Author(s): Mark A. Meyer
Published: 06/16/2010
The 67th General Assembly of the State of Colorado adjourned on May 12, 2010, resulting in several new laws pertaining to real estate issues of which brokers should be aware. This article provides a brief summary of the new laws and effective dates resulting from the Second Regular Session.
While most brokers are aware of the "Commercial Real Estate Brokers Commission Security Act" enacted this year (discussed in Dick Clark's article in this Broker Bulletin), brief summaries of additional laws affecting real property follow:
HB 10-1017: Voluntary Agreements Affecting Rent on Private Residential Property
This law was signed by the Governor on May 6, 2010, and is scheduled to take effect September 1, 2010. This act, in making rent control a matter of statewide concern, prohibits counties and municipalities from enacting any ordinance or resolution that imposes rent control on either private residential property or a private residential housing unit.
Despite this overriding ban on rent control, the act specifies that rent control does not include the following: (1) a voluntary agreement between a county or municipality and a permit applicant or property owner to limit rent on the property or unit or that is otherwise designed to provide affordable housing stock, or (2) the placement on title to the unit of a deed restriction that limits rent on the property or unit or that is otherwise designed to provide affordable housing stock pursuant to a voluntary agreement between a county or municipality and a permit applicant or property owner to place the deed restriction on the title.
The language of this act states that the voluntary agreements may specify how long the property is subject to its terms, whether a subsequent property owner is subject to the agreement, and any remedies for early termination.
As part of the discussion on this bill, certain groups expressed that even though the permitted agreements are stated to be "voluntary," they had concerns that counties and municipalities could delay approving a permit unless the applicant enters into a rent control agreement, practically making them mandatory at the discretion of the county or municipality. As a result, language was added specifying that a county or municipality may not deny an application for a development permit because a permit applicant declines to enter into such an agreement.
HB 10-1107: Limitations on Including Agricultural Lands within Urban Renewal Areas
The Governor signed this bill on April 14, 2010, revising and supplementing existing law on urban renewal. Under this act, urban renewal areas may not include agricultural lands within their boundaries, except in limited circumstances. In addition, for those areas that the governing body determines to be blighted, urban renewal plans shall be drawn as narrowly as feasible to accomplish the planning and development objectives of the proposed area.
This bill became effective on June 1, 2010, and now agricultural land may not be contained within an urban renewal area unless it meets certain specified exceptions, which are: (1) the agricultural land is a Brownfield site; (2) at least one-half of the urban renewal area constitutes a slum or blighted area and at least two-thirds of the perimeter of the area is contiguous with urban-level development; (3) the agricultural land is an enclave and the entire perimeter has been contiguous with urban-level development for not less that three years; and (4) each public body that levies ad valorem property tax on the agricultural land agrees to its inclusion in the urban renewal area. Additional exceptions apply for a period of ten years if the urban renewal area is contiguous with an existing urban renewal area and is developed solely for the purpose of creating primary manufacturing jobs, structured with property tax revenues to apply to a special fund to finance the urban renewal project. This act applies to urban renewal plans approved or substantially modified on or after June 1, 2010.
HB 10-1205: Land Use Development upon Military Installations
This bill was finalized in order to revise existing laws relating to local development near military installations. The purpose of this law is for local governments to cooperate with military installations to encourage compatible land, to help prevent incompatible urban encroachment upon military installations, and to facilitate the continued presence of major military installations within the state.
If the local government's territorial boundaries are within two miles of any portion of a military installation, it shall provide the specified officers information relating to proposed zoning changes, amendments to comprehensive plans, and land development regulations that, if approved, would affect any area within two miles of the military installation. This revised law was signed by the Governor on May 10, 2010, and is scheduled to become effective August 11, 2010.
HB 10-1231: Concerning the Regulation of Passenger Conveyances
Though typically a real property "conveyance" relates to a transfer of ownership, this law pertains to a "private residence conveyance," meaning a powered passenger conveyance (such as an elevator) that is limited in size, capacity, rise and speed and is designed to be installed in a private residence or in a multiple-family dwelling as a means of access to a private residence. This does not pertain to a single-family residence.
This bill amends existing laws governing the design, construction, operation, inspection, testing, maintenance, alteration, and repair of conveyances, and requires conformance with rules adopted by the administrator, local jurisdiction or other inspector approved under the law. These revisions were signed by the Governor on April 5, 2010, and are scheduled to become effective August 11, 2010.
HB 10-1249: Expedited Residential Foreclosure Sales
Under this bill signed by the Governor on April 29, 2010, eligible first lienholders of a residential mortgage loan may elect to have the public trustee use an expedited process in certain circumstances that reduces the foreclosure period from 110 - 125 days after filing the notice of election and demand, to 45 – 65 days. This expedited process will pertain to notices of election and demand recorded on or after August 1, 2010, but prior to August 1, 2013.
HB 10-1351: Concerning the Maximum Authorized Interest Rate for a Payday Loan
Under these revisions to existing laws, the general assembly has declared that payday lenders are charging excessive interest rates that can lead Colorado families into a debt trap of repeat borrowing. The revisions set limits on the interest rate for a payday loan charged to a consumer by a lender to a maximum rate of 45 percent per year, require a minimum six-month loan term, and preserve the ability for consumers to prepay their loans without incurring any prepayment penalties. This act was signed by the Governor on May 25, 2010 and is scheduled to take effect August 11, 2010.
The practical effect of these revisions to payday lending laws has been widely discussed in the session as imposing a requirement that will put many of the payday lending companies out of business in Colorado. While the pros and cons of having payday lending services available to the public are a matter of debate, a substantial portion of the leases for payday lenders contain termination clauses allowing the payday lender tenant to terminate their leases if a law is ever enacted that limits or prohibits them from continuing their business operations. As a result, it is anticipated that when this law becomes effective, many of these lending companies will exercise those termination rights, causing what some have estimated will be approximately 600 new retail space vacancies across the state.
HB 10-1394: Concerning Commercial Liability Insurance Policies issued to Construction Professionals
HB10-1394 was introduced late in the Colorado legislative session, promoted by the construction industry, and its announced purpose was to legislatively overrule a decision of the Colorado Court of Appeals in General Security Indemnity Co. of Arizona v. Mountain States Mutual Casualty Co., 205 P.3d 529 (Colo. App. 2009). In General Security, the Colorado Court of Appeals upheld the trial court's determination that there was no "occurrence" under a comprehensive general liability policy where the underlying complaint alleged only faulty workmanship and damage to the insured's own work product.
The overrule of General Security is contained in Section 1 of this bill, with the addition of C.R.S. § 13-20-808(3), providing that a court shall "presume that the work of a construction professional that results in property damage, including damage to the work itself or other work, is an accident unless the property damage is expected or intended by the insured."
In accordance with General Security, some insurers in the past have denied a duty to defend construction professionals where an underlying complaint only alleged damage to the insured's own work or product. This law will, in most instances, abolish this practice and preclude insurers from denying a duty of defense to an insured on the grounds that there has been no "occurrence" within the meaning of the CGL policy under such circumstances.
Section 1 of this bill (under C.R.S. § 13-20- 808(7)) also requires an insurer to provide a defense to insureds who receive a notice of claim under the Construction Defect Action Reform Act, C.R.S. § 13- 20-802, et. seq. ("CDARA"). Although CGL policies typically provide that insurers may, in their discretion, investigate claims prior to suit, this law imposes an obligation on insurers that issue CGL policies to construction professionals in Colorado to provide a defense to CDARA notices. This portion of the bill imposes new duties upon insurers to respond to CDARA notices sent to their insureds.
Section 2 of HB10-1394 precludes an insurer from relying upon any "unknown" loss exclusion. This section of the bill precludes enforcement of any CGL policy exclusion that precludes coverage in a subsequent policy for damage that began in a prior policy period and was "unknown" to the insured at the policy's inception date. ISO forms generally preclude coverage for any loss or damage that was known by the insured prior to the inception of the policy. Some insurers preclude coverage for any "known or unknown" losses, and this bill declares that "unknown" loss exclusions are void as against public policy.
HB 10-1141: Mortgage Broker Oversight and Mortgage Company Registration Requirement
The Governor signed this bill on May 26, 2010, changing the current regulatory program governing oversight of mortgage brokers. It is scheduled to become effective on August 11, 2010. This bill creates a Board of Mortgage Loan Originators which will have final authority for rule-making, enforcement, and administration over the regulatory program, with the ability of the Board to delegate certain responsibilities to the director of the Division of Real Estate. In addition, this bill extends the deadline for mortgage loan originator registration on the NMLS from July 31, 2010 to December 31, 2010. Mortgage companies are now required to be registered on the NMLS by January 1, 2011, which registration requires the company to be in good standing with the Colorado Secretary of State and not be legally barred from operating in Colorado. The revised law empowers the Board to deny, suspend, and revoke registrations. This bill also updates certain exemptions from registration.
Please refer to the actual language of the new laws and materials prepared by the Office of Legislative Legal Services to confirm how the new laws affect you and your transactions, or call me to discuss any questions.
Mark Meyer is a partner in RJ&L's Denver office where his practice is focused on real estate and finance, intellectual property, and corporate law. He regularly represents clients with acquisitions and sales of predevelopment and operational real property, in preparing and negotiating leases for both landlords and tenants, and advising borrowers and lenders in their financing transactions. He represents business entities in various aspects of their operations, including formation, corporate issues, contracts and day-to-day counsel, as well as protecting their trademarks and other intellectual property. He can be reached at 303-628-9570 or by email at mmeyer@rothgerber.com.