Commission Position Statements · 2019. 8. 15. · Page 1 of 75 Commission Position Statements CP-1 Commission Policy on Homebuilder’s Exemption from Licensing CP-2 Commission Position

CL Required Reading (Manual)

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Commission Posi t ion St at ements

CP-1 Commission Pol icy on Homebuilder ’s Exempt ion from Licensing

CP-2 Commission Posi t ion on Earned Fees

CP-3 Posit ion Sta tement Concern ing Commission Rule E-13

CP-4 Commission Posi t ion on In terest Bear ing Trust Accounts

CP-5 Commission Posi t ion on Advance Rentals and Secur i ty Deposi ts

CP-6 Commission Posi t ion on Release of Earnest Money Deposi ts

CP-7 Commission Posi t ion on Closing Costs

CP-8 Commission Posi t ion on Assignment o f Contracts and Escrowed Funds

CP-9 Commission Posi t ion on Record Keep ing by Brokers

CP-10 Commission Posi t ion on Compensation Agreements Between Employing and

Employed Brokers

CP-11 Commission Posi t ion on Assignments of Broker ’s Righ ts to a Commission

CP-12 Commission Posi t ion on the Broker ’s Payment or Rebat ing a Por tion o f an

Earned Commission

CP-13 Commission Pol icy on Single -Par ty Lis tings

CP-14 Commission Posi t ion on Sa le o f Modular Homes by L icensees

CP-15 Commission Posi t ion on Sa le o f I tems Other Than Rea l Estate

CP-16 Commission Posi t ion on Access to Proper ties Offered for Sale

CP-18 Commission Posi t ion on Payments to a Whol ly Owned Employee’s Corpora tion


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CP-19 Commission Posi t ion on Shor t Term Occupancy Agreements

CP-20 Commission Posi t ion Statement on Persona l Assistan ts

CP-21 Commission Posi t ion on Of f ice Pol icy Manuals

CP-22 Commission Posi t ion Statement on Handl ing o f Conf identia l Information

in Rea l Estate Brokerage

CP-23 Commission Posi t ion on Use o f “Licensee Buyout Addendum”

CP-24 Commission Posi t ion on Preparat ion o f Market Ana lyses and Rea l Estate

Eva lua t ions Used for Loan Purposes

CP-25 Commission Posi t ion on Record ing Contracts

CP-26 Commission Posi t ion on Auctioning

CP-27 Commission Posi t ion on the Performance o f Residential Leasing

and Proper ty Management Funct ions

CP-28 Commission Posi t ion on Showing Proper ties

CP-29 Commission Posi t ion on “Megan ’s Law”

CP-30 State of Colorado Real Esta te Commission and Board of Real Esta te

Appraisers Joint Posi t ion Sta tement on Seller Assisted Down Payments

CP-31 Commission Posi t ion on Acting as a Transaction Broker o r Agent in Part icu lar

Types o f Transactions

CP-32 Commission Posi t ion on Brokerage Disclosures

CP-33 Jo in t Posi t ion Sta tement from the Divis ion o f Real Esta te and Div ision o f

Insurance

CP-34 Commission Posi t ion on Set tlement Service Provider Se lection , Closing

Instructions and Earnest Money Deposi ts


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CP-35 Commission Posi t ion on Brokers as Pr incipals

CP-36 Commission Posi t ion on Minimum Service Requirements

CP-37 Commission Posi t ion on Survey and Lease Object ions to the Contract to Buy

and Se l l Real Estate

CP-38 Commission Posi t ion on Disclosure o f Af f i l ia ted Business Arrangements

and Conf l ic ts o f Interest

CP-39 Commission Posi t ion on Lease Options, Lease Purchase Agreements and

Insta l lment Land Contracts

CP-40 Commission Posi t ion on Teams

CP-41 Commission Posi t ion on Competency

CP-42 Commission Posi t ion on Apar tment Bu i ld ing or Complex Management


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Corporat ions that bui ld structures on land they own may sel l the land and bu i ld ing

together without l i censing, provided tha t the sales are made by corporate o ff icers

or regular ly sa lar ied employees. The land and bui ld ing must be sold as a unit and

the bui lding must not have been previously occupied . Th is exempt ion is usua l ly

refe rred to as the homebui lder ’s exempt ion . Since employees who sell must be

regu lar ly sa lar ied employees, the quest ion of ten ar ises as to what a regu lar sa lary

is. This is the posi t ion of the Commission : 12-61-101(2)(b)(X) C.R.S. , among other

requ irements, requires that a corpora tion use “regular salar ied employees” to se l l

or negot ia te the sa le o f rea l property.

It is the posi t ion o f the Commission tha t the phrase, “ regular salar ied employees”

means that:

1. The sa lary must be an actua l and sta ted amount and must no t be a draw or

advance against fu ture commissions.

2. The sa lary must be regu lar ly paid ( i .e ., weekly, month ly, etc.).

3. Al though the amount of sa lary may vary, an employee must be paid a t least the

preva i l ing federal minimum wage.

4. The corporat ion shou ld deduct amounts for state and federa l wi thholding

taxes, F IC A taxes, and other commonly deductible expenses, wh ich the

corpora t ion would employ wi th respect to other employees.

Payment of a commission , in add i t ion to a regular salary, wi l l no t inva l ida te the

exemption i f the above gu idel ines are met.

CP -2 Com miss i on P osi t i on on Ea rne d Fe e s

(rev ised 0 8 / 0 7/ 20 1 2 )

Commissions:

Section 12-61-113(1)( j) , C.R.S. of the l icense law forbids a broker from paying a

commission or valuab le considera tion, for performing brokerage funct ions, to any

person who is not l icensed as a real estate broker. Brokerage functions include


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negot ia ting the purchase, sa le or exchange of real esta te. See section 12-61-

101(2)(a), C.R.S. Pursuant to Colorado case law, “negot ia ting” means “the act of

bringing two part ies together for the purpose of consummating a real estate

transaction. ” Brakhage vs. Georgetown Assoc iates, I nc . ., 523 P. 2d 145, 147 (1974) .

Therefore , any unl icensed person who direct ly or ind irectly br ings a buyer and

se l ler together, is negot ia ting and would need a broker ’s l i cense in order to be

compensated. This includes, but is not l imi ted to, such act ivi t ies as re ferr ing

potential t ime-share purchasers to a developer or re ferr ing potential purchasers to

a homebuilder.

Referra l Fees:

Section 12-61-203.5(1) , C.R.S. permi ts a real estate broker to pay a referral

fee if reasonab le cause for payment ex ists. Reasonab le cause exists when:

1) An actual int roduct ion of business has been made;

2) A contractual re ferral fee rela t ionship exists; or

3) A contractual coopera tive brokerage re la tionsh ip exists.

Section 12-61-203.5(2)(b)( I I I) , C.R.S. de fines a referra l fee as “any fee pa id by a

l icensee to any person or ent i ty, o ther than a coopera tive commission o f fered by a

l is t ing broker to a sel l ing broker or v ice versa.” Payment for providing a name to a

l icensed broker is no t speci f ica l ly addressed in Colorado statute. However , i t wou ld

be i l legal to pay such a fee to anyone per forming acts tha t requ ire a l i cense (e .g .. ,

negotia ting , l i s t ing , and contract ing). Care should be taken. At best , the unl icensed

referrer can have no active invo lvement in the transaction beyond merely g iving to a

l icensee the name o f a prospect ive buyer , se l ler or tenant . If the payment is s imply

for the re ferral o f a name to a l icensee, wi th no fur ther activ i ty on the par t o f the

referrer , and the referrer is no t a provider o f a se tt lement service , the Commission

wil l no t consider it to be a vio la tion o f the l i cense law. Complaints and inquiries are

deal t with on a case-by-case basis.


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In real esta te transactions invo lving federal ly re la ted mor tgage loans, Sect ion 8

of the Real Estate Sett lement Procedures Act ( “RE S PA”) ,12 U.S.C. §§ 2601 et

seq. , governs the payment of referra l fees. Pursuant to 12 U.S.C. § 2602(1) of RE S

PA, the term “ federa l ly re la ted mor tgage loan” is de fined to include:

(1) any loan (o ther than temporary f inancing such as a construct ion loan)

which—

(A) is secured by a f irst or subordinate l ien on residentia l rea l proper ty

( including indiv idual uni ts of condominiums and coopera tives) designed

pr incipa l ly for the occupancy of from one to four famil ies, includ ing any such

secured loan, the proceeds o f wh ich are used to prepay or pay of f an existing

loan secured by the same proper ty; and

(B) ( i) is made in who le or in par t by any lender the deposits or accounts o f

which are insured by any agency o f the Federal Government , or is

made in whole or in part by any lender which is regu la ted by any

agency of the Federal Government ; or

( i i ) is made in who le or in par t , or insured, guaranteed, supplemented, or

assisted in any way, by the Secre tary or any other o ff icer or agency of

the Federa l Government or under or in connect ion with a housing or

urban deve lopment program admin istered by the Secre tary or a

housing or re la ted program administered by any o ther such of f icer or

agency; or

(i i i ) is in tended to be sold by the or iginat ing lender to the Federa l National

Mor tgage Associa tion , the Government National Mor tgage Associa t ion ,

the Federa l Home Loan Mor tgage Corpora tion, or a f inancia l insti tut ion

from which i t is to be purchased by the Federal Home Loan Mor tgage

Corporat ion; or

( iv) is made in who le or in par t by any “credi tor” , as de fined in sect ion 103( f)

of the Consumer Cred it Protect ion Act (15 U.S.C. § 1602( f), who makes

or invests in residential real esta te loans aggregat ing more than $


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1,000,000 per year , except tha t for the purpose o f this Act , the term

“credi tor” does not include any agency or inst rumental i ty of any State.

RESPA and Commission Rule E-22 prohibi t the payment or rece ip t of referral

fees and kickbacks wh ich tend to increase unnecessar i ly the costs o f se tt lement

serv ices. As par t o f th is prohib i t ion, any re fer ral o f a se t tlement service is no t

compensable. Thus, a company is not a l lowed to pay another company or its

employees for the referral of set t lement business. Moreover , i t is not appropr ia te for

a se tt lement serv ice provider to pay a broker, or offset a broker ’s expenses, for

lead genera tion . The Commission views this as payment for the referra l of

business, which would be a vio la tion of Rule E-22. Addi tiona l ly , the Commission is

requ ired by law to refer such issues to the Consumer Financial Pro tect ion Bureau for

investiga tion as a potential vio la tion o f RESPA.

RESPA, however , does permit:

1) A payment to an at torney a t law for services actual ly rendered:

2) A payment by a t it le company to its du ly appoin ted agent for services

actual ly per formed in the issuance of a pol icy of t i t le insurance;

3) A payment by a lender to i ts duly appo in ted agent or contractor for services

actual ly per formed in the or ig ina t ion , process ing, or fund ing

of a loan;

4) A payment to any person of a bona f ide salary or compensat ion for goods or

faci l i t ies actua l ly furn ished or for services actua l ly performed;

5) A payment pursuant to cooperat ive brokerage and referral arrangements or

agreements be tween real esta te brokers (al l part ies must be act ing in a real

esta te brokerage capacity);

6) Normal promotiona l and educat ional activ i t ies tha t are no t cond it ioned on the

referral o f business and that do not involve the defraying of expenses that


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otherwise would be incurred by persons in a posi t ion to refer set t lement

serv ices or business incident there to; or

7) An employer ’s payment to i ts own employees for any re ferral activ i t ies.

Admin istra t ive Fees:

As a resul t of the United States Supreme Court’s decis ion inFreeman v. Qui cken

Loans, I nc . , 132 S. Ct. 2034, 2012 U.S. Lexis 3940 (2012) , real esta te brokers may

charge administra tive fees, ei ther for serv ices per formed by the broker o r the real

esta te brokerage, in add i t ion to t he br oker ’ s commiss ion. I nQ uicken Loans, t he

Supr eme Cour t he ld that w hi l e RE S PA prohibits the spl i t t ing of fees if the charges

are div ided between two or more persons ( i .e. se t t lement service providers) and the

fee was paid for serv ices not actual ly per formed, d ividing or spl i t t ing fees amongst a

sing le se tt lement service provider is no t prohibited. The Commission considers a

real esta te broker and h is or her l i censed broker -employer (or brokerage) to be a

sing le provide r of se t t lement services and fees may be spl i t amongst them.

Marketing Services:

Payment for general p romotion o f a real esta te business is no t prohibi ted.

Contracting wi th newspapers, ca ta log companies of genera l c ir cula tion or wi th

insti tu tiona l adver t isers such as radio , television or any other med ia , is not

proh ibi ted provided the activi ty does not otherwise consti tu te o f fer ing , negotiat ing ,

l i s t ing, sel l ing, or leasing real esta te as def ined in Sect ion 12-61-101(2) , C.R.S.

Payment based on the successful sa le or lease o f real esta te does not in i tsel f

const i tu te broker ing as so def ined. However , in the past, the Commission has

determined that many so-ca l led advert ising serv ices actual ly invo lved brokering

act ivi t ies. The method o f payment is o ften an impor tan t factor in de termining whether

the act ivi ty requires a l icense.

The marketing of a sett lement service or product (separate f rom the l icensed

brokerage duties provided by the broker), inc lud ing the col lection and conveyance

of information , does not consti tu te the per fo rmance o f a set tlement serv ice . Any

market ing per formed by a real esta te broker for a provider o f se t t lement services


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must be equ ivalen t to the services tha t would be provided by a marketing f irm.

Brokers tha t share adver tis ing or marketing with o ther se t t lement service providers

must ensure tha t the cost o f the advert ising is commensura te wi th the adver t ising,

market ing services or space actual ly provided. Add i t ional ly , the broker cannot

requ ire a prospect ive cl ien t to use the serv ices of the sett lement service provider

shar ing the adver tising or market ing costs.

For example , a broker that pays $2 ,000.00 per month for a websi te designed to

promote the broker ’s business can enter into an agreement wi th a mor tgage loan

or ig ina tor to use the website fo r a fee . If the mor tgage loan or ig ina tor pays the

broker , or the websi te vendor , $1,000.00 per month to advert ise on the broker ’s

websi te , 50% of the advert ising services need to be dedicated to the mortgage loan

or ig ina tor . The broker cannot requi re a prospect ive buyer to pre-qual i fy wi th or

ut i l i ze the services of the mortgage loan or iginator.

CP -3 Posi t i on St a te me n t Conc e rn i ng C om mi ss i on Ru le E-1 3

Commission Ru le E-13, commonly re ferred to as the “s ign -crossing” rule , sta tes

as follows:

“A real esta te l i censee shal l no t negotiate a sa le , exchange, lease or l i s t ing

contract of real proper ty direct ly wi th an owner for compensat ion from such

owner if such l i censee knows that such owner has a wr i t ten unexpired

contract in connect ion wi th such proper ty wh ich grants to another l i censee an

exclusive r igh t to sel l or lease or wh ich grants an exclusive agency r ight to

se l l or lease. However , when a l icensee is contacted by an owner regard ing

the sale, exchange, lease or l ist ing of property that is exclusive ly l i s ted

with another broker , and the l i censee has not ini t ia ted the d iscussion , the

l i censee may negotia te the terms upon which the l icensee might take a

future l ist ing or, alterna tive ly, may take a list ing to become ef fect ive upon

expirat ion of any exist ing exclusive l ist ing.”

The Commission’s in ten t in promulgat ing Rule E -13 was (1) to prevent brokers

from interfer ing wi th existing l i s t ing contracts to the de tr iment of the owner and (2) to

protect the owner from possible c laims tha t two commissions are owed.


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Many owners are extremely dependent on the exper tise of the l i censee. They may

sincerely be l ieve an existing l i s t ing contract is not in e ffect when, in fact , i t i s . The

burden o f inquiry is on the l icensee.

Ear l ier versions of E-13 had been cr i t i cized for being too restr ic t ive . The

curren t rule st i l l provides that l i censees shall not negotiate direct ly wi th an owner if

they know tha t the owner has a wr it ten unexp ired Exclusive Right to Sel l or Lease.

However, the l icensee is now al lowed to negot ia te the terms for a future l i s t ing or

take a l ist ing ef fective upon exp ira tion of a curren t l i s t ing so long as the l i censee is

f ir s t contacted by the owner.

This recognizes the fact tha t an owner wi th p roper ty current ly l i s ted may in i t ia te

the negot ia tions concerning a future l i st ing . In addi t ion , the current rule recogn izes

that in some instances owners become d issat isf ied with the services of the broker

with whom they have a l is t ing and wish to cancel the l is ting. If a knowledgeable and

in formed sel ler wishes to cance l a l i st ing and l ist wi th another company, th is cannot

be prevented. Of course, the sel ler runs the r isk that improper cancel la tion of a

l i s t ing contract can resul t in legal consequences. Brokers should never

independent ly advise a sel ler in this area. Instead, an inquir ing sel ler should be

advised to seek legal counse l to explain the consequences o f cance l ing an

unexp ired l ist ing.

If the ru le is fo l lowed close ly it wi l l provide greater oppor tun i t ies for l i censees to

negot ia te l i st ings where a se l ler does not wish to re- l is t with the same broker wh i le

main ta ining the integr i ty o f the pr incipa l/agent brokerage relat ionship.

CP -4 Com miss i on P osi t i on on I n te res t B ea r i ng T rus t Acc ount s

(R evi sed P osi t i on 8 - 04 )

Section 12-61-113 ( l) (g .5) C.R.S. permi ts brokers to place entrusted money in an

in terest bear ing account.

The Commission has taken the posit ion that in the absence of a contract signed

by the proper part ies to the contrary, any in terest accumulat ing on a trust account

does not belong to the broker who is acting as escrow agent . (This posi t ion is


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based upon 12-61-113( l) (q) and upon the well-establ ished tenet of agency that the

agent may not prof i t personal ly f rom the agency relat ionship except for agreed

upon compensation.)

Contracts cal l ing for large earnest money deposi ts or other payments should

contain a provision speci fying wh ich par ty is ent i t led to interest earned and under

what cond i t ions. In the absence o f such a provision , accrued in terest normally

belongs to the sel ler i f the contract is consummated or if the sel ler is successful in

decla r ing a for fe iture . The entrusted money normally belongs to the purchaser i f the

contract fails.

In a proper ty management trust account, the accrued in terest on that por tion o f

rental money rece ived that belongs to the lessor benef icia ry ( landlord) , would

belong to the lessor benef iciary. The accrued in terest on secur i ty deposi ts would

belong to the respect ive tenants unless the lessor can establ ish a r igh t to the

secur i ty deposi t ( in the absence o f a contract to the contrary).

However, in the case of the property management of mob ile homes, by Colorado

sta tu te , the interest earned on security deposi ts may be re tained by the land lord of

a mob ile home park as compensat ion for administer ing the trust account .

(38-12-209(2)(b) C.R.S.)

Nothing in thi s posi t i on s tatement precludes a real es tate broker f rom voluntar i l y

t ransfer r i ng i nterest earned on a trust accoun t to a fund establ i shed for the purpose

of prov idi ng af fordable hous ing to Colorado residents if such a fund is established.

CP-5 Commiss ion Posi t i on on Advance Ren ta ls and Se c u r i ty De pos i t s

Pursuant to C.R.S. 12-61-113 ( l) (g .5) and Commission Rule E- l and E-16, al l

money be longing to others wh ich is received by a broker must be placed in an

escrow or trust account. This app l ies to tenant secur i ty deposits and advance ren ta l

deposits, including cred it card rece ip ts, he ld by a broker.

A broker may not de l iver a secur i ty deposi t to an owner unless no tice is given to

the tenant in the lease, ren ta l agreement , or in a separa te wr i t ten no tice that the


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secur i ty deposi t wi l l be he ld by the owner . Such notice must be given in a manner

so tha t the tenant wil l know who is hold ing the secur i ty deposit , and sha l l include

ei ther the true’ name and curren t mai l ing address of the owner or the true name

and curren t mai l ing address of a person author ized to receive legal not ices on

beha l f of such owner, along wi th speci f ic requirements for how the tenant is to

request re turn o f the deposit .

If , a f ter receip t by the broker , the secu r i ty deposi t is to be transferred to the

owner or used for the owner ’s benefi t , the broker, in add it ion to proper ly no ti fying the

tenant , must secure the consent of the owner to assume ful l f inancia l responsib i l i ty

for the return of any deposi t which may be refundable to the tenant. The broker

shal l not wi thhold the identi ty of the owner f rom the tenant if demand for the return

of the deposi t is proper ly made according to the lease, ren tal agreement , or separa te

not ice , and the owner has re fused to re turn the secur i ty deposit . The lease, rental

agreement, or separate no tice may also give not ice tha t the security deposi t wil l be

transferred upon the happening of certain events, e .g. , sale of the property or the

naming of a new property manager.

Del ivery of the secur i ty deposit to the owner or to anyone ( inc luding a

succeed ing broker /manager of the property) without proper no tice to the tenant , in

addi t ion to sub jecting the broker to possible civ i l l iabi l i ty, wi l l consti tu te a vio la tion

of the l i cense law escrow statute c i ted above. The l icensee must retain copies of

such notices for inspect ion by the Commission.

Under a proper ty management contract, the broker must transfer a l l escrowed

money be longing to the owner of the proper ty at reasonab le and agreed upon

in terva ls and wi th proper accounting pursuant to sta tu tory requirements and

Commission Ru les E-l and E-2 . If advance rental money is held by a broker bu t is

subject to reca l l by the tenant o r occupant , i t must be escrowed unti l such t ime as

it is earned and r igh tful ly transferred or cred ited to the owner . A broker has no

claim on or r igh t to use advance deposi ts which are subject to reca l l by a tenant or

prospect ive occupant . Deposi ts wh ich are no t sub ject to recal l are the property of

the owner and may not be transferred to the broker ’s account o r used for the broker ’s


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benef i t unless speci f ical ly au thor ized and agreed to by the owner in the

management agreement.

If l i t iga t ion concern ing escrow money commences, the money may be placed wi th

the cour t. The jur isdiction of the cour t wi l l , of course , supersede the sta tutory

requ irement for escrowing money belong ing to others.

C P - 6 C o m mi s s i o n Po s i t i o n o n R e l e a s e o f Ea rnes t Money De posi ts

(R evi sed P osi t i on 8 - 6- 2 0 08 )

Rule E-15 states in part that: “When for any reason the owner fails, refuses,

neglects or is unable to consummate the transact ion as provided for in the

contract, and through no faul t or neglect of the purchaser the real esta te

transaction cannot be comple ted , … the deposi t shou ld be returned to the purchaser

at once …”

The Commission wil l no t pursue disc ip l inary act ion against a broker for refusa l

to disburse d isputed funds when the broker is act ing in accordance with the

language of the appropr iate Commission-approved contract to buy and sell. It is

clear in the contract to buy and sell real esta te that the broker holds the earnest

money on beha lf o f both buyer and se l ler . If there is no dispute , the broker should

disburse to the appropr ia te par ty immediately.

Some brokers unnecessar i ly require a signed release by both parties even

when there is no disagreement . Audits have disclosed many instances where

brokers have he ld deposits for extended per iods just because one or both par ties wi l l

not s ign a release. Whi le good judgment is a lways urged, releases are no t a

requ irement o f the Real Esta te Commission . In addi t ion , where one party has given

wr it ten au thor izat ion for the release of a deposi t to another, a wr i t ten release by

the other party is not required.

Excu lpa tory provis ions holding the broker harmless do not belong in an

agreement for the release o f earnest money and should not be used to rel ieve the

broker from l iab i l i ty unrelated to earnest money.


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In the case of a dispute be tween the part ies, the broker is au thor ized by the

contract to buy and se l l to ob ta in mutua l wr i t ten instructions (such as a release)

before turn ing a deposit over to a party. The Commission has approved an optional

use “Earnest Money Release” form when such a wri t ten release might help faci l i ta te

exped i t ious disbursement.

Unless o therwise indicated in the Commission-approved contract to buy and sel l ,

a broker is not required to take any act ion regard ing the release of the earnest

money deposi t when there is a controversy. I f the fol lowing provis ions are included

in the contract, the broker may exercise three options in the event o f an earnest

money dispute , i f the broker is the holder o f the earnest money deposit . One opt ion

is that the broker may await any pro ceed ing between the par ties. Another op tion for

the broker is to interplead al l par ties and deposi t the earnest money into a cour t of

competent jur isd iction. If included in the contract to buy and sel l , the broker is

ent i t led to recover cour t costs and rea sonable a t torney and legal fees. However, i f

th is provis ion is struck f rom the contract to buy and sel l , the broker may not be

ent i t led to recover those costs. A third option avai lab le to the broker is to provide

not ice to the buyer and se l ler tha t unless the broker rece ives a copy of the

Summons and Complaint or Claim (be tween the buyer and sel ler) containing a case

number of the lawsui t within one hundred twenty (120) days of the broker ’s no tice to

the parties, the broker wi l l be au thor ized to return the earnest money to the buyer.

If the broker is unab le to loca te the par ty due the refund, the broker may be

requ ired to transfer the deposi t to the Colorado State Treasurer under the

provis ions of the Colorado “ Uncla imed Property Act” C.R.S. 38-13-101 . Notice of

funds held is published in local newspapers under the “Great Colorado Payback

Program” each year . Further information and repor ting forms may be obta ined from

tha t off ice.

CP -7 Com miss i on P osi t i on on C l os i ng Cost s

In the past, the Commission’s posi t ion had been that real estate l icensees

were responsib le for all costs of closing. This posi t ion has been modi fied a f ter a


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re-examination of the Colorado Supreme Court case of Conway-Bogue vs. The

Denver Bar Associa tion and af ter the adop t ion o f Rule E-37.

Commission Ru le E-37 states:

“There is no obl iga tion for a l i censee to prepare any lega l documents as par t

of a rea l estate transaction . However , i f a l icensee or the l i censee’s agent

prepares any lega l document , the l i censee or the l i censee ’s agent may not

charge a separa te fee for preparat ion of such documents. A l icensee shall

not be responsible for fees charged for the prepara tion of legal documents

where they are prepared by an a t torney represent ing the purchaser or se l ler .

Costs of closing no t rela ted to prepara tion of lega l documents may be paid

by the l icensee or by any other person. A broker who c loses transactions

and charges separa te ly for costs of c losing not re la ted to the preparat ion of

lega l documents must speci fy th e costs and obtain the wr i t ten consent o f the

part ies to be charged.”

Based on the new ru le the posi t ion is as follows:

1. Licensees are st i l l responsible for paying the costs of legal document

prepara tion when they are prepar ing such documents for their c l ien ts. If the

broker delegates this funct ion to an agent (Ti t le Company or closing service)

the broker is st i l l responsib le for bear ing the cost.

2. Other costs associa ted wi th closings can be pa id for by the l icensee or any

other par ty. The Commission wi l l no longer requ ire tha t l i censees bear these

costs. Licensees are urged to use the Closing Instructions and Earnest Money

Receipt form deve loped by the Commission.

3. It is now permissib le for brokers to close their own transact ions and make

addi t ional charges for provid ing c losing serv ices so long as the charges are

not t ied to legal document preparat ion . If a l icensee does this it must be

with the consent of the par ties and a l l charges must be speci f ied . Th is

consent may be obtained through the Listing Contract, the Contract to Buy


Page 16 of 75

and Se ll , the Closing Instruct ions and Earnest Money Rece ip t form,

or otherwise.

4. Licensees are no t responsible for bear ing the cost of lega l document

prepara tion where the documents are prepared by an at torney represent ing

the part ies to the transaction . However , the broker should not designate

the broker ’s own at torney to prepare legal documents for the parties and

then charge as if the attorney had prepared the documents on behal f

of a client.

5. The broker must st i l l provide accura te closing statements.

Par t icular no te should be paid to the f ir s t sentence o f the ru le . While there is no

lega l ob l iga tion for a broker to prepare the legal documents in a transact ion the

Commission strong ly advises that l i censees make this clear in the List ing

Contract . Many persons, purchasers and sel lers al ike , normally look to the broker

for the prepara tion of these documents. If the broker has not made it clear tha t the

broker ’s compan y wil l no t under take the preparat ion of legal documents, the par t ies

might we l l assume that the broker wi l l do so at the broker ’s cost.

CP -8 Com miss i on P osi t i on on Ass i gnme n t o f Con t rac ts and E sc rowed Funds

Assignments of contracts and escrowed funds usual ly occur when one real

esta te company is purchased or taken over by another real esta te company.

The fo l lowing re flects the general posi t ion o f the Commission concern ing the

assignment o f contracts and escrowed funds as it concerns the brokers.

1. Al l par ties to a contract must be informed o f assignments and al l benef iciar ies

of escrowed funds must be informed o f any t ransfer o f escrowed funds.

2. Listing contracts may not be assigned by the l i st ing broker to another broker

(without the consent of the owner) , because the l is ting contract is a persona l

contract of a type which would not be entered into except when the owner

rel ies on the personal ski l l s and expert ise o f the broker.


Page 17 of 75

3. The broker concerned wi th an executory contract is no t a party pr incipa l to

the contract i tsel f and, there fore, has no vo ice in i ts assignment. The broker

signs the sa les contract only as the receip ting agent.

4. The r igh t o f en ti t lement o f a broker to a commission , pursuant to a contract

between the broker and a se l ler , is assignable. In the Commission approved

form of executory contract, the agreement of the se l ler in regard to a

commission is placed outside the body o f the contract be tween the purchase r

and seller.

5. The contract be tween the se l ler and the broker concerning commissions does

not af fect the contract be tween the pr incipa l part ies in the sale.

6. Earnest money taken pursuant to an executory contract is money belong ing to

others and fa l ls within the purv iew o f 12-61-113( l) (g) and (g.5) , C.R.S. Earnest

money be ing held by the broker is not transferable to any par ty except to a

closing agent as immedia te ly pr ior to closing as is pract icable.

7. The main tenance of earnest money held in escrow must be pursuant to the

rules of the Commission . The broker may, for convenience, au thor ize

other persons to wi thdraw money from th is escrow account (see

Commission Ru le E- l(a)) , bu t the wi thdrawal must be pursuant to law and

Commission rules.

8. Unless contracted to the contrary, the mechanica l act o f closing the

transaction may be per formed by any qua l i f ied person or persons wi th the

agreement o f the pr incipal part ies to the contract.

9. The absence of the closing broker or the Broker ’s agent wi l l not rel ieve such

broker from the broker ’s responsib i l i t ies of approving the Sta tement of

Set tlement . (See Commission Rule E -5) . However, the absence o f the

broker cannot impede the closing o f the transact ion pursu ant to the

executory contract.


Page 18 of 75

10. If a l icensed broker receipts for earnest money pursuant to an executory

contract and then transfers such earnest money to an unauthor ized person,

who is also a l icensed broker , the l icensed t ransferee, (as wel l as the

transferor) , is also sub ject to the law and rules of the Commission in regard

to money belong ing to o thers. Such l icensed t ransferee is obl iga ted to re ta in

such money in a trust account unti l the transact ion is consummated,

defea ted, or se t tlement has occurred , or unless d irected otherwise by a cour t

of law. If l i t iga t ion concern ing escrowed money commences, the money may

be placed wi th the cour t . The jur isdict ion of the cour t wi l l supersede the

sta tu tory requ irements and the Commission Rules.

11. If the se l ler and the buyer , who are the so le benef iciar ies o f the escrowed

money, bo th agree tha t such escrowed money be transferred, then se t tlement

has occurred and the broker must transfer the money according to the

wishes of the benefic iar ies. This does not defeat the broker ’s r igh t to a

commission whether by or ig ina l contract with the se l ler or by assignment of

such contract right.

CP-9 Commi ss i on P osi t i on on R eco rd Keepi ng by Brok e rs

The Commission is of ten asked what documents must be kept in the broker ’s f i les

which concern a part icu lar transaction.

A dupl ica te means photocopy, carbon copy, or facsimile, or electronic copies

which contain a d ig ital or e lectron ic signature as def ined in 24-71-101(1) C.R.S.

Pursuant to Rule E-4 and E-5, a broker sha l l maintain a dupl ica te o f the or ig ina l of

any document (except deeds, notes and trust deeds or mor tgages prepared for the

benef i t of third par ty lenders) which was prepared by or on behal f of the l icensee

and pertains to the consummation of the leasing , purchase, sa le or exchange of real

proper ty in which the broker par tic ipates as a broker. The payof f sta tement and new

loan sta tement monetar i ly a f fect the se t tlement sta tements and shou ld be reta ined

by the respective broker concerned. Coopera ting brokers, includ ing brokers acting as

agents for buyers in a specif ic rea l esta te t ransact ion, shal l have the same

requ irements for retent ion of dupl ica te records as is sta ted above, except that a


Page 19 of 75

coopera ting broker who is not a party to the l ist ing contract need not retain a copy

of the l ist ing contract or the seller’s set tlement sta tement. A broker is not requ ired

to obta in and retain cop ies of existing publ ic records, t i t le commi tments, loan

appl ica tions, lender requ ired d isclosures or rela ted af f irmations from independent

th ird par ty closing en ti t ies a fter the sett lement date . The broker sha l l re ta in

documents bear ing a dupl ica te signature for the disclosures requ ired by Commission

Rule F-7 . The broker engaged by a par ty shal l insure that the fina l sales agreement ,

se t t lement statement , or amendment of the sett lement, del ivered at closing for that

party’s tax report ing or future use, shall bear dupl ica te signatures as author ized

by the part ies concerned.

A comple te l i st ing of the documents normal ly required by the Commission for

sa les transact ions and management act ivit ies can be found in the current edit ion

of the Colorado Real Estate Manual, Chapter 20, and at the website address:

http:/ /www.dora.state.co.us/real-estate.

CP- 10 C o m mi s s i o n Po s i t i o n o n C o m p e n s a t i o n Ag r e e me n t s B e t w e e n E mp l o y i n g a n d Emp l oye d

Brok ers

In regard to an employed broker ’s claim for compensat ion from an employing

broker , the Real Esta te Commission has no legal author i ty to render a monetary

judgment in a money dispute nor wil l i t arbi t rate such a mat ter . A broker ’s failure

to pay an employee does not warran t disc ipl inary act ion.

The Commission’s posi t ion is:

1. An employed broker is an employee of the employing broker.

2. That an employed broker may not accept a commission or valuab le

considera tion for the sale of real proper ty except f rom his or her employing

broker . (12-61-117 C.R.S.)

3. That a commission or compensation paid to the employing or independent

broker for real esta te services is money be long ing to such broker and is no t


Page 20 of 75

money be longing to others as de f ined in 12 - 61-113( l) (g) and

(g.5 ) C.R.S.

4. That a c la im by an employed l icensee fo r money al legedly owed by an

employing broker must be decided by the c ivi l courts on the basis of contract

or “quantum merit .”

5. That an employing broker pays the ir l i censed or unl icensed employees

pursuant to an oral or wr i tten employment contract. There fore, the

contractua l relat ionship be tween employing and employed brokers, as wel l as

the office po l icy manual , should adequately cover the compensation o f

employed brokers.

CP- 11 Com missi on P osi t i on on A ssi gnmen ts of B roke r ’ s R i gh ts t o a Com mi ssi on

The Real Esta te Commission recogn izes and wil l en force the sta tu tory obl igat ion

of employed l icensees as descr ibed in (12-61-113(1) , C.R.S.) , and more part icularly:

“12-61-113( l) ( f) C.R.S. In the case o f a broker registered as in the employ

of another broker , fai l ing to p lace, as soon after rece ip t as is practicab ly

possib le , in the custody of tha t l i censed broker -employer any deposi t

money or other money or fund entrusted to the employee by any person

deal ing with the employee as the representat ive of that l icensed

broker-employer.”

The Commission recogn izes an d wi l l en force the proh ibi t ion descr ibed in

12-61-117 C.R.S.:

“12-61-117 C.R.S. It is un lawful for a real estate broker registered in the

commission of f ice as in the employ of another b roker to accept a

commission or valuab le considera tion for the performance of any of the

acts speci f ied in this par t 1 from any person except the broker ’s employer,

who sha l l be a l icensed real esta te broker.”


Page 21 of 75

However: If a broker is en ti t led to a commission pursuant to 12-61, Par t 2,

C.R.S., or , a broker is en t i t led to a commission in a transaction and t i t le has passed

from a sel ler to a buyer, the broker may assign any or a l l lega l r ights to such

commission to any person includ ing employed l icensees and no discipl inary act ion

wil l be invoked against such broker for having made such an assignment.

CP- 12 Com missi on P osi t i on on the B roker ’ s P aymen t or Reba t ing a P o r t i on o f a n Ea rne d

Com mi ssi on

The License Law forb ids a broker from paying a commission or va luable

considera tion for perfo rming brokerage funct ions to any person who is not l icensed

as a real estate broker . Thus, “ re ferral fees” or “ f inder ’s fees” paid as the result of

performing brokerage activi t ies are prohibited.

The question o f whether or no t a broker may make payments from the ir earned

commission to a buyer or a se l ler in a par t icular transaction wi l l ar ise because

usual ly ne ither the buyer nor the sel ler is l icensed.

However, the License Law also permi ts any person to sel l or acqu ire real proper ty

on such person ’s own account.

In a l is t ing con tract , the broker is pr incipal party to the contract and the

considera tion o f fered is the brokerage serv ices. The broker may add to this

considera tion the payment of money to the proper ty owner in order to secure the

l is ting. This is not a vio la tion o f the License Law.

Also, in a par ticular real esta te transaction , the broker may pay a por tion o f

commission to the unl icensed sel ler . This is merely a reduction in the amount o f the

earned commission and does not vio la te the License Law.

Payment to the unl icensed purchaser is o ften re ferred to as “ rebating” and the

in ten tion to pay money to the purchaser is somet imes advert ised and promoted as

a sales inducement . The payment to the purchaser in itself is not a viola t ion of

the License Law because the broker is l i censed to negotia te and the purchaser may

negot ia te on the ir own account . However , a broker represent ing the sel ler in a


Page 22 of 75

transaction shou ld take care to insure that such payments do not confl i c t wi th

f iduciary duties. For example , the “ rebate” of a portion of a commission to a

purchaser to be used by the purchaser as a down payment could distor t the

purchaser ’s f inancial qua l i f i cat ions and ult imate ly harm the se l ler . Addi t iona l ly , a

purchaser who does not receive a promised rebate of a partial commission may try

to hold the seller l iable for the wrongdoing of the broker on the theory of

respondent super ior . The Commission recommends that brokers disc lose such

payments to the sel ler and obta in the seller’s consent pr ior to acceptance o f any

of fer to purchase.

Gra tui tous gif ts to a purchaser subsequent to closing and not promised or

of fered as an inducement to buy would also be al lowed ( i .e. , a door knocker or

dinner) . Such g if ts would no t requ ire d isclosure and consent inasmuch as fiduciary

dut ies would not be involved.

CP- 13 Commi ssi on P ol i c y on S i ng l e -Pa r ty L is t i ngs

Brokers o ften secure single -par ty l i st ings because they have what they be l ieve to

be a good prospect for purchase. These l is t ings are usua l ly only for a few days, bu t

occasiona l ly the broker wishes to be protected for a longer per iod while the broker

is negot ia ting with a part icu lar

prospect ive purchaser.

A single-par ty l i st ing , when p laced on a Commission approved form for an

Exclusive Right to Sel l o r Exclusive Agency, results in greater pro tection to the

broker than the broker needs to have and the owner is p laced in a posi t ion wh ich is

unfair . The owner may not rea l ize that i f the owner s igns a l is t ing contract wi th

another broker , the owner may become l iable for the payment of two commissions

even though the owner has excepted a sale to the person ment ioned in a single-

party l i s t ing contract.

In any and all contracting , the in tent of the part ies is paramount in its

impor tance, in a l ist ing contract, a broker is deal ing with those less in formed than


Page 23 of 75

the broker , and the broker has a duty to disc lose the true mean ing o f the

l i s t ing contract.

The Commission does not wish to l imi t any owner of the freedom to contract .

However, the broker should ful ly disclose to the owner the ef fect o f the exclusive

r igh t to se l l l i s t ing contract or the exclusive agency contract.

Usual ly , when an owner signs an exclusive r ight to sell or exclusive agency

agreement concerning a s ing le party, the owner wishes to l imi t the r igh ts of the

broker under the l is ting contract . There fore , in the space provided for addi t iona l

provis ions, one, two, or al l of the fo l lowing l imi ta t ions should be inser te d in this

space:

1. The provis ions o f this l i s t ing contract shal l apply only in the event a sale is

made to .

2. The termination da te shal l no t be extended by the “Holdover Per iod” o f this

l i s t ing contract.

3. In the event a sa le is made by the owner or their broker to any o ther par ty

than the above names, th is l i s t ing contract is void. If an owner is misled

to their d isadvantage, the broker may be found gu i l ty o f endanger ing

the public.

CP- 14 C o m mi s s i o n Po s i t i o n o n Sa l e o f Modu l a r Homes by Li c e nse es

The Commission is aware tha t many services rendered by l icensees may or

may not , in themse lves, require l i censing . Such services as col lection of ren ts on

real proper ty, subdivis ion deve lopment services o ther than sa les, or the general

management of real proper ty not invo lving rent ing or leasing may a l l be performed

independent ly by an unl icensed person. When per formed by a l icensee, these

serv ices are al l so integrated wi th real estate brokerage tha t a l l money rece ived in

connect ion therewi th must be held or disbursed according to the law and rules o f

the Rea l Esta te Commiss ion.


Page 24 of 75

Therefore , i t is the posi t ion of the Commission tha t a l i censee who sel ls land

and a modu lar home to be af fixed to the land, to the purchaser in concurrent or

an arranged or pre-arranged or packaged transact ion, is subject to the laws and

rules of the Commission. Consequent ly, al l money rece ived concerning the

in tegrated t ransact ion , including the modular home, shou ld be processed through

the broker or the employing broker pursuant to 12-61-117, C.R.S. and 12-61-

113( l) ( f) , C.R.S. and Commission Rules E- l and E-5.

It is a lso the posi t ion of the Commission tha t i f a l icensee se l ls to an owner of

land, a modu lar home to be aff ixed to the land, and there has been no brokerage

rela tionsh ip between the owners of the land and the l i censee, such l icensee in such

a sale wil l no t be requi red to comply wi th the requ irements of 12-61-117, C.R.S. or

12-61-113( l) ( f) , C.R.S. or Commission Rules E- l and E-5.

CP- 15 C o m mi s s i o n Po s i t i o n o n Sa l e o f I te ms O th er Tha n Re a l Est a t e

Inquir ies have been made to the Commission as to the proper handl ing of sa les,

made by l i censees, o f i tems or services other than real esta te . The fol lowing is the

posi t ion o f the Commission:

If the i tem, appl iance, repa ir , remode ling or instal la tion is performed in

conjunction wi th a management contract or lease for a par ticu lar party or pursuant

to an oral or wr i t ten contingency in a specif ic executed contract of sale of the

proper ty, the employed l icensee must process any fees or commissions rece ived

f rom the vendor o r contractor thr ough the employing broker . A lso, disclosure

must be made by the l i censee to both the buyer and the se l ler of the proper ty tha t

the l i censee is compensated by the vendor o r contractor.

It is a lso the posi t ion of the Commission tha t i f the sale of the i tem,

appl iance, repa ir , remodel ing or instal la tion is per formed pursuant to a separate

contract, and wi thout re ference to a speci f ic contract of sa le of the property, then

the employed l icensee may receive compensat ion d irectly from the vendor , or

contractor and payment need not be made th rough the employing broker. However ,

i f the sale of i tems or serv ices is made to a buyer o f rea l proper ty dur ing the term


Page 25 of 75

of the brokerage agreement wi th the se l ler o f such property, then disc losure must

be made by the l icensee to both the buyer and the sel ler of the property that the

l icensee is compensated by the vendor or contractor.

The Commission takes no posi t ion when the l icensee engages in se l l ing i tems

or services unconnected wi th real esta te sales. In any of the above si tua tions the

employed l icensee may be subject to any requirements or prohib i t ions imposed by

the employment agreement with the employing broker.

CP- 16 Com missi on P osi t i on on Ac c ess t o P rope r t ies Of fe red f o r Sa l e

(R evi sed Novembe r 1 , 2 0 05 )

The Commission approved l ist ing agreements (LC series) include a section

t it led OTHER BROKERAGE FIRMS ASSISTANCE – MULTIPLE LISTING SERVICE

– MARKETING.

Provisions o f this section al low the sel ler and l ist ing broker to agree on whether

or no t to submit the proper ty to a mul tip le l is t ing service, in formation exchange,

and whether there are l imi ta tions on the methods o f marketing the property.

The provisions of the section also al low for discussion and the establ ishment

of “Other Instruct ions” regarding access to the property by other brokerage f irms

such as through a lock box, for example.

It is the posi t ion of the Commission that the access in format ion , and adherence

to the Other Instruct ions, whether through lock box code or other means, is the

responsib i l i ty of the l ist ing broker . Listing brokers should take every e ffor t to

sa feguard the access information on behalf of the seller. The l ist ing agreements

also include a section t it led MAINTENANCE OF THE PROPERTY, which addresses

the broker ’s l iabi l i ty for damage of any kind occurr ing to the property caused by

the broker’s negligence. Brokers are advised that fa i lure to sa feguard the access

in formation and adhere to the instruct ions o f the Seller rela ted to access by

other brokerage f irms could resu lt in a c laim of negl igence brought aga inst the

l i s t ing broker.


Page 26 of 75

Se l l ing brokers who obta in access in format ion shou ld sa feguard that in formation

at a l l t imes. At no t ime should a sel l ing broker share the access in format ion wi th a

th ird par ty ( inspector , appra iser , buyer, etc.) without the l i s t ing broker ’s

author iza tion . Sell ing brokers are reminded that pursuant to the Contract to Buy

and Sell, the Buyers indemni fy the Se ller against damage to the proper ty in

connect ion with the proper ty inspection provision.

CP- 18 Commi ssi on P osi t i on on P aymen ts to a Whol l y Owned E mployee’ s Corpora t i on

The Commission has received several inqu ir ies concerning the payment of

commissions or fees by an employing broker to a corpora t ion tha t is who lly owned

by an employed l icensee.

12-61-103(9) wh ich prohibi ts the l i censing o f an employed broker as a corpora tion ,

partnership or l imi ted l iabi l i ty company and the l imitat ions on the payment or rece ip t

of real esta te fees, as descr ibed in 12 -61-113( l) ( j) and 12-61-117, are recognized by

the Commission ; however , i t is the posi t ion o f the Commission that:

An employing broker ’s payment of earned real esta te fees to a corpora t ion which

is sole ly owned by an employed l icensee of such employing broker sha l l not be

considered by the Commission as a v io la tion of 12-61-113( l) ( j) or 12-61-117;

however, a contract between the employing broker and such corpora tion or employed

l icensee shal l no t rel ieve the broker o f any obl iga tion to supervise such employed

l icensee or any other requirement of the l icensing sta tu te and Commission rules. It

is no t the in ten t of this posit ion sta tement that the employed l icensee be rel ieved

f rom personal c ivi l responsib i l i ty for any l icensed act ivi t ies by interposing the

corpora te form.

It must be stressed that the above posi t ion sta tement does not al low such

corpora t ions to be l icensed under a broker and speci f ical ly re fers on ly to

corpora t ions which are owned so le ly by the employed l icensee.


Page 27 of 75

CP- 19 Com missi on P osi t i on on Shor t Te rm Occupancy Agree me n t s

The Commission has been asked for i ts posi t ion concern ing the need for a

real esta te broker to escrow funds coming into their possession involv ing

short - term occupancies.

A shor t- term occupancy can be dist inguished f rom a lease in tha t i t is in the

nature of a hotel reserva tion and a l icense to use. Short- term occupancy

agreements, i f proper ly treated, are not considered lease agreements. Act iv it ies

relat ing to these agreements are exempt from the def ini t ion o f real esta te

brokerage. Concerns ar ise when a l icensed real esta te broker wants to engage in

short term occupancy act ivi t ies ei ther exclusive ly or as par t of the ir separa te

brokerage pract ice . In some instances brokers have ob jected to ho ld ing money

belong ing to o thers in their trust accounts or account ing for these funds i f the

act ivi ty itself is exempt.

C.R.S. 12-61-113( l) (g) sub jects a l i censee to discip l inary action for “Fai l ing to

account for or to remi t, wi thin a reasonab le t ime, any moneys coming in to the

l i censee ’s possession that belong to o thers, whether act ing as rea l esta te brokers or

otherwise , and fa i l ing to keep records re la tive to said moneys….” In addi t ion , the

case of Seibel v s. Colorado Real Estate Commiss ion, 533 P .2nd 1290 , g ives the

Commiss ion jur i sd ic t ion over the acts of a l i censed broker even where those acts would

otherw ise exemp t the person from or ig ina l l icensure.

Based on the above, it is the posi t ion of the Commission tha t a l i censed real

esta te broker engaging in shor t te rm occupancy agreements must escrow and

account for funds coming in to the ir possession which belong to o thers. To ho ld

otherwise , wou ld be to invite fur ther confusion and mistrust on the par t o f the publ ic

in an a lready confusing real esta te rela ted pract ice . It has been the Commission’s

exper ience that most brokerage companies engag ing in shor t term occupancy

act ivi t ies combine those act iv it ies wi th those requir ing a l icense ( i .e. , long term

rental and lease agreements, sales) . In addi t ion, brokers continual ly hold themselves

out to the publ ic as being both l i censed and professiona l. The pub l ic does not


Page 28 of 75

distinguish be tween an act ivi ty technica l ly exempt from l icensure and the overa l l

business practices o f a l i censed real esta te broker.

CP- 20 Com missi on P osi t i on S t a t e me n t on Pe rsona l Ass i s t a nt s

(Revised Oc tobe r 2 , 20 1 2)

Persona l assistants ( “assistan ts”) are genera l ly thought of as employees or

independent contractors ( “employees”) that perfo rm var ious functions, including

cler ical du t ies, on behalf of a l icensed real estate broker ( “broker”) . Assistan ts

can be grouped in to two separa te categor ies: un l icensed assistan ts and l icensed

assistan ts. An un l icensed assistan t cannot perfo rm the same duties tha t a l i censed

assistan t can per form. A broker needs to be cognizant of these di f ferences, a long

with the broker’s indiv idual supervision responsib i l i t ies to the assistan t . If a

“ l i censed” assistan t’s broker ’s l i cense is current ly on inactive or expired sta tus, the

assistan t is l imi ted to performing only those tasks tha t may be comple ted by an

unl icensed assistant.

§12-61-118, C.R.S. mandates tha t a broker can be held l iable for any un lawfu l act

or v iolat ions of the l i cense law commi t ted by an employee of a broker , i f the broker

had actual knowledge of the unlawful act or viola t ion or had been negl igent in the

supervision of such employees. Commission Rule E-29 clar i f ies that employees

include “but are not l imi ted to, secretar ies, bookkeepers and personal assistan ts…”

Employing brokers tha t employ assistan ts, or al low their employed brokers to

employ assistan ts, need to include procedures on the use o f l i censed and/or

unl icensed assistan ts in the o f f ice pol icy manual.

The l icense law proh ibi ts unl icensed persons, inc lud ing unl icensed assistan ts,

f rom practic ing real esta te brokerage, which includes negotia ting the sale,

exchange or lease of real proper ty on behal f of another person. An un l icensed

assistan t should prompt ly disc lose to brokers, o ther industry professiona ls ( i .e . loan

or ig ina tors, lenders, appraisers, proper ty inspectors, etc.) and consumers that he or

she is not a broker , and disclose the name of the broker for whom the assistan t

works. An unlicensed assistan t may comple te the fo l lowing tasks:


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1. Complete forms prepared for, and as directed by a broker. Unl icensed

assistan ts cannot independent ly draf t legal documents such as l i s t ing or

sa les contracts, and they cannot o ffer op in ions, advice or in terpre ta tions o f

these documents.

2. Distr ibute prepr in ted, object ive information prepared by the broker about a

proper ty l i s ted for sale.

3. Per form cler ical dut ies, inc lud ing ga ther ing informat ion for a l ist ing.

4. If au thor ized by the sel ler , provide access to proper ty, conduct showings or

open houses.

5. Del iver paperwork to o ther brokers, buyers or sellers.

6. Del iver paperwork tha t requ ires signatures in regard to f inancing documents

tha t are prepared by lending inst itut ions.

7. Prepare market ana lyses on behal f of the broker, i f the analyses are

approved and submit ted by the broker to the client wi th a d isclosure tha t the

market ana lyses were prepared by the un l icensed assistan t. The broker must

ensure that market analyses comply wi th Commission Rule E-42.

8. Col lect and receipt for earnest money deposi ts, secur i ty deposits o r rents.

9. Schedu le proper ty repairs on behal f of the broker , i f there is an existing

agreement that au thor izes the broker to make repairs to the property.

The broker shou ld inqu ire as to whether any of the unlicensed assistan t’s

act ivi t ies are covered by the broker ’s errors and omissions insurance pol icy.

Fur thermore , l i censed assistants may need their own separa te errors and

omissions insurance pol icy to cover the acts they perform on beha lf o f

the broker.


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CP- 21 Com missi on P osi t i on on Of f i c e P ol i c y Ma nua l s

(R evi sed and A dop ted 4- 1- 2 0 03 )

12-61-Par t 8 C.R.S. and Commission Ru les E-29, E-30, E-31 E-32, E38 and

E29 set out a broker’s supervis ing responsibi l i t ies. (See Rules E-29, E-30, E-31

and Ru le E-32 in chapter 2 of th is manual .) In order to he lp brokers comply wi th the

rules i t is suggested tha t a pol icy manual conta in procedures for a t least

the following:

1) typ ical real esta te transact ions

a) review of contracts

b) hand l ing o f earnest money deposi ts, including the release thereof

c) back-up contracts

d) closings

2) non-qua l i fying assumpt ions and owner f inancing

3) guaranteed buyouts

4) investor purchases

5) ident i fy ing brokerage rela tionsh ips o f fered to publ ic ( required by

12-61-808C.R.S.)

6) procedures for designation of brokers who are to work wi th a se l ler , land lord ,

buyer or tenant, ind ividua l ly or in teams (required by Ru le E-38) (Does not

apply to brokerage f irms tha t consist o f on ly one l icensed

natura l person.)

7) ident i fy and provide adequate means and procedures for the main tenance and

protection of conf ident ia l information (required by Ru le E-39)

8) l i censee ’s purchase and sale o f property


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9) moni tor ing o f l i cense renewals and transfers

10) delegation o f authority

11) proper ty management

12) proper ty l i s t ing procedures, including re lease o f l ist ings

13) training

a) dissemination o f i nformation

b) s ta f f meetings

14) use o f personal assistants

15) fa ir housing /af f irmat ive action marketing

Brokers are encouraged to add o ther pol icies as appropr ia te to the ir pract ice.

In the event tha t one or several of these suggested top ics (e.g . , guaranteed

buyouts) are not appl icab le in a par ticular o ff ice, they should be addressed by

sta ting tha t the o f f ice does not part icipa te in tha t act ivity.

The Commission does not become involved in mat ters re la ting to independent

contractor agreements, and disputes over earned commissions. Of fice po l icies in

these areas do not fal l wi th in the purview o f Commission rules.

(See addi t i onal di scuss ion of o f f i ce pol i cy manual s i n Chapter 20)

CP- 22 Com missi on P osi t i on S t a t e me n t on H andl i ng o f Con f i de nt i a l In fo rmati on i n Re a l Es t a t e

Brok era ge

(Adopted Oc tobe r 1 , 20 0 3)

Pr ior to designated brokerage, it was common for brokers to share the

motivat ions of a buyer or se l ler dur ing o f f ice sales meetings, for example . Under

designated brokerage, the law speci f ical ly prohib i ts shar ing of such information.

Confidential information , and the broker responsib i l i ty there to , are defined in


Page 32 of 75

C.R.S. 12-61-804 (2) , 12-61-805 (2) , 12-61-807 (3) , and Rules E-32 and E-39.

Confidential information can include, bu t is not l imi ted to , motiva t ion o f the part ies.

Brokers a re requ ired to have a writ ten off ice pol icy that identi f ies and provides

adequate means and procedures for the maintenance and protection of confidential

in formation . Si tua tions where inadver ten t disclosure of conf ident ia l in format ion may

occur, include, but are no t l imi ted to:

• sa les meet ings or market ing sess ions,

• shared fax or copy machines,

• shared computer networks, pr inters and fi l e directories,

• in-o f f ice mail boxes,

• hand wr i tten telephone messages,

• phone conversa tions or meetings wi th c l ients,

• relocat ion , d ivorce , pend ing foreclosure and other sensit ive documents,

• conversa t ions with a ff i l ia ted business providers,

• product ion boards,

• socia l functions

Brokers must deve lop o f f ice pol icies and procedures to address the hand ling of

conf identia l in format ion. For example , some off ices may have “ locked” transact ion

f i les that include confident ial in formation and other off ices may elect not to

include confidential information in transaction f i les.

A designated broker is permi t ted to share conf ident ial in format ion with a

supervising broker wi thout changing or extending the brokerage rela t ionship beyond

the designated broker. Brokers may want to consul t legal counsel regard ing the

necessi ty of securing the author iza tion of the party to whom the information is


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conf identia l before the designated broker shares that conf ident ia l in format ion with

the supervising broker. Such advice cou ld include modi ficat ions to the l ist ing

agreement o r buyer agreement that crea te such authorizat ion.

CP- 23 Commission Posi t i on on Use o f “L i censee Buyou t Addendum ”

(R evi sed J a nuary 17 , 2 0 0 6)

Ru le F-7 requires real estate l i censees to use the Commission approved

“Licensee Buyout Addendum to Contract to Buy and Sel l Rea l Estate”, when

purchasing certain l i s ted propert ies.

It is the Commission ’s posit ion that Rule F -7 requ ires use o f the Buyout Addendum

under the fo l lowing ci rcumstances:

1. When a l icensee enters in to a contract to purchase a proper ty concurren t wi th

the l i s t ing o f such property.

2. When a l icensee enters into a contract to purchase a proper ty as an

inducement or to faci l i tate the proper ty owner’s purchase o f another

proper ty, the purchase or sale of which wil l genera te a commission or fee to

the l icensee.

3. When a l icensee enters in to a contract to purchase a proper ty from an owner

but continues to market that property on behalf of the owner under an

existing l i s t ing contract.

Unless one o f the above si tua tions exists, l i censees are no t required to use the

Buyout Addendum.

The term “ l i censee” , as used above, refers to the ind ividua l l i censee who has

personal ly taken a l is t ing or to the l i s t ing broker or brokerage ent i ty if the buyout is

to be accomplished by that broker or brokerage ent i ty . If the l i st ing l i censee or

broker desires to acquire a l isted proper ty so lely for personal use or fu ture resa le

and not as an inducement to the owner , the l icensee or broker is advised to (1)

clear ly sever their agency or l ist ing rela t ionsh ip in wr i t ing ; (2) renounce the right


Page 34 of 75

to any commission , fee or compensat ion in conjunction with acquisi t ion of the

l isted proper ty; and, (3) advise the owner to seek other ass istance,

representa tion or lega l advice.

Fu ture resale of a purchased property, as re ferred to above, means resa le to a

th ird par ty purchaser wi th whom the l icensee has not negotia ted dur ing the l ist ing

per iod . Resa le to a person with whom a l icensee has conducted previous

negot ia t ions concern ing the subject property dur ing the l i st ing per iod (o f ten re ferred

to as a “pocket buyer”) , would consti tu te a violat ion o f 12-61-113( l) (n) in the

absence o f fu l l wr i t ten disc losure and acknowledgment by the owner.

CP-24 Commi ss i on P osi t i on on P repa ra t ion o f Market Analyses and R eal Es ta te E val ua t ions

Used fo r Loa n Purposes

The Colorado Real Estate Appraiser L icensing Act conta ins specia l provisions

which a l low l icensed real esta te brokers to perfo rm cer tain real esta te valuat ion

rela ted act ivi t ies wi thout be ing registered, l i censed or cer t i f ied as real esta te

appraisers. These provisions are found in Sect ions 12 -61-702 and

12-61-718, C.R.S.

The fir s t o f these a l lows a broker to prepare an “estimate o f va lue” which is no t

represented as an appra isa l and is no t used to obta in f inancing . The posit ion of the

Commission is tha t this provis ion a l lows a broker to prepare a market ana lysis for

use in the real esta te brokerage process and to of fer their estimate as to the value

or market pr ice of real estate for cour t test imony or tax purposes.

The second provis ion allows a broker to prepare what are termed

“evalua tions” in federal banking regula tions. These evalua tions may be used for

lend ing purposes. This provision is very narrow in scope —a broker may prepare

such an eva lua tion only for a federal ly regu lated bank, savings and loan or credi t

union wi th whom they have a contract. The loan amount must be be low the

thresho ld wh ich invokes the requ irement for a true appraisal.

As the author i ty to prepare such est imates of value and evaluat ions is t ied to

the holding of a Colorado real esta te broker l i cense, the Colorado Real Esta te


Page 35 of 75

Commission has jur isd ict ion over the activ i t ies of brokers engaged in such

act ivi t ies. The Commission wil l consider the conduct of l icensees who prepare

est imates of value and evalua tions in l igh t o f Sections 12-61-113( l) (n) and ( t) ,

which speak to unworthiness, incompetency and d ishonest dealing.

It is the posi t ion of the Commission that the mere holding of a broker l icense

does not in itself assure the competency necessary to prepare more complex

est imates of value or evalua tions. Licensees prepar ing est imates of value and

evaluations have a responsib i l i ty to possess t raining and exper ience commensura te

with the complexi ty o f the assignment undertaken.

Invest iga tions under taken by the Commission re la ting to unworthiness,

incompetency and dishonest dea l ing wi l l take into account the following:

• Brokers prepar ing estimates of va lue and evalua t ions must act

independent ly at a l l t imes. The estimate or eva lua t ion must be unbiased.

• The broker prepar ing an estimate or evalua tion must not represent

themselves as an appra iser , nor represent the work product as be ing

an appraisal.

• The broker prepar ing an estimate or evalua tion must at all t imes comply

with the statu tory requirement in Sect ions 12-61-702 and 12-61-718,

Colorado Revised Statu tes, for a wr i t ten no tice that they are no t an

appra iser . The wording and use of the wri t ten no tice are speci f ied in

Chapter 15 of the Rules of the Board of Real Estate Appra isers. The

requ ired wording is:

“NOTICE: The preparer o f this appra isal is no t reg istered, l i censed or

cer t i f ied as a real esta te appra iser by the State of Colorado” .

• The broker must not prepare an estimate of value or evalua tion of real

proper ty which requ ires a level of competency beyond the level of tra ining

and exper ience possessed by the l icensee.


Page 36 of 75

CP- 25 Com missi on P osi t i on on Reco rd i ng Con t ra c ts

Over the years the Commission has received many inquir ies and complain ts

concern ing the recording of l i st ing contracts to protect claims for commissions. In

addi t ion , some l icensees have a t tempted more “crea tive” ways of hold ing up a

closing , such as f i l ing mechan ics l iens or no tices of l is pendens, as we ll as

record ing demand le t ters or purchase contracts. The end resul t is usual ly a c loud on

the ti t le and sometimes a slander of t i t le act ion.

Some sta tes have passed sta tu tes author izing the fi l ing of such l iens. Co lorado

has not . Fi l ings and recordings such as these are inappropr ia te and wil l resul t in

Commission act ion.

Here is a typica l scenar io : Broker l i s ts a property at $125,000 for 120 days and

act ively markets it . No o f fers come in during the fir s t 30 days. Broker advises her

se l ler to lower the pr ice by $5 ,000 to encourage some act ivi ty. The sel ler is adamant

tha t the proper ty is wor th the l i st pr ice and refuses. Af ter another 15 days with no

of fers, the se l ler reluctant ly lowers the pr ice . He a lso tells the broker that he

doesn ’ t feel she is tr y ing hard enough to sel l the proper ty and he’s going to take

it off the market if nothing happens.

A week la ter an of fer for $100,000 comes in f rom another company, which is

presented and rejected . The sel ler is qui te upset at the low o f fer and demands to be

released from the l i st ing. There is no fur ther communicat ion be tween the part ies, bu t

the l ist ing is never formal ly terminated. Three weeks later the broker learns tha t the

se l ler has en tered in to a contract wi th the same buyer for $110,000 and c losing is

se t . The broker is very upset and wants to protect her commission . What can

she do?

1. Fi le a mechan ics l ien?

ANS: No. Real estate l i censees are not a pro tected c lass of l ien c la imant

under the sta tu te except as provided in C.R.S. 38-22.5 (Commerical

Real Esta te Brokers Commission Secur i ty Act).


Page 37 of 75

2. Fi le a l i s pendens (no tice o f pending lawsuit )?

ANS: No. A l is pendens re la tes to a ti t le o r ownersh ip d ispute invo lving the

land i tsel f . The broker has no lega l in terest in the real estate.

3. Record the l i s t ing contract?

ANS: No. This wi l l usual ly have the ef fect of cloud ing ti t le to the proper ty,

which in turn af fects the closing be tween buyer and se l ler . The broker

should no t in ter fere in the process of transfer r ing t i t le

to property.

4. Escrow the disputed commission?

ANS: Maybe. Th is is a touchy area. If the broker makes demand on the

se l ler for the commission pr ior to closing and states her possib le r igh ts

(media t ion ; arb i tra tion ; c ivi l act ion) the par ties may agree to an escrow

pend ing set tlement of the dispute. However , there is no legal

requ irement tha t the closing en ti ty escrow funds absent

an agreement.

5. Commence media t ion , arbi tra tion or civ i l action (as appropriate).

ANS: Yes. Noth ing prevents a l i censee f rom asser t ing any legal claim against

a principal.

A commission d ispute is an emot ional issue. Somet imes a l icensee has put in

considerable t ime on a l is t ing on ly to be faced wi th a sel ler who refuses to pay,

at tempts to renegotiate or is outr igh t decei t ful . On the o ther side, the Commission

has wi tnessed instances in wh ich the l icensee had no leg it imate r igh t to a

commission and was using super ior knowledge and scare tact ics to force payment .

Clear ly this is a t ime to consul t a good rea l esta te at torney and avo id the risk of a

compla in t based on a hasty decision.


Page 38 of 75

CP- 26 Com missi on P osi t i on on Auct i oni ng

(Adop ted 5 - 1- 9 7)

Real estate exper ts predict tha t the next decade wi l l see a sign if ican t increase in

the sale of real estate through auct ions. For many years auct ion ing was associa ted

with rura l o r distressed proper ties. However , forecasts are for a prol i fera t ion of

sales activ i ty in both resident ia l and commercial real estate. Sales by auction

are already occurr ing in the resident ia l market in Co lorado and o ther par ts o f

the country.

The brokers act requires tha t real estate auctions be conducted by a l icensed

broker and def ines the act ivi ty as “…offe r ing, at tempt ing or agreeing to auction rea l

esta te, or in terest therein , or improvements a ff ixed thereon…”

(CRS 12-61-101(2)(VI)).

A long-standing At torney General ’s op in ion a l lows an un l icensed auctioneer to

“cry” the bid at a real esta te auction in the presence of a broker or sel ler .

However, the control of the sale , includ ing l i s t ing , adver t ising, showing the property

and writ ing contracts must remain wi th the broker or the auct ioneer wi l l be vio la ting

the law.

Based on the sta tu te and At torney Genera l ’s opin ion, the fo l lowing gu ide l ines are

establ ished fo r unl icensed persons involved in the auct ion process:

1. Auctioneers should never hold themselves out as provid ing real estate

brokerage serv ices to the public (e.g., l ist ing, adver tis ing , negotia ting,

contracting, legal document preparation);

2. Inquir ies f rom sel lers should be re ferred to a l icensed broker or attorney;

3. Inquir ies f rom buyers shou ld be referred to the sel ler , l i s t ing broker or se l le rs

attorney;

4. Only auctioning services shou ld be adver t ised to buyers and sel lers;


Page 39 of 75

5. A potent ia l buyer may be chauf feured to a proper ty, so long as the proper ty is

shown by the sel ler or a l i censed broker;

6. In formation on l i s ted propert ies may be distr ibu ted when such information has

been prepared by a broker;

7. Auctioneers may “cry” the sale, but may not engage in subsequent

negot ia tions, document dra f t ing and the handling of earnest money;

8. Payment shou ld be based on auct ion ing services per formed regard less o f the

success o f a sale.

* CP- 2 7 Com missi on P osi t i on on the Pe r fo rmance o f Res i de nt i a l Lea s ing and Prope rty Managemen t

Func t i ons

(Adop ted August 1 99 8 – Revi sed August 2 01 3 )

Proper ty management is one of the leading sources of complain ts received by the

Commission . This posit ion sta tement is designed to identi fy common issues found

during the course of a compla in t invest iga t ion or an audit ; however it does not

encompass al l of the potential issues associa ted with proper ty management . Any

l icensed real estate broker ( “Broker ” ) in terested in per forming proper ty management

duties are strongly encouraged to comple te educat ional o f fer ings speci f ic to property

management , t rain with a Broker exper ienced in proper ty management , and develop

a strong fami l iar i ty with the Co lorado Real Esta te Manua l chapters t i t led Escrow

Records, and Property Management and Leases.

L i c e nse Re qu i re me n t s

Pursuant to C.R.S. §12-61-101(2)(a)&(b) , the leasing and subsequent

management o f rea l esta te for a fee or compensation , is inc luded among the

act ivi t ies for which a l icense is required . As a resu lt of the compla in ts received and

issues identi f ied in Commission invest igat ions and audi ts, the Commission

considers proper ty management to be a complex area of pract ice.

C.R.S. §12 -61-113(1)(n) requires tha t a Broker be competent and wor thy in the

performance o f their dut ies so as to not endanger the interest of the publ ic .


Page 40 of 75

Fur thermore , it is the Commission’s posi t ion tha t pr ior to performing any acts tha t

requ ire a Broker ’s l i cense, a Broker should determine whether he or she

possesses the knowledge, exper ience and/or training necessary to per form the

terms o f the transact ion and to main ta in compliance with the appl icab le federal ,

s ta te or loca l laws, ru les, regulat ions, or ord inances. If the Broker does not have

the requ isi te knowledge, exper ience and/or train ing necessary to ful f i l l the terms o f

the agreement , the Broker should ei ther decl ine to provide brokerage serv ices or

seek the assistance of another Broker who does have the necessary exper ience,

tra ining and/or knowledge. A Broker who agrees to lease property, or per form

ongo ing property management du ties, needs to ensure tha t he or she is competent

to perform the du ties he or she agrees to undertake and must have permission from

the Broker ’s employing broker . Simi lar ly, the employing broker has the

responsib i l i ty to ensure tha t he or she is competent to supervise a broker tha t

performs leasing or proper ty management duties.

Lea si ng v. P rope r t y Ma na ge me n t

Whi le leasing and proper ty management a re similar , they are two d ist inctively

di fferen t serv ices. Leasing is a onetime act ivity in which the broker acts as a

specia l agent, whi le proper ty management is an ongoing relat ionship in which the

broker is a general agent . If a Broker is per forming leasing , the Broker may l ist a

proper ty for lease, adver tise the property, help screen tenants and/or he lp

negot ia te a lease. Once the lease is signed by the landlord and tenant , the

Broker ’s duty to the land lord or tenant is comple te . Wi th property management , a

broker ’s obl igat ions continue beyond the formation of the lease. A Broker

performing proper ty management du ties may also perform leasing du ties;

where a Broker only performing leasing du ties is not per forming proper ty

management duties.

General ly , a Broker wi l l function in one of three capaci t ies wi th regards to ren ta l

proper t ies. The Broker may provide leasing serv ices only for a landlord , where the

broker is invo lved in procur ing a tenant and negot ia ting the lease terms.

Al te rna tively, the broker may provide leasing serv ices on beha l f of the tenant in

loca ting a sui tab le rental proper ty and negotiat ing a lease. In the fir s t two


Page 41 of 75

scenar ios, the Broker ’s du ties are ful f i l led once the lease is executed and the bro ker

is no t involved in the transaction any fur ther . In the third scenar io , the Broker

agrees not only to provide leasing services, but is also responsible for one or more

of the fol lowing: ma in ta ining the proper ty ’s physica l cond it ion, communicat ing with

tenants, col lecting rent and/or co l lect ing security deposi ts. In this scenar io , the

Broker ’s dut ies are ongoing ; there fore the Broker is conducting proper ty

management services. Regardless of whether the Broker is working with the

land lord or the tenant, the Broker must establ ish clear expecta t ions regard ing

the services the Broker agrees to provide and communicate these expecta tions to

the consumer.

Supe rv i s i on

Before engag ing in proper ty management or leasing , the Broker should discuss

with the employing broker whether the Broker is capable of and allowed to

perform proper ty management or leasing duties. The employing broker is

responsib le for main ta in ing all t rust accounts and all transact ion records, and the

employing broker is responsible for exercising authority, direct ion and control over

the Broker ’s conformance to sta tu tes and Commission rules (Ru les E-29 and E-30) .

This includes reviewing all contracts to ensure competent prepara tion and

reviewing al l transact ion f i les to ensure that required documents exist (Rule E-31).

If the employing broker does not al low Brokers to per form leasing and/or proper ty

management du t ies, the Broker needs to re frain from leasing and/or proper ty

management activ i t ies or seek employment elsewhere . If the real estate brokerage

firm does al low leasing and/or proper ty management , regardless o f how minor , the

employing broker must ensure that the o f f ice po l icy manua l addresses these

act ivi t ies, including management of the Broker ’s own property. Both the Broker and

the employing broker need to be aware of state and loca l laws that impact the

performance of property management du ties, which include, bu t are not l imi ted to,

laws pertain ing to secur i ty deposi ts, hab i tab i l i ty, carbon monoxide a larms, asbestos,

lead-based pain t, hand l ing o f confident ial in format ion , zon ing and agency.


Page 42 of 75

Fo rms

C.R.S. §12 -61-803(4) indica tes that a Broker may comple te standard forms

including those promulgated by the Commission. Forms that are not promulgated by

the Commission must be dra f ted by an a t torney. When the Broker provides leasing

services for a tenant, the Broker should comple te the Exclus ive Tenant L ist ing

Contract . When the Broker provides ONLY leasing serv ices for the landlord , the

Broker should comple te the Commission-approved Exclusive Righ t to Lease Listing

Contract . If the Broker also wil l be provid ing property management services in

addi t ion to leasing services for the landlord , a Broker should use the Brokerage

Dut ies Addendum to Proper ty Management Agreement with a proper ty management

agreement d raf ted by an attorney. Under Rule E-4, the Broker must provide a copy

of any executed contracts to the consumer . While not all property managers

provide a physical copy of the lease to the landlord , because somet imes it is

executed by the Broker on behal f of the land lord , the Broker shou ld make the

document avai lab le to the landlord upon request.

If the Broker is going to provide property management services, the Broker

needs to provide a property management agreement . The proper ty management

agreement must be dra f ted by an a ttorney. The proper ty management agreement

should outl ine the duties and responsib i l i t ies of both part ies. The property

management agreement shou ld , at the very minimum, address:

• Dura tion o f the relat ionship;

• The part ies;

• Identi fy the proper ty to be managed;

• General du ties per formed by the Broker , inc luding the signing o f leases.

• Fees for the manager ’s serv ices, inc lud ing d isc losure of any mark-ups

(Commission Rule E-1 (p)(8)) . Before a mark-up can be charged, the

Broker must ob tain pr ior wr i t ten consent to assess and receive mark-ups


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and/or o ther compensation for services per formed by any th ird party or

af f i l ia ted business entity;

• Tenant select ion cr i ter ia. If the decis ion to lease wil l be based on

cr imina l histo ry or f inancia l wor th iness, the property management

agreement should indicate who is responsible for co l lecting this data

and what sources wil l be used. Addi t ional ly , the Broker must ensure

compliance wi th the Fair Housing and Fair Credi t Acts.

• Posting of eviction no t ices. If a Forcib le Entry and Deta iner (a/k/a

eviction) is necessary, an a t torney should represent the land lord in the

f i l ing of the Forcib le Entry and Deta iner. A Broker that f i les a Forcible

Entry and Deta iner wi thout the assistance o f an at torney may be practic ing

law wi thout a l icense;

• Ownership Interest. The Broker must disc lose a Broker ’s direct or ind irect

ownership in terest in any company wh ich wil l be provid ing main tenance or

other services to the landlord, and any other conf l i c ts o f in terest

(Rule E-25);

• Identi ty of the enti ty responsib le for hold ing the secur i ty deposit , and if

in terest is earned on secur i ty deposi t escrow accounts, who

benef i ts from such in terest and consent to transfer the in terest to

the benef iciary;

• Process to be fol lowed for any subsequent transfer of the landlord’s

monies, secur i ty deposi ts, keys and documents (Rule E- l6 ) ; and,

• Requ irement that the landlord rece ive regular month ly accounting o f al l

funds rece ived and disbursed.

Whi le these genera l du ties shou ld be addressed in the property management

agreement, i t is no t an al l inclusive l i s t of al l the dut ies tha t may be performed by a

proper ty manager or that shou ld be addressed wi th in the proper ty management

agreement. Brokers are encouraged to pay close a t ten t ion not only to Commission


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rules and regulat ions, but a lso the “Proper ty Management and Leases” chapter in the

Colorado Rea l Esta te Manual.

Regardless of whether the Broker is act ing as a leasing agent or a proper ty

manager, p r ior to engag ing in any o f the act ivit ies that requ ire a rea l estate broker ’s

l i cense, the Broker is requ ired to disc lose in wr it ing the di f ferent b rokerage

rela tionsh ips that are ava i lable to the tenant (Rule E-35) . The Commission-

approved Brokerage Disclosure to Tenant form shou ld be used to disc lose the

brokerage re la tionsh ips available.

In Colorado there is not an approved lease form. There fore , prior to a tenant

being procured, the Broker must: 1) hi re an at torney to draf t a lease form fo r the

Broker to use; or 2) the landlord wil l need to designate a lease. The terms of the

lease need to be clear and in wr it ing. A Broker may choose to l imi t which lease is

used to only the lease fo rm provided by their a t torney so long as

the landlord au thor izes the Broker to use the ir at torney prepared lease form in the

proper ty management agreement.

T rus t Ac c oun ts and Re cord K ee p i ng

Any Broker per forming property management dut ies in which the Broker is

responsib le for the co l lection and distr ibu tion o f rent or secur i ty deposits needs to

be especial ly cognizant of the Commission rules and regula t ions per taining to the

management of funds of others and records reten tion. Brokers should pay close

at tent ion to the chapters t i t led “Escrow Records” and “Property Management and

Leases” in the Co lorado Real Esta te Manua l. C.R.S §12 -61-113(1)(g) requires tha t a

Broker account for and remit , within a reasonable t ime, any moneys coming into the

Broker ’s possession that belong to others. Rule E-1(g) def ines money be longing to

others as includ ing , bu t not l imi ted to, funds received by a Broker in connection wi th

proper ty management agreements, ren t or lease contracts, and money belong ing to

others tha t is co l lected for fu ture investment or o ther purposes. All money be longing

to others which is rece ived by a Broker act ing as a proper ty manager must be

deposi ted in the Broker’s escrow or trust account wi th in f ive (5) business days of

receipt (Rule E-1(n)).


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If a Broker is going to deposi t ren t or secur i ty deposits into the employing

broker ’s trust account(s) , the Broker is requi red to keep records re la tive to these

monies. Rule E-1 requ ires that all money be long ing to others that is accepted by

Broker be deposi ted in one or more accounts separa te f rom money belonging to

the Broker , employing broker or brokerage entity. Separate trust accounts must be

main ta ined in the name of the employing broker, or the employing broker and the

l icensed business ent i ty, and the main tenance o f the separa te accounts is the

responsib i l i ty o f the employing broker (Rule E -1(a) and (c)). This includes rent

checks. A Broker who manages fewer than seven residences may deposi t rental

receipts and security deposits , and d isburse money fo r such purposes, in the “sales

escrow” account (Ru le E -1( i) ) , a l though th is is not recommended. A bet ter pract ice

is to main tain separa te accounts for proper ty management. At a minimum, a Broker

is recommended to have two trust accounts for property management; one for

secur i ty deposi ts and one for opera ting trust mon ies. As an alterna tive to trust

accounts, a Broker may deposi t rent monies or secur i ty deposi ts directly into an

account owned and control led by the landlord.

Rule E-16 prohib i ts a Broker who receipts for secur i ty deposi ts from del iver ing

such deposi ts to a land lord , unless the tenant’s wr it ten au thor iza t ion is given in the

lease or wr i t ten not ice is given to the tenant by f ir s t - class mai l . The notice must

ident i fy who is holding the secur i ty deposi t and the procedure the tenant must fol low

to request the re turn o f the deposi t. If the secur i ty deposi t is held by or transferred

to the landlord , the proper ty management agreement must specify tha t the landlord

is responsible for the secur i ty deposi t ’s retu rn and tha t , in the event of a dispute,

the Broker is author ized to revea l the true name and curren t mail ing address o f the

land lord. The Broker may not use any por tion o f the secur i ty deposi t for the

Broker ’s benef it .

Pursuant to Rule E-1(p) , a Broker is required to supervise and main tain a record

keeping system, at the Broker ’s l icensed place of business that consists of an

“escrow or trust account journa l” , a “ ledger” and a “bank reconci l ia tion worksheet” .

The Broker must also main ta in suppor t ing records tha t de ta i l a l l cash received and

disbursed under the terms o f the management and ren ta l agreements. If a Broker


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has deposi ted personal funds into the trust account to open and main ta in the trust

account , the journal and “broker ’s ledger record” must contain en tr ies documenting

this money. The Broker ’s persona l funds must also be included in the bank

reconci l iat ion worksheet. Al l deposits o f funds into an escrow or trust account

must be documented, as must a l l d isbursements of funds from an escrow or

trust account.

Absent a wr i t ten agreement that indicates otherwise , the “cash basis” of

account ing is requ ired for main ta ining all requ ired escrow or trust accounts

and records. Funds f rom one owner cannot be used to supplement

opera t ing capi ta l, or to f inance expend itures of other owners or the Broker

(C.R.S. §§12-61-113(1)(g ) and (g .5) and Rules E-1( f) , (g) , (p) , and (q), E-29 and E-

30). The Broker is requ ired to re tain accurate, on-go ing records which ver i fy

disclosure o f and consent to any mark-ups assessed or received, and fully account

for the amounts or percentage of compensat ion assessed or received (Rule E-

1(p)(8)) . For Commission purposes, brokers may main tain their records in electron ic

format as long as the records are stored in a format that can be continua l ly

retr ieved and leg ib ly pr in ted (Ru le E-6) . C.R.S. §12 -61-113(1)( i) requi res Brokers to

main ta in possession of the ir records for four (4) years.

Se cur i t y De pos i ts

Brokers have to be very careful how they handle secur i ty deposi ts. The

secur i ty deposit law is complicated and legal assistance is advisab le . Wrongfu l

withho ld ing of a secur i ty deposit may resul t in the landlord , and the Broker as the

landlord’s agent , being l iab le for treb le the amount wrongful ly wi thheld, p lus

reasonab le a ttorneys’ fees and cour t costs. C.R.S. §38-12-103 requ ires tha t the

secur i ty deposi t be returned to the tenant within one month a f ter a lease is

terminated or the premises have been vacated and accepted, whichever occurs last .

The lease may ind ica te a longer per iod o f t ime to re turn the secur i ty deposit to the

tenant ; however state law does not al low this extension of t ime to exceed s ixty

days. Secur i ty deposits cannot be retained to cover normal wear and tear .

C.R.S. §38 -12-102 def ines normal wear and tear as:


Page 47 of 75

“deter iora tion wh ich occurs, based upon the use for which the rental

unit is intended, without negl igence, carelessness, accident , or abuse

of the premises or equ ipment or chattels by the tenant or members of

his household , or their invi tees or guests.”

Normal wear and tear is at the core of most secur i ty deposi ts lawsu its. Secur i ty

deposi ts may be re tained for nonpayment of rent , abandonment of the premises, or

nonpayment o f u ti l i ty charges, repa irs or cleaning contracted for by the tenant in the

lease. If there is cause to reta in any por tion o f the secur i ty deposi t , the tenant must

be provided wi th a wr i tten sta tement l i s t ing the exact reasons why all or a por tion

of the secur i ty deposi t is being reta ined. The statement must be del ivered with the

dif ference between the amount of the secur i ty deposi t and the amount re tained. The

Broker or the land lord is deemed to have complied with this requirement by mail ing

the sta tement and payment to the tenant ’s last known address. If the Broker or the

land lord fails to provide the sta tement to the tenant wi thin 30 days (or the

al ternat ive dead l ine specif ied in the lease) o f the lease terminating or the surrender

and acceptance of the premises, whichever occurs last, the landlord or the Broker

may for fe it h is r ight to re ta in any port ion of the secur i ty deposi t to o f fse t amounts

owed. The land lord does not lose the r igh t to pursue amounts due, they just lose the

right to uti l i ze the secur i ty deposi t to of fse t amounts owed. Furthermore, if the

tenant pursues cour t action regard ing any portion o f the secur i ty deposi t be ing

reta ined, the landlord or the Broker bear s the burden to prove tha t re ten tion o f any

port ion of the secur i ty deposi t was not wrongful.

In the rare event tha t a lease is nul l i f ied and vo ided due to the land lord ’s fa i lure

to repair a hazardous cond it ion at tr ibu ted to a gas appl iance, pip ing , or other gas

equipment , the land lord or the Broker must del iver all, or the appropr ia te por tion

of, the secur i ty deposi t plus any ren t rebate owed to the tenant for the time per iod

tha t the tenant vacated the premises. Payment must be made to the tenant wi th in

72 hours of the tenant vacating the premises. If the 72nd hour fa l ls on a Saturday,

Sunday, or legal hol iday, the secur i ty deposit , and any rent rebate due, must be

del ivered to the tenant by noon on the next day that is not a Saturday, Sunday, or

lega l ho l iday. If a portion of the secur i ty deposi t is re tained, the tenant must be


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provided with a writ ten statement l i st ing the exact reasons why all or a por tion of

the secur i ty deposit is being re ta ined and payment of the remaining balance of the

secur i ty deposi t . If the tenant does not receive a l l or a por tion of the secur i ty

deposi t wi th the sta tement wi thin the required dead l ines, the tenant may be enti t led

to three times the amount of the secur i ty deposi t and reasonable a t torney fees

(C.R.S. §38-12-104).

T ra ns fe r o f Se rv i c es

If a Broker no longer wil l be manag ing a property, the Broker must transfer a

copy of the entire f i le to the landlord or, upon wri tten author iza tion from the

land lord, to the new Broker engaged to per fo rm the proper ty management. At a

minimum, the entire fi le should include:

(a) Copy o f existing lease

(b) Copy o f check- in condi t ion report

(c) Keys

(d) Outstand ing tenant balances

(e) Tenant(s) secur i ty deposit(s)

( f) Owner ’s funds (subject to outstanding obligat ions)

Al though the Commission rules do not speci f ical ly address the transfer of

management du t ies, there should be no delay in transferr ing the tenant ’s secur i ty

deposi t to e ither the land lord or the new Broke r . The Broker must g ive wr it ten no tice

by f ir s t class mail to the tenant tha t the secur i ty deposi t has been transferred to

the landlord or new Broker along wi th the landlord’s or new Broker ’s contact

in formation . The notice must ind ica te who is hold ing the secur i ty deposi t and the

speci f ic requ irements for the procedure in which the tenant may request re turn of the

deposi t [re fe rence Rule E-16 and C.R.S. §38 -12-103(4) ] . T imely transfer of the

deposi t pro tects the Broker f rom get ting caught be tween the land lord and the tenant

regard ing the accounting of the deposi t. The Broker must a lso provide the landlord


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with a final account ing o f a l l trust funds held by the Broker . Al though the Broker may

delay the transfer of the landlord’s funds unti l al l ou tstanding invoices or debts

have been reso lved, the transfer of the landlord’s funds needs to occur wi thin a

reasonab le amount of t ime. A Broker that fa i ls to transfer funds in a reasonab le

amount of t ime may be sub ject to discipl ine by the Commission fo r unwor th iness or

incompetency, C.R.S. §12-61-113(1)(n).

Ma na g ing Brok e r ’ s Own Prope r t y

Brokers a re subject to the l icense law and Commission rules when they

part icipa te in real estate mat te rs as pr incipals, including managing the Broker ’s

own proper ty. See Seibe l v. Colorado Rea l Esta te Commission , 34 Co lo . App. 415,

530 P.2d 1290 (1974) . A Broker who manages his or her own ren ta l proper ty needs

to disc lose known confl ic ts of interest and that the Broker possesses a Colorado

real esta te broker ’s l i cense (Rule E-25) . The Broker also needs to use a lease

draf ted by an attorney for the transaction , along wi th disclosing in wr i t ing to the

tenant the brokerage rela tionships under Co lorado law (Rule E-35).

If the Broker has an employing broker , i t is impor tan t for the Broker to

consul t with the employing broker regarding the brokerage f irm’s requi rements or

l imi ta tions regard ing manag ing a Broker ’s own property. When a Broker personal ly

receipts for a secur i ty deposi t on his or her own proper ty, the l icense law does not

requ ire tha t the secur i ty deposi t be placed in an escrow account . Addi t ional ly , a

Broker cannot deposi t ren ta l proceeds in to the brokerage firm’s escrow account(s)

for proper ties owned by the Broker [Ru le E-1(f )] .

CP- 28 Com missi on P osi t i on on Show i ng Prope r t i es

( Ad o p t e d Ma r c h 4 th 19 9 9 )

The Rea l Estate Commission reminds l i censees tha t the Brokerage

Rela t ionships Act imposes duties on agents to promote the interests o f their

buyers or se l le rs wi th the u tmost good fai th as well as to counsel the ir pr incipals

on mater ial benefi ts or r isks of a transact ion . A transaction-broker must exerc ise

reasonab le skil l and care, advise the par ties and keep the parties fully informed


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regard ing the transaction . Whether working as an agent or a transaction-broker ,

these duties include d isclosing the accessibi l i ty of and actual access to a property

or propert ies.

W or k ing W it h a Se l le r : Pursuant to the section in the var ious l i s t ing contracts

ent i t led, “ OTHER BROKERS, ASSISTANCE”, the l i censee shou ld advise the se l ler of

the advantages and d isadvantages o f using mult ip le l i st ing services and o ther

methods of making the proper ty accessible by other brokers (e.g ., using lock boxes,

by appoin tment on ly showings, e tc.) . If appl icable , i t shou ld be expla ined tha t some

methods may l imi t the ab i l i ty of a sel l ing broker to access and show a par t icular

proper ty. The chosen methods o f coopera t ing wi th o ther b rokers should be incl uded

in the l i st ing agreement.

W or k ing W i t h a B uy e r : A l i censee working wi th a buyer has an obl iga t ion to

expla in the possible methods used by a l ist ing broker and se l ler to show a

part icu lar proper ty. These methods may include l imitat ions on the buyer and sel l ing

broker being able to access a proper ty due to the type of lock box placed on the

proper ty, the se l ler ’s cho ice to have the property shown by appo in tment only, etc.

The se l l ing broker should inc lude such showing l imitat ions in the Exclusive Righ t to

Buy Contract (agency or t ransaction-broker).

There shou ld be no instances of a l ist ing broker re fusing to al low a proper ty

to be shown, un less the se l ler has given prior expl ici t, wr i tten au thor izat ion to

do so.

CP- 29 Com missi on P osi t i on on “Megan’s La w”

(Adop ted J u ly 1 , 1 99 9 )

The Commission has been asked for its posit ion as to the disclosure

requ irements for real esta te l i censees with regard to “Megan’s Law.” In 1994, and

pr imar i ly as a response to the murders of two young gir ls , a federa l law was

passed creating a registra tion and not i f i ca tion procedure to aler t the pub l ic as to

the presence o f cer tain types o f convicted sex o f fenders l i ving in a ne ighborhood.

This is commonly re ferred to as “Megan’s Law.” Identi f ied sex o f fenders are


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requ ired to reg ister wi th loca l law enforcement o f f icials. The federa l law also

requ ired states to estab l ish registr ies of convicted sex of fenders. It conta ins no

disclosure requ irements for real esta te l i censees when working with the public.

In compl iance wi th federa l law, Co lorado enacted legisla tion that sets

procedures and timeframes for loca l reg istra tion . The o f fice o f ch ie f o f pol ice is

the designated place o f reg istra tion fo r those o f fenders residing wi thin any c i ty,

town or ci ty and county. The o f f ice of the county sher i f f is the designated place of

registra tion for those l iv ing outs ide any ci ty , town or c i ty and county, in add it ion,

the law enforcement agency is required to release in format ion regarding

registered persons. However , the duty to release information may di f fer depending

on whether the inqu ir ing par ty does or does not l i ve wi thin tha t jurisdict ion.

Whi le legis la tion in a few sta tes has speci f ical ly imposed disc losure

requ irements on rea l estate l i censees working wi th buyers and sel lers, Colorado ’s

leg isla tion imposes no such requirements. Colorado ’s leg islat ion c lear ly places

the duty to release information on the local la w enforcement agency, a f ter

consider ing a request.

It is the posi t ion of the Rea l Estate Commission tha t al l real estate l i censees

should in form a potent ia l buyer to contact loca l law enforcement o f f ic ials for fur ther

in formation i f the presence of a reg istered sex o f fender is a matter of concern to

the buyer.

Edi tor ’ s Note:

C.R.S . 18-3- 412.5 requi res the Colorado Bureau of Invest i gat i on to post on the

Internet i dent i f yi ng i n format i on, i ncl uding a pi c ture, of each sex offender:

• Sentenced as a sexual l y vi ol ent predator; or

• Conv i cted of a sexual of fense i nvol v i ng children


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CP- 30 Sta t e of C ol o rado Re a l Es t a t e Commi ssi on and Boa rd o f Re a l Est a te Appra i sers J o i n t

Po s i t i o n S t a t e me n t

(R evi sed J a nuary 8 , 20 0 9)

The Colorado Real Estate Commission and the Colorado Board of Real Esta te

Appraisers have issued this Joint Posit ion Sta tement to address mutua l concerns

pertaining to pract ices of real estate brokers and real esta te appra isers wi th regard

to residential sa les transact ions invo lving sel ler assisted down payments, se l ler

concessions, persona l proper ty transferred with real property and o ther i tems o f

va lue included in the sale o f resident ia l rea l property.

A resident ial real estate transaction has a l i fe well beyond c losing and

possession of the property. Accura te sales data is crucia l for appraisa ls and

compara tive market analysis ( C MA) work products. Both appraisers and real

estate brokers can ef fectively work together to main tain the safegu ards tha t

accura te so ld da ta af fords.

A rea l e s t a t e b r oker can faci l i ta te these sa feguards by adherence to the following:

• Note the amount of any sel ler paid costs ( including a se l ler assisted down

payment or fee paid to a char i table organization on behalf of the buyer)

or other sel ler concession in the proper transact ion documents, including

the Buy/Se l l Contract , Closing Sta tements, and Rea l Property Transfer

Declarat ion.

• Uti l i ze al l ava i lable f ields in the mul tiple l i s t ing service to repor t sold

in formation including al l transact ion terms and seller concessions. Sold

in formation should be entered promptly fol lowing c losing and be speci f ic

and detai led part icu lar ly when the sold pr ice includes a sel ler assisted

down payment or concessions.

• Advise buyers and sel lers to consu lt legal and tax counse l for advice on

tax consequences of sel ler contr ibu t ions and inducements to purchase.


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• Coopera te with appraisers as they per form their due

di l igence in asking quest ions about sales.

An a ppr a is er can faci l i ta te these safeguards by adherence to the following:

• Research and confirm sub ject proper ty and comparable sales, including

obtaining de ta i ls of the contract and financing terms.

• Research and confirm al l relevant information about a transaction , inc luding

determination of sel ler pa id costs.

• Uti l i ze al l avai lable data search tools, inc luding the l i s t ing h istory and sel ler

contr ibut ions features o f mul tiple l i s t ing serv ices.

• Make appropr ia te adjustments to comparab les wi th sel ler contr ibut ions

and inducements to purchase when develop ing work p roducts.

• Comply with the appl icab le provisions of the Ethics Rule and Standards 1

& 2 of the Uni form Standards of Professional Appraisal Pract ice.

• Comply with any scope o f work requirements requ ired by agencies such as

the Federa l Housing Administ rat ion.

CP- 31 Commission Posi t i on on Ac t ing as a T ransac t ion B roker o r Age n t i n Par t i c u l a r Types of

T ra nsac t ions

(Adop ted 9 - 8- 0 4)

The public may enter into either a Transaction-Broker relat ionship or an

Agency re la tionsh ip with a Broker . Fundamenta l among the di f ferences between

Agency and Transaction -Brokerage is tha t an Agent is an advocate wi th f iduciary

dut ies, wh i le a Transact ion-Broker should remain neutral , not advocate . However , in

some si tua t ions the rela tionship of the Broker with a particular par ty or proper ty

may make a part icular relat ionship inappropr iate or problematic.

Before act ing as a Transaction-Broker in transactions where neutra l i ty is

di ff i cul t , the Broker should consider whether the Transact ion-Brokerage


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arrangement is sui tab le , consul t with the Broker ’s supervis ing Broker and then

make the necessary d isclosures. Some examples o f these si tua tions include:

1. Se l l ing or purchasing for one’s own account (whether the property is sole ly or

part ia l ly owned or to be acquired by the Broker) , (See Rule E-25 regard ing

proper disc losures);

2. Se l l ing or purchasing for the account of a spouse or fami ly member o f the

Broker;

3. Se l l ing or purchasing for the account of a close personal fr iend, business

associa te, or o ther person where it would be dif f i cul t for the Broker to remain

neutra l; or

4. Se l l ing or purchasing for the account of a repeat or regular c l ient /par ty

where it wou ld be dif f i cul t for the Broker to remain neutral ( i .e. , undertaking

as a Transaction-Broker the l is ting of mul tip le uni ts, lots or propert ies such

as l is t ing a rea l estate deve lopment o r condominium complex for a single

developer, l i s t ing mul tiple residential or commercial propert ies for the same

se l ler that wi l l be sold to di fferen t buyers, or l i st ing for lease a mult ip le un it

residentia l or commercial proper ty tha t wi l l be leased to di fferen t tenants).

An agency rela tionship between a Broker and a sel ler o r landlord , buyer or

tenant , requ ires a wr i t ten agency agreement . The duties o f an agent go beyond

faci l i ta t ion o f the transaction as a neutra l par ty and requ ire represent ing the

in terests o f the Broker’s pr incipa l over the interests of the other par ty. In cer ta in

cir cumstances, ful f i l l ing the duties of an Agent including acting as an advocate may

be diff i cu lt . A Broker who enters in to an agency re la tionsh ip must ful f i l l the dut ies of

advocacy, f idel i ty , loyal ty and other f iduciary du t ies associa ted wi th a s ing le agency

rela tionsh ip . In c ir cumstances where the Broker may not be ab le to ful f i l l the duties

imposed on an agent the Broker should consider whether the agency arrangement is

appropr iate, co nsu lt wi th the Broker’s supervis ing Broker and act accordingly.


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This Posi t ion Statement appl ies to r e lat ionships where Brokers are working with landlords

or tenants , as wel l as sel lers and b uy e rs . I t app l ies equal ly to resident ia l a nd commerci a l

tr ansa c t ions .

CP- 32 Com missi on P osi t i on on Brok era ge D isc l osure s

(Adop ted 9 - 8- 0 4)

The Commission bel ieves tha t a broker who in tends to act as a buyer ’s or

tenant’s agent in a transaction should at tempt to secure a writ ten agency

agreement as early in the brokerage relat ionship as possible. However , the

Commission also recogn izes tha t in some instances, the buyer or tenant wi l l no t

immediately execute such a wr i t ten agency agreement.

In these s itua tions, the broker should ini t ia l ly function as a transaction-broker by

ei ther enter ing into:

BC 60: Exclusive Righ t- to-Buy Contract (Al l Types o f Proper ties) ;

or

LC 57: Exclusive Right- to -Lease Listing Contract (Al l Types o f

Proper ties; or

ETC 59: Exclusive Tenant Contract (Al l Types o f Propert ies)

Wi th any of the three forms the broker should check the box “Transaction -

Brokerage” whereby only the brokerage serv ices and dut ies contained in Section 4

of the agreement would apply; o r present a buyer or tenant wi th B D24 Brokerage

Disclosure to Buyer.

The broker may then engage as a transaction-broker and may perform any of the

act ivi t ies enumerated i n section 12-61-101(2), C.R.S., which are the acts o f rea l

esta te brokerage.

However, be f ore the broker beg ins to work as the buyer ’s o r tenant ’s a ge nt and

advocate to secure the best possib le pr ice or lease ra te and terms for the buyer or

tenant , the par ties must execute one of the above l is ted agreements wi th the


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“Agency” box checked. In an agency re la tionsh ip the broker has the duties and

responsib i l i t ies contained in Sect ion 4 of the agreement, and the add it ional dut ies

of an agent contained in Section 5 o f the agreement.

C P - 3 3 J o i n t Po s i t io n S t a te me n t f r o m t h e D i v i s i on o f R e a l Es t a t e a n d D i v i s i on o f I ns ur a n c e

C o n ce rn i ng App l i c a t i on o f t he Good Funds La ws

Issued : Ju ly 1 0 , 2 00 2

I. Background and Purpose

The purpose for this bul let in is to clar i fy the Divis ion of Insurance and the

Div is ion of Real Esta te ’s posit ion wi th respect to appl ica tion of Colorado’s good

funds laws to real estate transactions involving regulated ent i t ies. In par ticu lar ,

there is confusion in the industry regarding reconci l iat ion of § 38-35-125, C.R.S.,

Colorado ’s good funds laws, with Div is ion of Insurance regulat ion 3 -5-1(6)(F) and

the curren t pract ice of disbursing cash ier ’s checks drawn on a t it le enti ty’s

account, pursuant to instructions o f the par t ies and in connect ion wi th closing a real

esta te t ransaction.

Bu l let ins are the agencies’ interpre tat ions of exist ing laws or genera l

sta tements of pol icy. Bul le tins themselves establ ish ne ither b ind ing norms nor

f inal ly de termine issues or r ights.

II . Appl icab i l i ty and Scope

This bul le tin concerns al l t i t le insurance ent i t ies and real estate l i censees involved

in rea l esta te clos ings. I I I. Posit ion Statement

The good funds sta tu te prov ides, in relevant part:

No person or ent i t y t hat prov ides cl osing and set t l ement serv i ces for a real

es tate t ransact i on shal l di sburse funds as a part of such servi ces unti l

t hose funds have been rece ived and are ei ther : av a i l a bl e f or im me d ia t e

w i t h dr a w a l a s a m a t t e r o f r ig h t f rom the f i nanc ia l i nst i t u t i on i n whi ch the funds

have been depos i ted; or avai l ab le for immediate wi thdrawal as a


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consequence of an agreement of a f i nanc ial i nst i t ut i on i n whi ch the funds are

to be depos i ted or a f i nanc ia l i ns t i t ut i on upon whi ch the funds are to be

drawn.

§ 38-35-125(2) , C.R.S. The same sta tu te de f ines funds “avai lab le for immedia te

withdrawal as a matter o f r ight” to include any wire transfer or any cer ti f ied check,

cashier ’s check or te l ler ’s check. Thus, a cash ier ’s check or wired funds (most

typically used) that have been received by the en ti ty provid ing c losing and

set tlement services are considered “good funds”.

Div is ion of Insurance regu la tion 3 -5-1(6)(F) para l le ls § 38-35-125, C.R.S. and

provides tha t “Al l t i t le insurance ent i t ies sha ll comply wi th the ‘good funds law’ .” In

addi t ion , Div ision of Insurance regula tion 3 -5-1(5)(A)(3) speci f ies tha t fa i lure to

comply with the good funds laws consti tu tes an un lawfu l inducement for the referra l

of t i t le insurance business proscr ibed by § 10-11-108, C.R.S.

The federa l cour ts in terpre ted Colorado’s good funds laws i n Guardian Ti t l e v.

Matr i x, 141 F.Supp.2d 1277 (D.Colo . 2001). The cour t held that good funds laws

govern t it le en ti t ies that engage in closing and sett lement services. See id. at

1279. Fai lure to comply with the good funds sta tu te is a deceptive trade practice

and viola tes insurance regu la tion 3-5-1 . See id . at 1280-81. The court s ta ted: “The

Good Funds law was developed as a solut ion to ‘ the need to insure tha t the t i t le

company or other par ty responsible for real esta te closings has ‘good funds’ i n h a n d

before c losing the transactions’” . Id . at 1281.

Based on the above, it is the posi t ion o f the Divis ion of Rea l Estate and Divis ion

of Insurance tha t Co lorado’s good funds law and insurance regulat ion 3 -5-1(6)(F)

requ ire that a t it le enti ty must have good funds “ in hand” (e .g. , w i red funds,

cert if ied check, cashier ’s check, tel lers check) bef o re i t dis bu r ses fu nds as par t o f i ts

se t t lement services.

Fur ther , i t is the posit ion of the Div ision of Real Esta te and Div ision of

Insurance that a t it le company wh ich withdraws funds from its account in the form


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of a cashier ’s check, but (1) main ta ins comple te contro l and possession of the

check; and (2) does not disburse (pay ou t) unt i l de l i ve ry and receipt of “good funds”

rela ting to the speci f ic transaction , compl ies wi th the good funds l aws.

By way of example , i t is common in a real esta te transact ion for funds to come

to the closing from at least two sources, the buyer and the lender. It is a lso

common for a se l le r to ask for closing proceeds in the form of a cashier ’s check,

drawn on the t i t le ent i ty’s account . Apply ing the ‘good funds’ law and insurance

regu la tion 3-5-1, the ti t le company cou ld cause a cashier’s check to be issued

from its account and have the check avai lab le for the se l ler a t c losing . The t i t le

ent i ty could no t disburse to the se l ler un ti l “good funds” were received or “ in hand”

from the buyer and lender . “ In hand” means that a cash ier ’s check has been

received by the ti t le en ti ty or , in the case o f a wire transfer , has been wired in to the

t i t le en ti ty’s account.

Once the transaction closes and the cashier ’s check is paid to the seller, the

t it le entity is responsible for immediately deposi t ing the buyer’s “good funds”

into its account . If the transaction does not close, the t it le entity is responsible

for immediately redeposi t ing i ts cash ier ’s check in to i ts account. In tha t manner , no

other customer o f the ti t le en ti ty is harmed

IV. For more information:

Divis ion o f Insurance Divis ion o f Real Estate

1560 Broadway, Sui te 850 1560 Broadway, Sui te 925

Denver CO 80202 Denver CO 80202

Phone: 303-894-7499 Phone: 303-894-2166

Internet: Internet:

www.dora .sta te .co .us/ insurance http:/ /www.dora.state.co.us/real -estate


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CP-34 Commission Posi t i on on Se t t lemen t Se rv ice P rov ide r Select ion, C los i ng Ins truc t ions and

Earnes t Mone y De posi ts (rev ised 0 8/ 0 7/ 2 01 2 )

The Commission issues this posi t ion sta tement to clarify how set tlement

service providers are selected , when closing instruct ions must be comple ted by a

real esta te broker (“broker”) and how earnest money is to be handled.

Select ion of sett lement service providers

Regardless of whether a broker is acting as a single agent or transaction broker,

al l brokers acting in their l i censed capacit ies are required to advise their cl ien ts to

obtain exper t advice as to mater ia l mat ters about wh ich the broker knows but the

specif ics of which are beyond the exper tise of the broker . See C.R.S. 12-61-

804(1) (c)(V), 12-61-805(1)(c)(V) , and 12-61-807(2)(b)( I I) . Exper t advice includes,

but is not l imited to, the broker ing of a mor tgage, per forming t it le searches and

issuing insurance, apprais ing rea l property, surveying and issu ing improvement

loca tion cer ti f i ca tes, per forming proper ty inspect ions and o ther due di l igence

( including environmenta l) and practic ing law (which also includes analyzing the

legal imp lica t ions of the foregoing). Brokers need to ensure tha t they per form the

acts required by the real esta te brokerage pract ice act, based on the capaci ty in

which they have agreed to pract ice , i .e . as a single agent or transaction broker . A

common standard o f practice amongst brokers is to provide the names of three

se t tlement services providers in a specif ic area of pract ice and al low the consumer

to choose. The Commission understands that there are occasions when a broker

cannot provide the names of three separate se t t lement serv ice providers that

pract ice in one speci f ic area , but regard less of how many names may be provided,

i t is imperat ive tha t f inal select ion of the set t lement serv ice provider be lef t to the

consumer , no t the broker.

Closing Instruct ions

The purpose o f c losing instructions is for the consumer to engage the company

tha t wi l l be responsible for ul t imate ly closing the sales transaction. In most

transactions, the company responsib le for closing the transaction is a t i t le company,


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al though there are brokers that provide these services. As stated above, the

consumer is responsible for the selection of se t tlement service providers, includ ing

the ind ividua l or company that per forms the closing services. If the broker is

performing the closing services, inc lud ing the prepara tion, del ivery and recording of

closing documents and the disbursement of funds, the broker is the “Closing

Company” and thereby is responsib le for comple ting the Commission -approved

Closing Instructions a t the t ime tha t the Contract to Buy and Sell Real Esta te is

executed by the buyer and se l ler . As required by Commission Ru le E-4 and

C.R.S. 12-61-113(i), the broker sha l l re tain a copy of the Closing Instruct ions

for future use or inspection by an author ized representat ive of the Real

Esta te Commission.

If a ti t le company is engaged to per form the closing services, the Div ision of

Insurance requ ires tha t a ti t le en t i ty provide closing and se tt lement serv ices only

when there are wr i tten instruct ions from a l l necessary part ies. See Division of

Insurance Rule 3-5-1. Al l amendments to existing wr i t ten instructions wi th a t it le

ent i ty must a lso be in wr it ing. If a t it le company is engaged to provide the closing

serv ices, i t is the “Closing Company” and it is the responsibi l i ty of the t it le

company to comple te the closing instructions as requ ired by the Divis ion of

Insurance. The broker should make a reasonable ef for t to ob ta in a copy of the

closing instruct ions from the ti t le en ti ty for the broker ’s transaction fi le , to ensure

compliance wi th Commission Rule E-4 and C.R.S. 12-61-113( i) as sta ted above.

Earnest Money Deposi ts

Commission Ru le E-1(o) requ ires the se l l ing broker to del iver the contract and

the earnest money to the l is ting broker, unless the parties have o therwise agreed in

wr it ing. The l is ting broker is requ ired to deposi t the money in the broker ’s escrow

or trust account in a recognized deposi tory no later than the third business day

fo l lowing the day on which the broker rece ives no tice of contract acceptance. If the

se l l ing broker rece ip ts for a promissory no te , or thing of value, such note or th ing of

va lue must be del ivered wi th the contract to the l i s t ing broker to be held by the

l i s t ing broker. Any check or no te must be payable , or assigned, to the l i s t ing broker .

Upon receipt o f the earnest money, the l i s t ing broker must comple te the Earnest


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Money Receip t as the Earnest Money Ho lder . A copy o f the rece ip t must be

reta ined by the broker to ensure compl iance with Commission Rule E -4

and C.R.S.12-61-113(i).

If the buyer and sel ler have agreed in wr i t ing that a third party or en t i ty wil l

hold the earnest money, the l ist ing broker must del iver the earnest money to the

th ird par ty or ent i ty . The l is t ing broker must obtain a dated and s igned Earnest

Money Receipt from the third par ty or en t i ty upon del ivery of the earnest money.

For record keeping purposes, the broker must re tain a copy of the Earnest Money

Receipt and a copy o f the earnest money check, no te or o ther thing o f value as

requ ired by Commission Rule E-4 and C.R.S. 12-61-113(i).

CP- 35 Com missi on P osi t i on on Brok ers as Pr i nc ipa ls

The Commission regular ly rece ives publ ic complain ts regarding rea l esta te

transactions involving a l icensed rea l estate broker acting as a pr incipal .

Predominant ly these compla in ts al lege tha t the broker, who is a pr incipal to the

transaction, and may or may not also be serving as a broker in the transaction,

has failed to disclose an adverse mater ia l fact; has failed to disclose brokerage

rela tionsh ips (when acting as more than a pr incipa l) ; has failed to ensure that

the contract documents and/or se t tlement sta tements accura te ly re flect the terms

of the transact ion ; has f i led a document tha t unlawful ly c louds the t it le to the

proper ty; has failed to disclose the broker ’s l i censed sta tus; has mismanaged funds

belong ing to o thers; and/or has falsif ied informat ion used for the purpose o f

obtaining f inancing.

The Commission reminds l i censees tha t the Commission may invest igate and

discipl ine a l icense if a l i censee is act ing in the capacity of a pr incipa l in a real

estate transact ion and violat ions of the l icense law occur. The Commission ’s

author i ty to invest iga te and impose discip l ine in these transact ions was determined

by the Colorado Court of Appeals. See Seibel v. Colorado Real Estate Commission,

34 Co lo.App. 415, 530 P.2d 1290 (1974) . The cour t’s decision a f f irmed that l i censed

real esta te brokers are sub ject to the real esta te brokers l i censing act and ru les

adopted by the Commission when they par t icipate in real esta te matters as


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pr incipa ls. In such cases, l i censees need to be mindfu l of Rule E-25 (regarding

conf l ic t of interest and l icense sta tus disc losures) and posi t ion sta tement CP-31

(regarding act ing as a transact ion broker).

CP- 36 Com missi on P osi t i on on M i n i mu m Se rvi c e Requ i re me n t s

The Commission has received numerous inquir ies regarding the min imum

services that brokers must provide to buyers or sel lers of real proper ty.

§12-61-803, C.R.S. requires that any broker performing the activ i t ies requir ing a

real esta te broker’s l i cense as se t for th in §12-61-101(2) , C.R.S. , act in the capacity

of e ither a transaction broker or a s ing le agent in the t ransaction. The minimum

dut ies required to be performed by a real esta te broker acting in the capaci ty of a

sing le agent a re set for th in §§12-61-804 and 12-61-805, C.R.S. §12-61-804, C.R.S.

Sing le agent engaged by sel ler or landlord states, in part:

(1) A broker engaged by a sel l er or l andlord to act as a sel l er ’ s agent or a

landlord’ s agent is a l imi ted agent wi th the fol l owing dut i es and obligat ions:

(a) To perform the terms of t he wr i t t en agreement made w i th the sel l er or

landlord;

(b) To exerci se reasonable ski l l and care for t he sel l er or landlord;

( c) To promote the i nterests of t he sel l er or l andlo rd wi th the utmost good

fai t h, l oyal t y, and f i del i t y, i nc l uding, but not l imi ted to:

( I ) Seek ing a pr i ce and terms whi ch are accepta ble to the sel l er or

landlord; except t hat t he broker shal l not be obl i gated to seek

addi t i onal o f fers to purchase the proper t y whi l e the proper t y i s subject

t o a cont ract f or sale or to seek addi t i onal of fers to l ease the propert y

whi l e the propert y i s subject t o a l ease or l e t ter of i ntent t o lease:

( I I) P resent i ng all o f fers to and f rom the sel l er or l andlord in a t imel y

manner regardless of whether the propert y is subject t o a contract f or

sale or a l ease or l et ter of i n tent t o lease;


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( I I I ) Di sclos ing to the sel l er or l andlord adverse ma ter i al f acts actual l y

known by the broker;

( IV ) Counsel i ng the sel l er or l andlord as to any mater i al benef i t s or r i sks of

a t ransact i on whi ch are actual l y known by the broker;

(V ) Advi si ng the sel l er or l andlord to obtain expert advi ce as to mater i al

mat ters about whi ch the broker knows but the spec i f i cs of whi ch are

beyond the exper t i se of such broker;

(VI ) Account i ng i n a t imel y manner for al l money and proper t y recei ved; and

(VI I ) I nforming the sel l er or l andlord that such sel l er or l andlord shal l not be

vi car i ous l y l i ab le for t he acts of such sel l er ’ s or l andlord ’ s agent that

are not approved, d i rec ted or rat i f i ed by such sel l er or landlord.

(d) To comply wi th a l l requi rements of t hi s ar t i cl e and any rul es promulgated

pursuant to thi s ar t i cl e ; and

(e) To comply wi th any appl i cable federa l , state, or l ocal l aws, rul es ,

regulat i ons, or ordinances i ncluding fa i r hous ing and ci vi l r i ghts s tatutes

or regulat ions.

§12-61-805, C.R.S. Single agent engaged by buyer or tenant states, in par t :

(1) A broker engaged by a buyer or t enant to act as a buyer ’ s or t enant ’ s agent

shal l be a l imi ted agent wi th the fol l ow ing dut i es and obligat ions:

(a) To perform the terms of t he wr i t t en agreement made w i th the buyer or

tenant;

(b) To exerc i se reasonable ski l l and care for t he buyer or tenant;

(c) To promote the i nterests of the buyer o r tenant wi th the utmost good

fai t h, l oyal t y, and f i del i t y, i ncl uding but not l imi ted to:


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( I ) Seek ing a pr i ce and terms whi ch are acceptable to the buyer or

tenant ; except t hat the broker shal l not be obl igated to seek other

propert i es whi l e the buyer i s a part y to a contract t o purchase proper t y

or whi l e the tenant i s a par t y to a l ease or l et ter of i ntent t o lease;

( I I ) Present i ng a l l o f fers to and f rom the buyer or t enant i n a t imel y manner

regardless of whether the buyer i s a l ready a part y to a contract t o

purchase proper t y or t he tenant i s al ready a pa rt y to a c ont ract or a

le t ter of i ntent t o lease;

( I I I ) Di sclos ing to the buyer or t enant adverse mater i al f ac ts actual l y known

by the broker;

( IV ) Counsel i ng the buyer or t enant as to any mater ial benef i t s or r i sks of a

t ransact i on whi ch are actual l y known by the broker;

(V ) Advi si ng the buyer or t enant to obtain expert advi ce as to mater i a l

mat ters about whi ch the broker knows but the spec i f i cs of whi ch are

beyond the exper t i se of such broker;

(VI ) Account i ng i n a t imel y manner for al l money and pr oper t y recei ved; and

(VI I ) I nforming the buyer or t enant that such buyer or t enant shal l not be

vi car i ous l y l i ab le for t he acts of such buyer ’ s or t enant ’ s agent that are

not approved, di rected, or rat i f i ed by such buyer or tenant;

(d) To comply wi th al l requi rements of t hi s ar t i cl e and any ru l es promulgated

pursuant to thi s ar t i cl e ; and

(e) To comply wi th any appl i cable federa l , s tate, or l ocal l aws, rul es ,

regulat i ons, or ordinances i ncluding fa i r hous ing and ci vi l r i ghts s tatutes or

regulat ions.

The minimum dut ies required to be per formed by a rea l esta te broker acting in the

capaci ty o f a transaction broker are se t forth in §12-61-807, C.R.S. which sta tes,

in part:


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(1) A broker engaged as a t ransact i on -broker i s no t an agent for e i t her party;

(2) A t ransact i on-broker shal l have the fol l ow ing obl i gat i ons and

responsibil i t ies:

(a) To perform the terms of any wr i t t en or ora l agreement made w i th any par t y

to the transaction;

(b) To exerci se reasonable sk i l l and care as a t ransact i on -broker, i ncl uding,

but not l imi ted to:

( I ) P resent i ng all o f fers and counterof fers in a t imel y manner regardless

of whether the propert y is subject to a contract f or sale or l ease or

le t ter of intent;

( I I) Advi si ng the par t i es regarding the t ransact i on and suggest i ng that

such part i es obtain exper t adv i ce as to mater i al mat ters about whi ch

the t ransact i on-broker knows but t he speci f i cs of whi ch are beyond the

expert i se of such broker;

( I I I ) Account i ng i n a t imel y manner for al l money and proper t y received;

( IV ) Keeping par t i es ful l y i n formed regard ing the t ransaction;

(V) Assi st i ng the par t i es i n complyi ng wi th the terms and condi t i ons of any

contract i nc l uding cl os ing the transaction;

(VI) Di sclosing to prospect i ve buyers or t enants any adverse mater i al f acts

actual l y known by the broker i nc l uding but not l imi ted to adverse

mater i al f acts per tai ni ng to the t i t l e, t he phys i cal condi t i on of t he

propert y , any defects in the propert y, and any env i ronmental hazards

af fect i ng the proper t y requi red by l aw to be disclosed;

(VI I ) Di sclos ing to any prospect i ve sel l er or l andlord al l adverse mater i al

f acts actual l y known by the broker i nc l uding bu t not l imi ted to adverse

mater i al f ac t s per tai ni ng to the buyer ’ s or t enant ’ s f i nanc ia l abi l i t y t o


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perform the terms of the t ransact i on and the buyer ’ s i ntent t o occupy

t he proper t y as a pr i ncipal

residence; and

(VI I I ) I nforming the part i es that as a se l l er and buyer or as l andlord and

tenant they shal l not be vi car i ous l y l i ab le for any acts of t he

transaction-broker;

( c) To comply wi th a l l requi rements of t hi s ar t i cl e and any rul es

promulgated pursuant to th i s ar t i cl e ; and

(d) To comply wi th any appl i cable federa l , state, or l ocal l aws, rul es ,

regulat i ons, or ordinances i ncluding fa i r hous ing and ci vi l r i ghts s tatutes

or regulat ions.

§12-61-803, C.R.S. a l lows real estate brokers to per form dut ies in add it ion to

those estab l ished in §§12-61-804, 12-61-805 and 12-61-807, C.R.S. The add it ional

dut ies may include, bu t are no t l imited to , holding open houses, property showings,

providing a lockbox, use of multiple l i s t ing serv ices or o ther in format ion exchanges,

etc. Add it ional serv ices that brokers agree to provide their cl ien ts must be

documented in wr i t ing . A broker is not al lowed to so lely per form “addi t iona l”

services which requ ire a real estate broker ’s l i cense, i .e. o f fer ing the real p roperty

of another for sale through advert isements, without provid ing the minimum duties

requ ired by sing le agency or transact ion brokerage. The Commission does not

regu la te the fees or commissions charged by brokers for min imum or addi t iona l

serv ices provided. Fees and commissions are negotiable be tween the broker and

the principal.

CP- 37 Com missi on P osi t i on on Survey and Lease Ob j ec t ions t o t he Con t rac t t o B uy and Se l l

Re a l Est a te

The in ten tion o f the Commission in adopt ing the Contract to Buy and Se l l Real

Esta te (CBS1-8-10 and the other vers ions o f the Contract) is se t for th below.


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1. As background, under Section 8 .1 , Buyer has the r igh t to object to t it le

mat ters up to the Ti t l e O b je c t ion Dea d l ine . Under Section 8.5, Seller has the

obl iga tion and right to use reasonab le efforts to correct such object ions

and bear nominal expense pr ior to Closing. If any unsatis factory t i t le

condi t ion is no t corrected pr ior to Closing , Buyer may ei ther te rminate

the Contract or wa ive object ion to any unsatis factory t i t le cond i t ion pr ior

to Closing.

2. Under Sect ion 8 .2 , i f Buyer ob jects to any of f- record matter on or before the

Off - Recor d Mat te rs O b jec t ion Dea dl ine , the Contract wi l l terminate . Se l ler has no

r igh t to cure such o f f - record matters. Sel ler does not have a r igh t to cure any

object ion to existing surveys or leases under Section 8 .2 . Section 8 .5 does

not app ly to objections under Sect ion 8.2.

3. Under Sect ion 7.3, Buyer may obta in a new, updated or recer t i f ied Survey

(Curren t Survey) on or before the S u rve y D e a d l ine . Current Surveys are

di fferen t than existing surveys, surveys which are not curren t and wh ich may

be del ivered to Buyer under Section 8.2 as an o ff- record mat ter ; ob jections

to existing surveys must be made on or be fore the Of f-Reco r d Ma tte rs O bjec t ion

Dea dl ine . Buyer may ob ject to the Current Survey on or be fore the Sur ve y

O b je c t ion D e a d l ine . If Buyer t ime ly ob jects to the Curren t Survey, the Contract

wil l terminate . Buyer ’s objection to the Current Survey is governed by Sect ion

8.3 .2, and Se ller has no r igh t to cure any objection to the Survey. Sect ion

8.5 does not app ly to ob jections under Sect ion 8.3.2.

4. Under Sect ions 10.8.2 (Survey) and 10.8.3 (Leases) Buyer has a r igh t to

“ terminate” the Contract . Sel ler has no r ight to cure any such object ion .

Section 8 .5 does not apply to ob jections under Sect ions 10.8 .2 and 10.8.3.

Conclusion : Buyer has a r ight terminate the Contract due to objections with any

Survey (Existing or Curren t) or to any Lease. Se l ler has no r igh t to cure any

object ion to the Survey or Lease (whether such object ion is based on Section 7 , 8 or

10 as Section 8.5 does not app ly to Survey or Lease ob ject ions) .


Page 68 of 75

CP- 38 Com missi on P osi t i on on D isc l osure o f A f f i l i a t e d Bu s in e s s A r r a ng e me n t s a n d Con f l i c t s of

In te res t ( 4 - 5- 2 01 1 )

This statement supplements Rule E -46 Aff i l iated Business Arrangements.

§12-61-113.2 , C.R.S. Af f i l i a ted Business Arrangements was enacted i n Colorado to

provide transparency, accountabi l i ty , and consumer pro tect ion through disc losure

and consistency concerning a ff i l ia ted business arrangements. Af fi l ia ted business

arrangements have also been regu la ted for many years by the Real Esta te

Set tlement Procedures Act (RESPA). RESPA was precipi tated by s ign i f icant reforms

ident i f ied by Congress as necessary to ensure that consumers did not pay

dispropor tionately high se t tlement costs as the resul t of certain deleter ious

business practices by se t tlement serv ice providers. RESPA is app l icable to any

residentia l mor tgage transaction involv ing a federal ly rela ted mor tgage loan.

However, Colorado law requires d isclosure o f aff i l ia ted business arrangements to

consumers even i f the tr ansact ion does not involve a federal ly related resident ia l

mor tgage loan.

Colorado law C.R.S. 12-61-113.2(1)(a) defines an “a ff i l ia ted business

arrangement” as an arrangement in which:

“A provider of set t l ement servi ces or an associate of a provider of

set t l ement servi ces has ei ther an af f i l i a te rel at i onship wi th or a d i rec t

benef i ci al ownership i nterest of more than one percent i n another prov ider of

set t l ement serv ices;”

and the provider direct ly or indirect ly re fers business to the other provider or

af f i rmat ively in fluences the select ion of another provider of se t t lement

services.

It is the Commission’s posi t ion that real estate brokers must disc lose af f i l ia ted

business arrangements to consumers in all t ransactions in tended to result in the

transfer of t i t le f rom one party to another. RE S PA requires that aff i l iated

business arrangements be disclosed before or a t the time a re ferral is made to a

provider o f se tt lement serv ices. Co lorado law requires a l icensee to disc lose any


Page 69 of 75

af fi l ia ted business arrangement when an of fe r to purchase rea l proper ty is ful ly

executed. In Colorado, the disc losure is required to be in wr it ing , must be given to

both agents and transaction brokers, must comply wi th RE S PA and Colorado law,

and must be made using the Federal RE S PA disclosure form. Co lorado law

requ ires real estate brokers to disc lose thei r a f f i l ia ted business arrangements to al l

part ies to the rea l esta te t ransact ion and a l l part ies are expected to s ign the

disclosure form. The Commission recommends that real esta te brokers d isclose

the ir a ff i l ia ted business arrangements to the party wi th whom they are working ear ly

in the ir relat ionship, i .e. at the t ime brokerage relat ionships are d isclosed or when

the l is ting contract or buyer broker agreement is negot ia ted . In those transactions

where the broker does not dea l wi th another party unti l the t ime o f contract ing

wr it ten disc losure should be made to a l l par t ies a t the time the purchase contract is

fu l ly executed.

Addi t iona l ly , real estate brokers are required to make certain d isclosures to

the Div is ion of Real Estate regarding their af f i l ia ted business arrangements.

Colorado law requi res every l i censee to disc lose to the Commission when they

enter into or change an aff i l ia ted business arrangement . All a f f i l ia ted business

arrangements to which the l icensee is a party must be disclosed. Disclosure is

requ ired at the time of a new app l icat ion for l i censure or at the time of act iva tion

of an inactive l icense. The disclosure must include the physical loca tion of the

af fi l ia ted business. Employing brokers are required to disclose the names of all

af f i l ia ted business arrangements to wh ich the employing broker is a par ty on an

annual basis, at the least . The disclosure must include the physica l locat ion of the

af f i l ia ted businesses. The Commission has determined tha t these disc losures shall

be made electronical ly through the Div ision of Real Esta te ’s websi te at

www.dora .sta te .co .us/p ls/rea l/AFB_Web.Logon? p_div=REC.

It is t he Commiss ion’ s pos i t i on that Rule E -25Cont i nu ing duty to d i sc l ose conf l i ct

o f i n terest and l i cense s tatus, appl i es to all l i censees including real esta te brokers

who per form l icensed property management serv ices and are aff i l ia ted with

businesses or vendors that provide services appl icab le to lease transactions. For

example, a rea l esta te broker acting on beha lf o f a landlord is required to disc lose


Page 70 of 75

to the land lord tha t the real esta te broker has par t ial ownership of the main tenance

company tha t the real esta te broker u t i l izes for the landlord’s proper ty repairs. The

Commission strong ly recommends tha t this type of information be disclosed to the

pr incipa l ear ly in the business re la tionsh ip , i .e. at the t ime brokerage re la tionsh ips

are disc losed or when the l ist ing contract is negot ia ted . Add i t iona l ly , th is

disclosure should be made in writ ing.

C P - 3 9 C o m mi s s i o n Po s i t i o n o n L e a s e O p t i o n s , L e a s e Pu r c h a s e Ag r e e me n t s a n d I n s t a l l me n t

L a n d C o n t r a c t s ( 4 -5 - 20 1 1)

The Commission recogn izes tha t in order to main ta in the resi l ience of the real

esta te market dur ing times when conventiona l lending requirements are r igorous,

al ternat ive funding practices are ut i l ized to susta in the market cond it ions of

supply and demand. The Commission has rece ived and investiga ted numerous

compla in ts per ta in ing to lease opt ions, lease purchase agreements and instal lment

land contracts. Although the Commission does not have the author i ty to proh ib it

the types of real esta te transact ions that real esta te brokers part ici pa te in, the

Commission strong ly cautions real esta te brokers to u ti l i ze the services o f an

at torney l i censed to practice law within the Sta te o f Co lorado. I t has been the

Commission’s observa t ion , based on compla ints received, that lease option and

lease purchase transact ions are complex and genera l ly contain provis ions with

sign if ican t f inancial risk posed to the prospect ive buyer and seller. Instal lment

land contracts and the other transactions ment ioned in this posit ion sta tement

af ford buyers the opportuni ty to take possession of the real proper ty and make

installment payments to the se l ler . There is a signi f ican t po ten t ial for harm to the

se l ler , buyer or assignee if the instal lment land contract is not proper ly draf ted. In

all of the above transact ion s, the sel ler re tains legal t i t le to the property whi le

the buyer may acquire equ itab le t it le. The Commission does not have an

approved contract form necessary to memor ial ize the terms and nuances related

to these complex transactions, or any jur isd ictiona l regu la tions tha t may be

germane. Pursuant to Rule F, the appropr ia te provisions of the l icense law and the

brokerage re la tionsh ip act (§§12-61-113, 12-61-804, 805 and 807, C.R.S.) , real

estate brokers are proh ib ited from dra f t ing a contract document that wou ld re flect


Page 71 of 75

the terms of such a transaction as it wou ld exceed their leve l of competency and

is a mat ter requir ing the exper tise and advice of an attorney. Addi t iona l ly , such

behavior may be construed as the unauthor ized practice of law by the real esta te

broker and sub ject to civi l penal t ies. The contracts for these transact ions shou ld

not be prepared by a rea l estate broker; ra ther, the documents shou ld be dra fted

by a l icensed Colorado at torney-at- law engaged for each par ticular t ransaction.

CP- 40 C o m mi s s i o n Po s i t i o n o n Te a m s (4- 5 -2 0 1 1)

The Commission recogn izes that there are benef i ts to bo th real esta te brokers

and consumers in the usage of real estate broker teams. Teams may be formed

within a l i censed brokerage f irm wi th the approva l of the employing broker . Real

estate brokers opera ting as teams need to ensure tha t they are compl iant wi th

Commission rules regarding adver tis ing , name usage and supervision.

Adve rt i s i ng and name usa ge:

Whi le there is no prohibi t ion of teams, real esta te brokers need to ensure tha t

they do not advert ise in a manner tha t misleads the publ ic as to the ident i ty of the

brokers’ l i censed brokerage. Real esta te brokers that funct ion as teams should no t

advert ise teams using the terms “rea lty” , “ real esta te” , “ company” , “ corpora tion”,

“corp .” , “ inc.” , “LLC” or o ther s imi lar language that would indica te a company other

than the employing brokerage f irm. Adver t is ing includes, but is not l imited to,

websi tes, signage, proper ty f lyers, mai l ings, bus iness cards, let terhead and

contracts. The adver t ising o f team names should never give the impression tha t

the team is an ent i ty separate from the l icensed rea l estate brokerage. If the

ident i ty of the employing broker or the brokerage firm is d if f i cul t for the publ ic or

the Commission to ascer tain , the team may be in vio la tion o f Ru le E -8 Advert ising.

Supe rvi s i on:

In add i t ion to the supervision requirements set for th in Rules E-31 and E-32,

Rule E-30 Employing broker responsibi l i t ies requ ires that the broker designated to

act as the broker for any partnership, L imi ted Liabi l i ty Company or corpora t ion , i .e.

the employing broker, ful f i l l the fo l lowing dut ies:


Page 72 of 75

1) Ma in ta in al l trust accounts and t rust account records;

2) Ma in ta in al l transact ion records;

3) Develop an of f ice po l icy manua l and per iodical ly review o f fice po l icies wi th a l l

employees;

4) Provide for a high level o f supervis ion for newly l i censed persons pursuant to

Rule-32;

5) Provide for a reasonable leve l o f supervision for exper ienced l icensees

pursuant to Ru le E-31;

6) Take reasonab le steps to ensure tha t v io la tions o f sta tu tes, rules and of f ice

pol icies do not occur o r reoccur;

7) Provide for adequate supervis ion of a l l o f f ices opera ted by the broker, whether

managed by l i censed or unl icensed persons. Pursuant to §12-61-118, C.R.S.

and Rule E-29, employing brokers are also responsib le for provid ing

supervision over such act ivi t ies wi th re ference to the l icensing sta tu tes and

Commission rules for all brokerage employees, including bu t no t l imi ted to

admin istra tive assistants, bookkeepers and personal assistants of

l icensed employees. Thus, employing brokers are responsible for the

act ions of unl icensed persons who per form funct ions wi thin the real esta te

broker team. Employing brokers need to ensure tha t any un l icensed person

act ing within the team is no t engaged in practices that requ ire a real estate

broker’s l i cense. Employing brokers also need to establ ish tha t the

compensat ion paid to an unl icensed person for serv ices provided is no t in the

form o f a commission. Compensation pa id to an un l icensed person is no t

requ ired to to be paid solely by the employing broker. However, §12-61-117,

C.R.S. requires tha t all l i censee compensation or valuab le considera tion for

the performance of any acts requ ir ing a broker ’s l i cense is pa id solely by the

employing broker.


Page 73 of 75

CP- 41 Commission Posi t i on on Competency (Decembe r 6 , 2 01 1 )

Pursuant to sect ions 12-61-804, 12-61-805 and 12-61-807, C.R.S. , wh ich are the

laws tha t govern the dut ies of a real estate broker acting in the capaci ty of a single

agent or transact ion broker , real esta te brokers are required to per form the terms of

wr it ten or ora l agreements they make wi th certa in par t ies to a real esta te t ransact ion .

Pursuant to sect ions 12-61-804 and 12-61-805, C.R.S. , real estate brokers act ing in

the capacity of a sing le agent have a duty to promote the interests of the ir cl ien ts

with the utmost good faith, loyal ty, and fide l i ty. Pursuant to sect ion

12-61-113(1)(n) , C.R.S. , i t is a violat ion of the l icense law if a l i censee

demonstra tes unworthiness or incompetency to act as a real estate broker by

conduct ing business in such a manner as to endanger the in terest o f the public.

Prior to performing any acts that require a real estate broker’s l i cense, a

broker should determine whether he or she possesses the knowledge,

exper ience, and/or training necessary to perform the terms of the transaction

and maintain compl iance with the appl icab le federa l, state or local laws, rules,

regu la tions, or ordinances. If the broker does not have the requisi te knowledge,

exper ience and/or tra in ing necessary to consummate the terms of the agreement ,

the broker should either decline to provide brokerage serv ices or seek the

assistance of another real estate broker who does have the necessary exper ience,

tra ining , and/or knowledge. The Commission wil l have grounds to discipl ine a

broker ’s l i cense i f a broker fa i ls to take the measures necessary to ga in competence

and viola tions o f the l i cense law are substantiated.

CP- 42 Com missi on P osi t i on on Apa rt me n t B ui l d i ng or Com pl e x Ma na ge me n t

The Commission recogn izes tha t owners of apar tment buildings or complexes

wil l engage the services of real estate brokerages or unl icensed, on -s i te

managers, o r bo th . An “owner” inc ludes ei ther a person or an ent i ty recognized under

Colorado law. The owner must have a control l ing in terest in the en ti ty formed by the

owner to manage the apar tment bui lding or complex. In the instance of an enti ty ,

the “owner ” may form a separa te en t i ty to manage the apartment bu i ld ing or

complex. The ownership enti ty and the enti ty formed by the owner to manage the


Page 74 of 75

apar tment bui lding or complex must be under the control of the same person

or persons.

Pursuant to §12-61-101(2)(b)(X I I), C.R.S,. a regular ly sa lar ied employee of the

owner of an apartment bu i ld ing or complex is permi tted to per form customary du ties

for his or her employer without a real esta te broker ’s l i cense. The unl icensed, on-

site manager must e ither repor t direct ly to the owner or to the real esta te broker , i f

a real esta te broker is engaged to manage the property. The Commission views the

fo l lowing to be customary du t ies o f an unl icensed, on -s ite manager:

1. Per formance o f cler ica l du ties, including gather ing in format ion about

competing projects.

2. Obtain in format ion necessary to qual i fy perspect ive tenants for a lease. This

includes obtaining and ver i fying i n formation regard ing employment history,

credi t in fo rmat ion, re ferences and personal informat ion as necessary.

3. Provide access to a proper ty ava i lable for lease and distr ibu te prepr inted ,

object ive in formation prepared by a broker as long as no negotiat ing , o f fer ing

or contracting is involved.

4. Distr ibute prepr in ted, object ive information a t an on -si te leasing o f f ice tha t is

prepared by an owner or broker, as long as no negot ia ting , o ffer ing or

contracting is involved.

5. Quote the ren tal pr ice establ ished by the owner or the owner ’s l i censed broker.

6. Act as a scr ivener to the owner or the broker for purposes o f comple ting

predetermined lease terms on prepr in ted forms as negot ia ted by the owner

or broker.

7. Del iver paperwork to o ther brokers.

8. Del iver paperwork to land lords and tenants, i f such paperwork has already

been reviewed by the owner, or a broker or has been prepared in accordance

with the supervis ing broker ’s instruct ions.


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9. Col lect and deposi t ren ts and secur i ty deposits in accordance wi th the

owner ’s lease agreement or the brokerage f irm’s wr i tten o f f ice policy.

10. Schedu le proper ty maintenance in accordance wi th the brokerage f irm’s

management agreement or the owner’s lease agreement.

If the owner has executed a Power o f At torney form or a wr i t ten delegation of

author i ty tha t author izes the unl icensed, on-site manager to sign and execute

leases on behalf of the owner, the unl icensed, on-site manager may execute

those without possessing a rea l esta te broker ’s l i cense. Brokers supervising

unl icensed, on-s ite managers wi th th is au thor i ty are expected to review the executed

documents to ensure compliance with lease terms, management agreements, local ,

s ta te and federal laws, including the real estate brokera ge practice act and

Commission rules.

Employing brokers need to be especial ly aware of their supervisory du ties under

the l icense law. Supervisory du ties apply whether the on-si te manager is an

employee or independent contractor o f the broker or brokerage f irm, or if the on-s ite

manager is a regular ly sa lar ied employee of the apartment bui lding or complex

owner . The employing broker should have a wr it ten off ice pol icy explaining the

dut ies, responsibi l i t ies and l imi tat ion on the use of on-si te managers. This pol icy

should be per iodical ly reviewed wi th al l employees.

(DORA, 3-1 – 3-38)

Cited Material:

DORA. "Chapter 3: Commission Posit ion Statements ." Colorado Real Estate

Manual . Charlottesvil le, VA: LexisNexis, 2014. . Print.

Documents

Commission Position Statements · 2019. 8. 15. · Page 1 of 75 Commission Position Statements CP-1 Commission Policy on Homebuilder’s Exemption from Licensing CP-2 Commission Position