Bulletin: CO000003

Dear Associates:

The following is a summary of bills enacted by the 1992 Colorado Legislature and subsequently signed into law by Governor Romer which have some impact, either directly or indirectly, on the business of title insurance in Colorado.

Senate Bill 92-43: (C.R.S. 38-39-102)

This bill modifies the deed of trust release procedures by allowing a title insurance company licensed and qualified in Colorado to provide an indemnity agreement to the public trustee when the original note cannot be produced as required by law. The indemnity agreement must be signed by the title insurer, in this case Stewart Title Guaranty Company, by their authorized representative. The form of the indemnification and the individual(s) who will be signing such indemnities will be forwarded to you when each has been determined. This bill also codifies the ruling of Colorado Supreme Court in the "Upson" case by stating that if a written request to release a deed of trust is fraudulent the release by the public trustee based on such fraudulent request shall be void. The lesson for us is that we must be certain to accept a request for release from the lender only, not from the borrower or another individual. This bill is effective July 1, 1992.

Senate Bill 92-143: (C.R.S. various titles)

This bill repeals the controversial special district disclosure requirements included in Senate Bill 91-159 which became law in 1991 as a result of defects in the Governor's veto. For closings on or after July 1, 1992, the "purchasers acknowledgment regarding special districts" form will no longer need to be signed by the purchaser and, therefore, no special requirement need be placed in the Title Commitment. This new law requires that the following disclosure statement must appear in bold face type on every contract for the purchase and sale of residential real property (C.R.S. 38-35.7-101).

"Special Taxing Districts may be subject to general obligation indebtedness that is paid by revenues produced from annual tax levies on the taxable property within such districts. Property owners in such districts may be placed at risk for increased mill levies and excessive tax burdens to support the servicing of such debt where circumstances arise resulting in the inability of such a district to discharge such indebtedness without such an increase in mill levies. Purchasers should investigate the debt financing requirements of the authorized general obligation indebtedness of such districts, existing mill levies of such district servicing such indebtedness, and the potential for an increase in such mill levies."

The obligation to provide this disclosure shall be on the seller according to this statute.

This bill also requires that every title commitment issued for the sale of residential real property, must provide the following statement: "A certificate of taxes due listing each taxing jurisdiction shall be obtained from the County Treasurer or the County Treasurer's authorized agent" (C.R.S. 10-11-122). We are recommending that this statement be made as an attachment page along with the 91-14 disclosure from last year rather than as an exception in schedule B-2. See attached Exhibit "A". This bill is effective July 1, 1992.

Senate Bill 92-149:

This bill requires parties entering into an installment land contract (contract for deed to real property) to be performed in more than 6 months, to establish an escrow account with the Public Trustee as escrow agent for property tax impound accounts. The purchaser under an installment land contract has the option of voiding the contract if the Public Trustee is not designated as escrow agent for such escrow impound amounts. This bill is effective July 1, 1992.

House Bill 92-1038: (C.R.S. 38-35-110)

This bill clarifies the procedures, time limitations, and effects of a notice of lis pendens as notice of a lawsuit affecting title to real property. Specifically this bill provides that a notice of lis pendens shall expire "and cease to be notice to any person for any purpose 6 years after the date of its recording, unless an extension of the notice of lis pendens is recorded prior to its expiration". The bill also states that upon request by any person, the clerk of the trial court shall issue a certificate stating specifically the status of the case and what motions have or have not been filed. This bill is effective March 20, 1992.

House Bill 92-1083: (C.R.S. 38-35-106.5)

This is the "surveyor's bill" which provides that any deed, power of attorney, agreement, or other instrument in writing executed and recorded on or after July 1, 1992, which contains a newly created legal description of real property shall include the name and address of the person who created such legal description. This bill goes on to say that failure to do so does not affect the validity or recordability of the instrument and that the bill does not confer liability on a person who prepares any instrument in violation of this section.

House Bill 92-1270: (C.R.S. 39-22-604.5)

This new law requires withholding of state income tax from proceeds of the sale of Colorado real property by non-residents of Colorado. The bill requires that a closing agent must withhold 2% of the gross sales price of real property located in Colorado when the seller is a non-resident of the State of Colorado. Exempted from this withholding requirement are properties sold for less than $100,000, properties sold by banks, or situations when the closing agent obtains a sworn statement from the seller stating the seller is a resident of Colorado, if the seller is a corporation with a permanent place of business in Colorado, or if the property being conveyed is the principal residence of the seller. The bill goes on to require reporting and payment to the Department of Revenue of accounts withheld according to regulations provided by the Department of Revenue. However, neither these regulations nor the forms required have yet been promulgated by the state of Colorado. There is a penalty fine of no less than $500 and no more than $2,500 to be charged to the escrow agent for failure to collect this tax. The effective date of this bill is July 1, 1992, however it only applies to transactions which occur on or after January 1, 1993. The negative implications to closing agents is obvious. Further discussion, review and study will be done on this bill and additional instructions will be forwarded when available.

House Bill 92-1312: (C.R.S. 38-30-166)

This bill amends CRS Section 38-30-166 to distinguish between joint ventures and partnerships. Colorado law has been unsettled as to whether a joint venture is a partnership for a limited purpose or if it constituted a tenancy in common holding title under a trade name. Previous issues have included whether or not a joint venture's action to encumber or convey real property must be joined in by all joint venturers or if a joint venture could authorize less than all joint venturers to undertake such action. Previously most title companies have taken the position that all joint venturers must join in on a conveyance or encumbrance of real property in order to bind the joint venture. This new bill provides that so long as the joint venture or trust records an affidavit stating the name of the trust or joint venture and the names and addresses of all the trustees or joint venturers, that the affidavit can set forth a statement that fewer than all of the trustees or joint venturers are authorized to act on behalf of the trust or joint venture.

Another issue that has been troublesome has been whether or not a judgment or lien recorded against one joint venturer affected the joint venture. Previous title company position has been that such a judgment or lien did in fact affect the entire joint venture. This new bill provides that if a joint venture that has recorded an appropriate affidavit, "a lien or encumbrance arising out of a claim against a joint venturer may attach to the joint venturer's interest in the joint venture and to the separate property of the joint venturer but shall not attach to any property of the joint venture or any property or interest of any other joint venturer". This new law helps to clarify joint ventures and provides the mechanism for distinguishing between joint ventures and partnerships. This law is effective May 14, 1991.

This memorandum is intended to provide general information on new statutes affecting title insurance in Colorado. As additional issues or questions arise regarding specific procedures to be followed in each case, please don't hesitate to contact either myself or Lue Svedman. We will be forwarding additional information and clarification as it becomes available.