Monthly Archives: November 2015

Private Mortgages Post-TRID and Specific to Colorado

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

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

November 17,  2015

 

TRID is not applicable to a lender making 5 or fewer mortgages in a year.   12 CFR 1026.2(a)(17)(v).   So, there is no federal legal hurdle to over-come in making loans to family members and others as long as you stay within the 5 loan annual limit.  However, Colorado law is much more restrictive.

Colorado enacted the Mortgage Loan Originator’s Act in 2008 pursuant to the the Housing and Economic Recovery Act, which established minimum licensing standards for mortgage loan originators.  Furthermore, the S.A.F.E. Act mandated states to adopt such standards.   Colorado has an exemption for seller carry-back financing of up to three properties in a 12-month period, see C.R.S. 12-61-905, but there is no exemption when the mortgagee (lender) is not the seller unless it’s originated by a licensed MLO along with other conditions.  C.R.S. 12-61-910 states that violations of the Colorado law is a Class 1 Misdemeanor and subject to a $5,000 fine.  However, it does state in Section 4 that violations of the act do not affect the priority or enforceability of the mortgage/deed of trust.

So, if you wish to assist your children or anyone else in Colorado when they’re buying a home by providing all or part of the financing, here’s what I would recommend.  Buy the home and title it either solely in your name(s) or consider  joint tenancy if it’s with your child.  Then, enter into a 6 month lease/option agreement providing for an option to purchase your interest which clearly spells out the requirements to exercise the option including the terms of the owner carry financing.

Be aware that if you go the joint tenancy route, any judgments, liens and other possible adverse matters may come of record against the other joint tenant and attach to the real property title during the time of your dual ownership.  If your goal is to be in first position at the time you sell and attach your secured lien, it may be advisable to buy solely in your name(s) and wait to convey title until the option is exercised so you can record your deed of trust right after the deed.

Colorado Senate Bill 35 Regulates Subdivisions of Land Resulting in One or More Parcels Less Than 35 Acres In Size

This article is intended for educational purposes and not as legal advice. It is always advisable to seek the advice of a licensed attorney regarding the issues discussed in this article.

On May 5, 1972, C.R.S. 30-28-101, the session law that most Colorado attorneys refer to as Senate Bill 35, became effective.  SB 35 was enacted to provide some regulation over the subdivision of land in Colorado, and it required counties to pass regulations to regulate parcels of land smaller than 35 acres and preclude property owners in most circumstances from unilaterally subdividing their property without complying with SB 35.

C.R.S. 30-28-101(10)(a) defines a subdivision or subdivided land as any parcel of land in the state which is to be used for condominiums, apartments, or any other multiple-dwelling units, unless such land when previously subdivided was accompanied by a filing which complied with the provisions of this part 1 with substantially the same density, or which is divided into two or more parcels, separate interests, or interests in common. The 35 acre exemption is inapplicable when the property owner seeks to construct multiple residences on a parcel which is more than 35 acres. Wilkinson v. Bd. of County Comm’rs, 872 P.2d 1269 (Colo. App. 1993).  There are additional exemptions provided for in C.R.S. 30-28-101(10) in subsections (b), (c) and (d). There is no similar exemption from the applicable zoning regulations as SB 35 applies only to subdivision regulations.

Moreover, the sole remedy may be the forced re-combining of the land that gave rise to the illegal subdivision, and this can be a logistic nightmare when years have passed and sometimes ownership as well.

Lastly, don’t forget to refer to Chapter 4 of the Colorado Real Estate Manual regarding subdivisions that require registration with the Division of Real Estate.

Written by:

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

When Can A Colorado Real Estate Broker Lawfully Pay Unlicensed Parties

by Michael Selinfreund, President/General Counsel of Cherry Creek Title Services, Inc.

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

November 9, 2015

Colorado Real Estate Commission Rule Position CP-12 forbids the payment of a commission or other valuable consideration for PERFORMING BROKERAGE FUNCTIONS (emphasis added) to a person not licensed as a Real Estate Broker.  Two clear exceptions are rebating part of the commission to the seller and rebating part of the commission to the buyer in a transaction.   An agreement to rebate a portion of the commission to the buyer must be disclosed in writing and communicated to the lender if the buyer is obtaining a new loan.   Disclosing the buyer rebate in the sales agreement meets the writing requirement and gives notice to the lender and all parties.  No notice is required for a gratuitous post-closing gift to the buyer such as a dinner gift certificate.

Now, on to the murkier issue of paying referral fees to the unlicensed person who is not a party to the transaction.  I did a trial regarding a substantial promised referral fee to an unlicensed party resulting from a large commercial transaction.  I defended the broker.   My client testified and denied ever making any promise of payment.   He lost all credibility when he was subsequently impeached by a voice mail he left in which he thanked the plaintiff for all she did; acknowledged the amount of the referral fee; and promised to pay her after the deal closed.  On cross-examination, the plaintiff willing admitted to performing numerous “brokerage functions” including presenting the opportunity to the purchaser; driving the purchaser to the property; touring the purchaser around the property; and even assisting in the negotiations.  Clearly, she believed the more she did, the more she was entitled to the promised referral fee.

I was sure I’d won at that point and asked for a directed verdict.  I provided the judge with legal authority defining typical brokerage functions.  He denied my motion and allowed the case to proceed to the jury.  Since my client clearly had lied under oath, the judge likely hated him, and the jury did too.  They held in favor of the plaintiff for the full amount she was seeking.  I appealed and won; however, since as a matter of law, such a payment would be illegal thereby unenforceable since she was not licensed, and she admitted under oath to performing numerous brokerage functions.

This cautionary tale demonstrates that if you’re a licensed Colorado Real Estate Broker wishing to pay referral fees to parties not possessing a Broker’s license (who are not parties to the transaction), make sure they do nothing more than refer you the lead.

 

Beneficiary Deeds in Colorado

by Michael Selinfreund, President/General Counsel of Cherry Creek Title Services, Inc.

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

 

Beneficiary Deeds have been around in Colorado for a decade and are governed by C.R.S. 15-15-402-415.   They work very similar to a POD bank account.  The present owner seeking to pass property outside of probate upon their death not only retains full ownership and control, but they can revoke the Beneficiary Deed at any time in their lifetime just like you can remove or change a POD beneficiary to a bank account.  The Beneficiary Deed is a better choice in many estate planning circumstances that previously required the property owner to create a life estate, which gives up ownership, some control and cannot be revoked; a trust, which is more expensive and complicated; or the present conveyance of an interest to the intended beneficiary adding them in ownership as a joint tenant which immediately and irrevocably conveys an ownership interest including some control.  And, any conveyance or encumbering of the property will thereafter require the cooperation of the joint tenant grantee.  Finally, judgments, tax liens and other adverse recorded matters against the joint tenant grantee will attach to the property title whereas that isn’t the case with a Beneficiary Deed.   Beneficiary Deeds are not for everyone nor every circumstance, but they’re often the perfect vehicle for accomplishing your goals.  To read other helpful legal tips, visit my profile and view previous posts.

 

 

Minors Owning Real Estate in Colorado with Video Presentation

This article and video presentation are intended for educational purposes only and not as legal advice.  To view more educational videos on real estate and other related subjects visit us on the
Cherry Creek Title Services Channel on You Tube

 

Mother and Father holding hands

VIDEO PRESENTATION – MINOR CHILD OWNING REAL ESTATE

 

 

 

C.R.S. 15-14-102(8) defines a minor as an un-emancipated individual that has not attained 18 years of age.  Although not illegal, deeding directly to minors can create serious problems.  The minor cannot encumber nor convey without the appointment of a guardian per C.R. S. 15-14-101 et.seq., and their contracts are voidable at the option of the minor once they reach majority.  Jones v. Dressel, 623 P.2d 370(Colo. 1981).   So, if you want to add a minor to title in Colorado, I recommend doing so either pursuant to the Uniform Transfer to Minors Act, C.R.S. 11-50-101 et. seq., or through a trust.  To read other helpful legal tips, visit my profile and view previous posts.

 

 

IRS Tax Lien v. Purchase Money Mortgage. And the winner is . . .

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

November 6, 2015

The purchase money mortgage or deed of trust will have priority over an IRS lien already of record in the same county if permitted by state law. http://www.irs.gov/pub/irs-pdf/p785.pdf.   In Colorado, the purchase money mortgage (deed of trust) wins over both IRS and judgment liens already of record against the mortgagor in the same county.  Emery v. Ward et al., 191 P. 99, 68 Colo. 373 (Colo. 1920).   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

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

Real Property Homestead Exemption and Waiver in Colorado

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

November 6, 2015

C.R.S. 38-41-201(1)(a) provides for a Homestead exempt from execution and attachment arising from any debt, contract or civil obligation in the amount of $75,000.00 if the homestead is owner occupied or by an owner’s family.  C.R.S. 38-41-201(1)(b) provides for a Homestead exemption in the amount of $105,00.00 if the homestead is occupied by an elderly or disabled owner; an elderly or disabled spouse of an owner, or an elderly or disabled dependent of an owner.    C.R.S. 38-41-201(2)(B) defines elderly as 60 or older.

Deeds of Trust and Mortgages contain provisions whereby the borrower(s) waives or subordinates their homestead exemption.  In cases where the loan is made to the more creditworthy spouse with a requirement to vest title solely in the creditworthy spouse, it is advisable to have the non-signing spouse execute a separate homestead waiver or subordination of homestead.  Instead, many lenders just add the requirement for the non-signing spouse to execute the deed of trust since by doing so they waive their homestead exemption.  However, when the non-signing spouse is not on title but signs the deed of trust, they are immediately breaching the deed of trust “title” covenant contained in every deed of trust.   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

Master Form Deed of Trust and Master Form Mortgage in Colorado

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

November 6, 2015

A Master Form Deed of Trust (or Master Form Mortgage) does not encumber any particular property.  It doesn’t even include the names of the lender nor borrower.  This enables any lender to prepare individual deeds of trust for specific transactions and reference/incorporate any Master Form Deed of Trust recorded in the same county.  They are widely used in California, and perhaps they will catch on in Colorado as well since Colorado has a statute that specifically authorizes their use.

C.R.S. 38-35-109(1.5)  provides that any person may record in the office of the county clerk and recorder of any county a master form mortgage or master form deed of trust. Such forms shall be entitled to recordation without any acknowledgment or signature; without identification of any specific real property; and without naming any specific mortgagor, mortgagee, trustor, beneficiary, or trustee. Every instrument shall contain on the face of the document “Master form recorded by (name of person causing instrument to be recorded).” The county clerk and recorder shall index such master forms in the grantee index under the name of the person causing it to be recorded.  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

Deeds in Colorado including Video Presentation

by Michael Selinfreund, President / General Counsel of Cherry Creek Title Services, Inc.

 

This article is intended for educational purposes only and not as legal advice.  To view more educational videos on real estate and other related subjects go to Cherry Creek Title Services Channel on You Tube

Video Presentation on Deeds in Colorado

General Warranty Deed (see C.R.S. 38-30-13):  Warrants the title against defects  including those existing prior to the Grantor’s ownership.  It’s the most common deed utilized in residential transactions.  It also conveys any interest in the property that the Grantor may thereafter acquire: “after-acquired title”.

Special Warranty Deed (see C.R.S. 38-30-115):  Warrants the title only against defects arising  from the time of the Grantor’s ownership.  It also conveys after-acquired title.   This is the overwhelming favorite of real estate attorneys representing the seller; hence, you see them in virtually all residential builder sales and commercial property sales.

Bargain and Sale Deed (see C.R.S. 38-30-115): The Bargain and Sale Deed makes no warranties regarding the title.  It conveys whatever interest in the property that the Grantor owns, if anything, and it also conveys after-acquired title.

Quit Claim Deed (see C.R.S. 38-30-116): The Quit Claim Deed makes no warranties regarding the title and only conveys whatever interest the Grantor owns, if any, at the time of conveyance.  It does not convey after-acquired title.

Confirmation Deed: Used when title passes through designated grantees such as in death and foreclosure.  The number of recorded Confirmation Deeds has risen greatly since it replaced the Public Trustee’s Deed ( see C.R.S. 38-38-501).

Most Deeds drafted in fiduciary or official capacity by the Public Trustee, Treasurer or Sheriff are Bargain and Sale Deeds.

I did not include Beneficiary Deeds among this list for two reasons: I devoted a recent previous post to them that is on my profile page, and they are not used to make an immediate conveyance of property.   They are more of an estate planning device and quite different than these 5 since they’re  revocable and do not pass title until the Grantor’s death.