2011 Colorado Legislation Overview: Update on Laws Affecting Real Estate

The First Regular Session of the 68th General Assembly of the State of Colorado adjourned on May 11, 2011, resulting in several new laws that directly pertain to real estate, land use, and construction issues. This article provides a brief summary of these laws.

One of the more publicized legislative enactments pertaining to real estate is the ban on private transfer-fee covenants recorded in the future as well as the regulation of residential private transfer-fee covenants already recorded and in existence. This enactment (SB-234) became effective as of May 23, 2011; it is discussed in greater detail in Dick Clark's article "Colorado Bans Private Residential Transfer Fees" in our Summer 2011 RECL Update. Brief summaries are as follows:

SB 11-39: Concerning the Consequences of Default in Payments Due for Storage of Personal Property in a Self-Storage Facility. Laws that govern lien enforcement in favor of owners of self-storage facilities when tenants default on rental payments have changed. Owners are now permitted to use a tenant's email address (as an alternative to postal addresses) to notify the tenant of the sale or other disposition of the tenant's property; although regular mail is still required if a confirmation by email is not received. Owners are no longer required to notify the sheriff before selling a property to satisfy any liens. For notice purposes, the advertisement requirements have been expanded for what constitutes a "commercially reasonable manner." The self-storage facility owner is now absolved of liability for the misuse of personal information contained in documents, computer hard drives and the like, if the owner had no actual knowledge that the information was being misused. The sale of vehicles and watercraft is specifically addressed by this revised statute. This Act became effective on August 10, 2011.

SB 11-50: Concerning a Requirement that a Condemning Authority Pay Fair Market Value for Land Subject to a Conservation Easement. This Act created a twelve-member task force (the Condemnation of Conserved Property Task Force) to study, assess, and report its findings related to the value of any property subject to a conservation easement in condemnation actions. The task force will study aspects that will help assess the fair market value that condemning authorities must pay to land or easement owners upon condemnation. This bill became effective on June 8, 2011, and required the task force to submit its written report by October 17, 2011. That report is to set forth its findings and recommendations and be submitted to the agriculture, natural resources, energy and local government committees of the Senate; and to the agriculture, livestock, natural resources and local government committees of the House. If appropriate, the report also will propose statutory modifications to ensure that the property interests condemned are valued fairly and appropriately.

SB 11-264: Concerning a Clarification of State Law Governing the Circumstances under Which a Notice of Lis Pendens Must Be Recorded in Connection with the Filing of Debt Security Instrument As a Substitute for the Filing of Certain Liens. In June 2010, the Colorado Court of Appeals held that filing a bond or undertaking as a substitute for the filing of a mechanics' lien does not excuse a lien claimant from the requirement to record a notice of lis pendens against the affected real property. This bill recognizes that such a holding is contrary to the intended purpose of Colorado Revised Statutes (CRS) § 38-22-132, which was enacted with the intent that upon the filing of a bond or undertaking under (CRS) § 38-22-132, the lien against the property would be forever discharged and released from any action to foreclose the lien, because the bond or undertaking would be substituted in place of the lien. SB-11-264 amended the mechanics' lien laws to clarify that, upon court approval of a bond or undertaking as a substitute for the filing of a mechanics' lien and upon issuance and recording of a certificate of release, the lien and any notice of lis pendens relating thereto will be discharged and released in full and not required to be recorded in the real-property records in order to pursue a claim against the subject bond. SB 11-264 made conforming changes to the brokers' lien statute as well. This Act became effective July 1, 2011, and applies to actions commenced on or after that date.

HB 11-1023: Concerning the Continuation of the Foreclosure Deferment Program. The existing foreclosure deferment program has been extended to expire on June 30, 2014, rather than June 30, 2011. The governor signed this bill on April 13, 2011, which immediately became effective.

HB 11-1113: Concerning the Provision of Information Pertaining to Impact Fees Imposed by Local Governments. County or municipal governments that impose impact fees or land development charges must publish on its official web site, at least once annually, information detailing the allocation by dollar amount of each land-development charge collected to an account or among accounts, the average annual interest rate on each account, and the total amount disbursed from each account for the most recent fiscal year. This Act is scheduled to become effective December 31, 2011.

HB 11-1115: Concerning the Payment of Retainage in Construction Contracts Involving Public Entities. Effective August 10, 2011, this law changed the amount and timing of retainage and final payments for construction contracts that involve public entities. As was the case prior to this bill, and as remains the law, a public entity awarding a contract exceeding $150,000 for the construction, alteration or repair of a highway, public building, public work or public improvement, structure or system, at the end of each calendar month, or as soon thereafter as practicable, must authorize partial payments of the amount due under the contract if the contractor is satisfactorily performing the contract. Prior to the enactment of HB 11-1115, a public entity was permitted to withhold payment of up to 10 percent of the value of the completed work on the first half of a construction project, in order to obtain assurance that the work was meeting the specifications of the job. HB 11-1115 changed the permitted retainage to an amount of 5 percent of the value of the entire project. This law also requires a public entity to make the final payment within sixty days after the contract has been completed satisfactorily and finally accepted by the public entity.

HB 11-1124: Concerning Conflicts of Interest of Members of the Executive Board of a Unit Owners' Association. This House bill revises the criteria that must be included on the self-nomination and acceptance form or letter by a candidate running for a director position of a special district. The candidate completing that form must now indicate whether he or she is a member of the executive board of a unit owners' association. This amendment was made to address this conflict-of-interest matter for board members. The bill also adds various provisions that must be contained in the associations' policies, procedures, rules, and regulations regarding conflicts of interest of board members. This bill was signed by the governor and became effective on April 13, 2011.

HB 11-1146: Concerning a Requirement that a Residence Be Integral to an Agricultural Operation in Determining Whether Two Acres or Less Associated with the Residence Satisfies the Definition of Agricultural Land for Property Tax Purposes. The existing definition of agricultural land for property tax purposes has been amended so that effective January 1, 2012, up to two acres of land associated with residential improvements will no longer be classified as agricultural for tax purposes, unless the improvement is "integral to an agricultural operation" conducted on the land. This Act is aimed at eliminating residential improvements being taxed as agricultural land solely because such improvements are located within a larger property classified as agricultural land. When this Act becomes effective, residential improvements will be deemed to be "integral to an agricultural operation" (thus allowable as agricultural for tax purposes) if an individual occupying the residential improvements either regularly conducts, supervises, or administers material aspects of the agricultural operation; or is the spouse or a parent, grandparent, sibling, or child of the individual.

HB 11-1174: Concerning the Filing of a Certificate of Destruction by a Person on Whose Land a Manufactured Home is Situated When a Governmental Entity Has Deemed the Manufactured Home in Violation of Local Codes. Effective August 10, 2011, the prior statute was amended so that if a governmental entity deems a manufactured home to be materially dangerous or materially hazardous, pursuant to local building or health codes, then a person on whose real property the manufactured home is situated can file a certificate of destruction without a certificate of title and without a certificate of taxes due. The certificate of destruction must be accompanied by evidence of the code violation. Before filing the certificate of destruction, the person on whose property the manufactured home is situated must also notify the owner and attempt to obtain the consent of all lien holders of the manufactured home. Failure to file a properly completed certificate of destruction opens the owner, or person on whose real property the manufactured home is situated, to liability for damages sustained by any affected party related to the manufactured home being destroyed, dismantled, sold, or otherwise disposed of as salvage.

HB 11-1218: Concerning a County Power to Create a Federal Mineral Lease District for Purposes of Receiving Moneys Distributed by the Department of Local Affairs from the Local Government Mineral Impact Fund. Effective May 9, 2011, under the newly established Federal Mineral Lease District Act, counties are now allowed to create a federal mineral lease district for purposes of receiving moneys from the local government mineral impact fund, to be distributed to the county by the Department of Local Affairs. The Act sets forth the requirements to create the district, establish the board of directors, how to approve the district's service plan and powers and duties of the board of directors.

To confirm how these and other new laws affect you and your transactions, please refer to the actual language of these new laws, which can be found on the Colorado General Assembly web site at www.leg.state.co.us, or call me to discuss any questions.