Real Property Owner Carry v. Third Party Financing Priority Tip in Colorado

This article is intended for educational purposes only and not as legal advice

November 6, 2015

Colorado is a race/notice recording state.  C.R.S. 38-35-109 (1).  However, an important exception exists in determining priority when sellers carry back financing alongside a third party lender (such as a bank) also providing a purchase money secured loan for a portion of the purchase price.   Even if the third party lender records ahead of the purchase money owner carry deed of trust/mortgage, absent clear written evidence to the contrary, the owner carry will still have priority.  See A.L.H. Holding CO. v. The Bank of Telluride, 18 P. 3d 742 (Colo. 2000).   So, if your intent is for the owner carry to be subordinate to the third party financing which is the typical situation, make sure you have a properly prepared subordination agreement signed by the owner carry mortgagee/beneficiary acknowledging their security interest is subordinate/junior to that of the third party lender.  To read other helpful legal tips, visit my profile and view previous posts.

 

Written by:

Michael Selinfreund
President/General Counsel
Cherry Creek Title Services, Inc.,
Agent for First American Title Insurance Company & NATIC