rule G-6. Broker shall make and post a written register of all advertised/ published properties. All advertised properties must have been verified as being for rent within four days before the advertisement appears. All properties advertised must be assigned a broker-developed unique identifying code, must be approved by the owner to be offered for rent (may be oral, but logged in writing by the broker), and all ads must be retained for 1 year. Rule G-7. A broker violating any of these G rules may be found unworthy or incompetent in the license law. This includes: Property is not in the area represented. Rental price advertised is other than asked by the owner. Property is non-existent or unverifiable for rent. Advertised specifics differ from the actual property. Type of property is different than advertised (e.g. advertised single-family home is actually a duplex). Rule I is entitled "Declaratory Orders" and deals with the process for petitioning the Commission for such an order to clarify or interpret any uncertainty as to the applicability to the petitioner of any statute, rule or order of the Commission. It is not germane to the issuance of a license. Rule K was added in 2008. It pertains to administrative procedures and time limits for filing designations, requests, exceptions and pleadings in regard to disciplinary actions taken by the Commission. It is not germane to the issuance of a license.

Rule A-16:

- Applicants for an initial license must submit a set of fingerprints to the Colorado Bureau of Investigation (CBI) and Federal Bureau of Investigation (FBI) for the purpose of conducting a state and national criminal history record check prior to submitting an application for a license. Fingerprints must be submitted to the CBI for processing in a manner acceptable to the CBI. Fingerprints must be readable and all personal identification data completed in a manner satisfactory to the CBI. Fingerprints to meet this requirement may be taken at PSI test centers, Arapahoe Community College in Littleton, CO, and at some law enforcement agencies. PSI and Arapahoe Community College take prints digitally - a much more legible and reliable form of printing when compared to hand-rolling prints in ink. NOTE: If you have prior legal involvement, see Commission Rule A-12 in the next section regarding a free procedure for obtaining a "Preliminary Advisory Opinion" before taking the exam and applying for a license. In addition to licensing individuals, the Commission also licenses real estate firms organized as corporations, limited liability companies, and partnerships. Sole proprietorships are not licensed separately as the individual and the proprietorship are one and the same. A broker qualified at the employing level is responsible for compliance and supervision within the firm. The law permits issuing a temporary license to a qualified employing broker in a corporation/LLC or partnership for 90 days (with one extension) to cover broker succession emergencies. Unlike individual licenses, licenses of firms do not require renewal. The broker acting for a firm is personally responsible for any mishandling of trust account money. An individual broker associate must be licensed under his or her real name, under only one name, and under only one employing broker. A woman may elect to be licensed under her maiden name. (We warned you this Section 103 was the longest...)

12-61-808 Broker Disclosures.

1 (a) Every broker shall adopt a written office policy that identifies and describes the brokerage relationships offered to the public. (NOTE: There are only two: either agency or transaction brokerage.) 1 (a) Every broker shall adopt a written office policy that identifies and describes the brokerage relationships offered to the public. (NOTE: There are only two: either agency or transaction brokerage.) 1 (c) If a seller, buyer landlord or tenant asks about a brokerage relationship NOT offered by the firm, the broker must provide the CREC definition of that brokerage relationship. This is normally accomplished by providing the Commission-approved form: "Definitions of Working Relationships." 2 (a) (I) Prior to engaging in activities requiring a license, a transaction-broker must disclose his or her transaction-broker status in writing. 2 (a) (II) The transaction-broker disclosure form is not a contract. If the buyer, seller, tenant or landlord refuses to sign, just annotate the refusal on a copy and keep it in the transaction file. 2 (a) (III) Any duties additional or different than those listed in the disclosure or employment contract must be agreed to in writing by both the transaction broker and the seller, buyer, landlord or tenant. 2 (b) A written employment agreement is required to establish an agency brokerage relationship. 2 (d) An agent of a seller/landlord intending to work with a buyer or tenant as a customer (no brokerage relationship) must disclose the agency status to the buyer. He or she must also disavow agency for the customer, must list the tasks that the broker will perform for the customer, and must advise the customer that he or she is not liable for the acts of the broker not approved, directed, or ratified. Since these disclosures are not contracts, the customer may refuse to sign, in which case the broker simply annotates that fact on the disclosure and retains it in the transaction file. 2 (f) A broker must advise other potential parties or their brokers of existing brokerage relationships at the earliest reasonable opportunity.

12-61-201 When Entitled to a Fee.

A commission is not earned until closing or until the seller states intent not to close or actually does not close.

Duties NOT owed by the Broker:

A seller/landlord agent has no duty to the buyer/tenant to investigate the property, nor to verify statements made by the seller or inspector concerning the property. (NOTE: "No duty to inspect" does not mean you may overlook material defects you actually see or may come to know.) A buyer/tenant agent has no duty to the seller to investigate the buyer's financial condition, nor to verify statements made by buyer or independent inspector. (NOTE: Again, "no duty" means you do not have to go out of your way to find out. It is just plain wrong to present an offer from a buyer you know cannot complete the terms of the offer.) A buyer/tenant agent likewise owes no duty to the buyer to independently inspect the property, nor to verify statements made by the seller/landlord or independent inspector - but must, of course, disclose adverse material facts that are known. A transaction-broker is not obligated to inspect the property, the buyer/tenant's financial condition, or to verify accuracy or completeness of statements made by either side. By its very nature and definition, a transaction broker is a non-agent, non-advocate, neutral, impartial real estate service provider. A transaction-broker has no imputation of knowledge, that is, he or she is not presumed to know any confidential information not actively transmitted to him or her. An agent, on the other hand, is presumed to have imputed knowledge about the client and transaction. Note: We've discussed imputed knowledge twice, the severing of the employing and other associate brokers from the relationship and the designated broker's sole responsibility to protect confidential information. So what happens when the licensee needs guidance involving these issues to keep a transaction on track? While not in the license law, the Commission has enacted a rule (E-45) to allow for sharing of confidential information with a "supervising" broker when necessary, if authorized by the client. We'll present this in the chapter on Commission Rules and again in the consideration of the listing contracts.

12-61-809 Duration of Relationship

A. A brokerage relationship continues until performance of the contract OR the earlier of: A. The date of expiration in the contract or agreed to by the parties. B. Any termination by either party. C. One year after the date of the contract. B. After the contract expires, terminates, or is completed, an agent owes no further duty to the principal except: I.Accounting for all money and property.Maintaining confidential information unless disclosure is approved in writing by the principal, required by law, or is released by someone other than the broker. II.After the contract, a transaction-broker only has the duty to account for all money and property. C. After the contract, a transaction-broker only has the duty to account for all money and property.

12-61-118 Employing Broker Liability Limited for Acts of Employees.

An employing broker shall NOT be subject to discipline for unlawful acts of associates unless the employing broker had actual knowledge of the violation or was negligent in supervision.

TITLE 38 ARTICLE 32 - ESTATES ABOVE THE SURFACE.

Authorizes creation of estates, right and interests in areas above the surface (i.e. air rights)

COMMISSION RULE C - LICENSING - OFFICE

C-1. A broker licensed as an individual proprietorship must be the sole owner of the brokerage. C-2. Every resident Colorado broker must maintain and supervise a brokerage practice available to the public, EXCEPT employed associate brokers or inactive brokers. C-3. Every employing broker must be "reasonably" available to manage and supervise the brokerage practice during regular business hours. C-16. A licensee may not lend his/her/its licensed name or license to anyone to circumvent the license law or commission rule. C-17. The commission may refuse to issue a license that duplicates (or is similar to) the name on a license that has been suspended or revoked. C-18. A broker's trade name, if any, will appear on the broker's license and the brokerage must do business only under the trade name, or under the full (firm name plus trade name) name appearing on the license. C-20. No brokerage may be licensed in a name identical to another brokerage name. C-21. An individual proprietorship may not use a trade name containing any words that would appear to be corporate (e.g. Inc., LLC, etc.). C-22. The applicant employing broker for an entity license (Corp, LLC, or Partnership) must certify that: The entity (and any assumed or trade name) is properly incorporated, filed or registered with the Colorado Secretary of State, or Colorado Department of Revenue, as appropriate to the type of business. Proof of the business establishment and proof of the trade name approval must accompany the application. The applicant employing broker has been duly appointed to be the real estate broker for the entity by the entity's ownership. C-23. A brokerage firm employing an unlicensed on-site manager who prepares leases or rental agreements must: A. Require the on-site manager to be accountable to and report directly to the employing broker or a specifically delegated qualified employed broker associate who must actively and diligently supervise all on-site manager activities. B. Engage the on-site manager as either a salaried employee or independent contractor paid through the real estate brokerage firm. Salary may include any non-commission value, such as rent. C. Prevent the on-site manager from negotiating material terms of any lease or rental agreement. Duties may include filling in blanks on pre-printed brokerage lease forms, showing available units to prospects, and collecting rent and security deposits. C-25. An employing broker must immediately notify the commission of termination of employment with the licensed entity or of any lapse in the qualifications (contained in C.R.S. 12-61-103) to act as employing broker. Upon such notification, the employing broker's license and all associate broker licenses shall be placed on inactive status. C-26. A broker license may be issued on inactive status.

12-61-804 (Seller/Landlord Agent), -805 (Buyer/Tenant Agent) and -807 (Transaction-Broker) duties

Colorado has adopted "uniform" duties that are expected of every broker and spelled out in every Commission-approved listing contract and disclosure. Regardless of whether acting as an agent or a transaction-broker, every licensee owes the following duties in every transaction. a. Perform the terms of any written (or for transaction-broker - oral) agreement. b. Exercise reasonable skill and care (relative to professional education and experience). c. Present all offers and counteroffers in a timely manner - even if the party or property is under contract or subject to a letter of intent. d. Disclose all adverse material facts actually known by the broker, including title problems, physical condition defects, environmental hazards, inability to financially perform the contract and intent of buyer to occupy (or more importantly, to not occupy) the property as a principal residence. e. Advise to seek expert advice when material matters are beyond broker's expertise, (e.g. engineering, flood plains or complex zoning issues). f. Account in a timely manner for all money and property received. g. Keep your party (or if Transaction-broker for both sides - both parties) fully informed regarding the transaction. h. Comply with this license law and commission rule. i. Comply with applicable federal, state and local laws or regulations, including fair housing and civil rights. As far as protecting confidential information, again it makes no difference whether you are an agent or a transaction-broker. Without the specific informed consent of the affected party a broker may NOT disclose: That a party will accept less than the list price or pay more than the offered price. How motivated the seller is to sell or the buyer is to buy the property. That either party will agree to financing terms other than those offered. Any material information about any party unless disclosure is required by law or withholding the information would constitute fraud or dishonest dealing. Any facts or suspicions about psychological impact (e.g. murder, suicide, serious felony, HIV-AIDS or other non-communicably diseased occupants etc.).

12-61-907 Bond Required:

Every Colorado mortgage broker must post a bond prior to registration in an amount prescribed by the board by rule.

SINGLE LICENSING:

Every active Colorado real estate licensee is a BROKER. Unlike many other states that require basic education to apply for a salesperson license, and later qualify as a broker after some experience and advanced education, Colorado only licenses individuals as brokers. Why? 1. In the early 1990's, the Commission observed that the public was little concerned with (and even less aware of) the distinction between salesperson and broker, but wanted a high degree of competence and service from whomever they chose as their real estate licensee. 2. The nature of the real estate business itself does not protect those with little experience from complex transactions. A licensee's most complex transaction may occur at the beginning of a career. 3. When a complaint was filed against salespersons with extensive experience, it was not unheard of for the salesperson to claim ignorance of certain requirements supposedly known only to brokers. So Colorado requires all the education needed to broker real estate from day one. Public Protection: A new licensee, however, is poorly equipped to practice real estate independently. There is only one broker license, but three levels of performance. An inexperienced broker must practice as an associate broker for two years. This includes attorneys. A Colorado broker may apply to engage in independent brokerage after two years active licensed experience under a high level of supervision. Since the original education and exam were at the broker level, no further qualification is required. There is no required activity or transaction level. A Colorado broker desiring licensure as an employing broker, must in addition to the experience requirement, complete the 24-hour "Brokerage Administration" course.

TITLE 38, ARTICLE 33.5 - COOPERATIVE HOUSING CORPORATIONS.

In the pre-licensing Law and Practice course, Co-ops are studied in detail as part of forms of combined ownership. This part of the Colorado Revised Statutes simply extends that general definition to more specific Colorado requirements. It contains provisions for the management of stock and stockholder rights. It provides that not less than 80% of gross income of the Co-op must be derived from tenant-stockholder payments, and that tenant stockholders must be credited with their individual fair share of property taxes and loan interest paid in any given year. Every proprietary lease or right-of-ownership document of a tenant-stockholder must prohibit subleases of more than one year without lender approval, and that tenant-shareholder default in loan payments are treated the same as defaults secured by real property (as opposed to defaults in stock purchase). It also makes Co-op sales certificates and shares exempt from Colorado securities law.

Previously licensed salesperson:

Must complete 120 hours in Colorado Contracts and Regulations (48), Real Estate Closings (24), Trust Accounts and Recordkeeping (8), Current Legal Issues (8) and Practical Applications (32). Previously licensed broker: Must complete 72 hours in Colorado Contracts and Regulations (48) and Real Estate Closings (24). Currently licensed salespersons or brokers from other states: Colorado participates in bilateral license recognition agreements with many other states. These agreements allow an applicant who has been licensed for two years in a license recognition state to apply for a Colorado broker license with limited education and passing just the Colorado part of the broker licensing exam (partial recognition), or no additional education and no exam (full recognition), provided the other state reciprocates. See the current list of participating states on the Commission Website at Real Estate Broker License Partial Recognition Agreement & Reciprocity. Attorney applicants, active at any bar, must only complete a 12-hour course entitled Trust Accounts, Recordkeeping and Real Estate Closings and pass both the national and Colorado parts of the broker exam. In addition to the education, applicants must pass a standardized BROKER LICENSING EXAM. The exam is in two parts, national and Colorado. All previously unlicensed applicants must complete both parts of the exam. Applicants reinstating an expired license and some license recognition applicants, among others, may only require the state portion of the exam or no exam. The best source for determining this information is Real Estate Commission's website. Details on taking the exam are provided in the "Candidate Information Bulletin" published by PSI, the Exam Vendor.

TITLE 12, ARTICLE 61, PART 8, BROKERAGE RELATIONSHIPS.

NOTE: Colorado is unique in its brokerage relationships with the public. Colorado law overrides the common law of agency that you studied in the Real Estate Law and Practice (General) course or experienced in other states. This part of the license law is critical to your passing the state broker examination and to your understanding the actual day-to-day practice of real estate. Keep in mind that the following is paraphrased from the official statute language for ease of comprehension. Because this topic is so important to your career and because it is abbreviated here, we strongly recommend that you read Chapter 13 of the Colorado Real Estate Manual, "Brokerage Relationships" in concert with your review of the following material.

C.R.S. 12-61-Part 6 TITLE 12, ARTICLE 61, PART 6 - PRE-OWNED HOUSING HOME WARRANTY CONTRACTS.

New home construction in Colorado is protected for 1 year by an implied warranty inherent in the contractor's license. For previously occupied residences, however, no such warrant exists unless specifically purchased for the transaction. Home Warranties are readily available from several vendors. Such a warranty may protect everything from the structure to the furnace to the appliances depending on the warranty company and the premium paid.

12-61-202 Failure to Close due to Title Defect.

No commission is earned and no buyer must close a transaction in the face of title defects, unless owner corrects the defects.

12-61-611 Home Warranty Not Compulsory.

No one (including the lender (12-61-614)) may require a buyer or seller to purchase a home warranty. NOTE: Home warranties must be debited/credited on the settlement statement provided at the time of closing, regardless of who purchases the policy.

12-61-702(1) Scope of Article.

The appraiser license law does not apply to an appraisal relating to a real estate related transaction or loan made by a financial institution or affiliate if the transaction or loan is excepted from regulations established by the primary federal regulator and the appraisal is performed by a licensed real estate broker with whom the financial institution has contracted for the performance of the appraisal. Such an excepted appraisal may be deemed an "appraisal" ONLY by the said financial institution, the regulatory agencies of the financial institution, and any secondary markets that purchase loans secured by real estate. There must be a disclaimer in any such appraisal, the wording of which is specified verbatim in Appraisal Board Rule 15.2: "NOTICE: The preparer of this appraisal is not licensed as a real estate appraiser under the laws of the State of Colorado." The format of any such notice is specified in Board Rule 15.3 and must appear on the first page, on each copy, clearly show on any photocopy and not be smaller than the type size of the body of the appraisal. NOTE: Since most loans are sold on the secondary market, and secondary market rules prescribe the use of licensed or certified appraisers, this exemption is very rarely used.

TITLE 12 ARTICLE 61 PART 4 - SUBDIVISION LAW

The complexity of subdivision development is beyond the scope of this course. However, a basic understanding of subdivisions statute and rule is required for licensure. 12-61-401 Definitions. Colorado defines a subdivision as any real property, divided into 20 or more interests offered for residential use. This includes condominium conversions of an existing building, residential timeshare development and proprietary leases in a cooperative housing corporation. Specifically excluded from the definition are: A. Campground memberships; B. Bulk land sales between developers; C. Property used for new home development when the purchase price includes both the land and the home; D. Sales by public officials (e.g. foreclosure by the public trustee); and E. Lots which, at the time of sale or lease occupancy, are subject to county planning oversight or that have streets in place, feasible water and sewer plans, and installed telephone and electricity systems.

12-61-713 Unlawful Acts.

The license law forbids an appraiser from accepting an appraisal assignment that is contingent upon a pre-determined estimate of value. As a broker, you may certainly offer suggested comparable properties or improvements you feel may be overlooked in the appraisal. You must refrain, however, from coercion or demands that the appraiser establish a certain, predetermined value.

12-61-108 Master File.

The record of licenses is public information. Anyone may determine the name, address, license number, brokerage firm, date of original licensure, last renewal date and record of disciplinary actions on the Commission Website. https://www.colorado.gov/dora/division-real-estate

12-61-113.2 Affiliated Business Arrangements

This part of the law was enacted in 2006 to mandate broker responsibilities under the Federal RESPA law and to regulate broker connection to services other than real estate brokerage. An affiliated business arrangement is defined as an arrangement in which a provider of settlement services is related to or has a beneficial relationship with another provider of settlement services, and they refer business or influence the selection of providers in favor of each other. This refers to any service, not just title companies. The law specifies 19 affiliations, including home inspection, appraisals, attorneys, even pest and fungus inspectors. The law prohibits a licensee from 1) requiring the use of an affiliated business as a condition of using the licensee's brokerage services, and 2) giving or receiving anything of value for referring clients to another settlement service provider. The law requires disclosure by brokers in two ways: A. To all parties involved at the time of a transaction. B. To CREC when a licensee enters into, or changes any arrangement, and annually. The following are NOT violations or prohibited by the statute: a. Payment to an attorney, title company or lender for settlement services actually rendered. b. Salary or regular compensation to any person for real goods or services connected to closing. c. Cooperative brokerage or referral splits among brokers. d. Requiring buyer to pay for service providers chosen by lender representing lender's interests. e. An attorney representing a law client who issues or arranges for title insurance. License law specifically requires CREC to adopt H.U.D. rules, policies and guidelines under the Real Estate Settlement and Procedures Act (RESPA).

Unit 2-4 Electronic Duplication

You have previously learned that Commission Rule E-6 permits transaction documents to be electronic as long as they are readily retrievable by the Commission upon request and as long as all parties agree. This permission is implemented by client choice in the Commission-approved Contract to Buy and Sell Real Estate (Paragraph 28).

Unit 2-4 Statute of Frauds

You will recall from the Law and Practice course that most states have a statute of frauds designed to protect the public from oral trickery - claims that can only be backed up by "he said, she said" types of arguments. Colorado's statute is found in the Contracts Chapter of the Real Estate Manual. The law is C.R.S. 38-10-108 which says: "Every contract for a leasing of more than one year, or for the sale of any lands or any interest in land is void unless the contract or some note or memorandum thereof expressing the consideration is in writing, and subscribed (signed) by the party by whom the lease or sale is to be made." Note that such a contract is void (never legally existed) rather than voidable (valid until challenged). On a related note, and for the same reason as above, remember that a Colorado broker may not claim an earned commission based on an oral agency listing/employment agreement. Such an agreement must be in writing.