Proposed Legislation Would Profoundly Impact Colorado Construction Contracts

Posted by Christopher S. Jensen on May 01, 2012

A last minute bill has been introduced in the Colorado Senate.   Colorado Senate Bill 12-181, introduced last week by State Senator Lois Tochtrop, proposes new requirements related to construction projects in Colorado.  These proposed changes are not favorable to property owners in Colorado and will limit the ability of property owners to negotiate business terms in their construction contracts.  SB 12-181 is set for a hearing before the Senate Business, Labor and Technology Committee on Wednesday, May 2, 2012. 

SB 12-181 applies to “Building and Construction Contracts” which is defined as any contract subject to Title 38, Article 22 of the Colorado Revised Statutes, Colorado’s mechanics’ lien law.  SB 12-181 contains the following points:

  • Colorado Law Must Apply.  Any provision in a Building or Construction Contract for work to be performed in Colorado that makes the contract subject to the laws of another state or contains a dispute resolution provision governed by the laws of another state, is void and unenforceable. 
  • Parties Cannot Contract Around Colorado Mechanics’ Lien Law.  Any provision in a Building and Construction Contract that requires a contractor or subcontractor to waive its right to file a mechanics’ lien or claim against a payment bond prior to being paid is void and unenforceable.
  • Payment to Subcontractors and Suppliers Required Within 7 Days.  All principals, general contractors and subcontractors must pay their subcontractors and material suppliers within seven days of receipt of services.
  • Mandatory Interest Penalty; Costs and Attorney Fees Award.  A 1.5% monthly interest penalty applies to all unpaid amounts, and subcontractors and suppliers who successfully sue to collect this interest penalty will also be entitled to collect their costs of suit, including attorney fees.
  • Monthly Progress Payments Required; Retainage Amounts Capped.  Property owners or parties responsible for payment must make monthly progress payments to the general contractor unless the Building and Construction Contract specifies otherwise, and owners or payment parties may only reserve as retainage a maximum of 5% of each payment.
  • Change Orders.  General contractors must submit the costs of any change orders to owners for payment within 30 days of the change order.  Owners or payment parties will be required to pay at least 50% of any disputed change order amounts.

Take Two for a Colorado Foreclosure Bill

Posted by Catherine M. Clendinning on April 04, 2012

With foreclosures on the rise, it is no wonder that Colorado’s unique public trustee approach to the bank/borrower relationship finds itself in the limelight.  The CEO of RealtyTrac was quoted in a recent USA Today article suggesting that foreclosure-related sales will increase this year “as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months.”

While many believe that Colorado’s foreclosure statutes afford a reasonably inexpensive and prompt remedy for lenders while providing property owners a fair chance to protect their interests, others strongly disagree.  As a recent article in the Denver Post put it, “No other state allows for a foreclosure without the lender first proving it is the right entity to do so;” and those in agreement have been working on legislation to tighten Colorado’s foreclosure process.

Rep. Chris Holbert, R-Parker, however, sees these efforts as adding more unnecessary regulations to an already overregulated industry.  Another recent Denver Post article quoted Rep. Holbert as saying, “Since 2005, the legislature has run and enacted 15 different bills to affect and change the foreclosure process in Colorado.  Now is a good time to leave it alone and stop changing things.  The process we have in place works fine.  Changing things for the 16th time isn't the right solution.”

At the heart of the debate is which specific documents a foreclosing lender must provide to the public trustee, especially when that lender’s interest is based on an assignment of the debt.  Currently, Colorado law allows lenders to foreclose on real property even if their interest is based on an assignment from the original lender and that assignment is not produced.  Instead, all that is necessary is a statement signed by the lender, or its attorney, stating that the lender’s interest is valid.  House Bill 1156, which died in committee last month, sought to tighten the rules by, among other things, striking that option for foreclosing parties.

But advocates of the bill are trying again and going further this time with a ballot proposal that would require all documents necessary to institute a foreclosure, including any endorsements, assignments, and transfers of the debt, be recorded in the real property records prior to commencing a foreclosure.  If proponents of the initiative are successful, an amendment to the Colorado Constitution will be put before voters in November.

Photo by Taber Andrew Bain (Flickr)

 

2011 Mid-Session Colorado Legislative Update

Posted by Andrew Schwartz on March 24, 2011

We are past the half-way point of the 2011 Colorado legislative session, which began in early January and ends in early May.  Several hundred bills have been proposed, and many have already been “postponed indefinitely” or voted down in committee or in a legislative chamber.  Below are summaries of certain significant bills affecting Colorado real estate law or the commercial real estate industry that continue to be debated as of the date of publication of this post.  Given the many bills under consideration, this list is not intended to be a comprehensive overview.

colorado capitol.jpgReal Estate Finance – Lenders Must Pursue Collateral First (HB 11-1139).  This bill would prohibit consumer loan creditors, credit unions, savings and loan associations, state banks, industrial banks and mortgage lenders from attempting to collect a debt from a borrower personally unless (a) the creditor first attempts to collect the debt from the collateral, and (b) the proceeds from the collateral are insufficient to pay the debt.

Ballot Measures – Constitutional Initiatives and Referenda Require 60% Voter Approval (Senate Concurrent Resolution 11-001).  This resolution would put to the voters via referendum in November 2012, a proposed amendment to the Colorado Constitution that would: (a) beginning in 2013, increase the amount of votes needed to pass a ballot measure for a Constitutional amendment from a simple majority to 60%, except as to measures that repeal Constitutional ballot measures passed prior to 2013, (b) require that a certain number of signatures for Constitutional initiatives be obtained from each congressional district in the State, and (c) increase the voting requirement in the legislature to amend or repeal a successful statutory initiative or referendum from a majority to two-thirds for a three year period after passage.  The scope of this measure clearly goes beyond real estate.  However, it may be of particular concern to the Colorado commercial real estate industry, which has had to defend against various initiatives over the years.  This referendum would make future Constitutional initiatives and referenda more difficult to pass, although it would provide greater protection to successful statutory ballot measures.  The concurrent resolution to establish this referendum has passed the House with minor modifications to the approved Senate version.  It now is back in the Senate for a vote on the modified version.  My colleague Bob Fisher provides more information about this resolution in a post below.

Agricultural Land Taxation – Split Assessment for Agricultural Land with Residence (HB 11-1146).  This bill would allow tax assessors to divide a parcel for assessment purposes into agricultural land and up to two acres of residential land unless the residence is “integral to agricultural operations.”  The phrase “integral to agricultural operations” would be defined by the Colorado property tax administrator.

Property Disclosures – Commercial Properties Must Disclose Energy Data (SB 11-130).  This bill would require owners and operators of commercial properties, defined to exclude multifamily properties sold or leased on a unit-by-unit basis, (a) to upload to the Environmental Protection Agency data necessary to generate an energy performance rating, and (b) disclose the building’s energy performance rating (if one is generated by the EPA) to a buyer, tenant, or lender at the time of conveyance and upon request by such parties.  The bill would only cover commercial buildings in excess of 50,000 square feet during 2012, but would cover all commercial buildings thereafter.

Also, a bill restricting private transfer fees is expected to be introduced this session but has not been introduced yet.  Further information on these and other bills affecting real estate may be obtained by visiting www.statebillinfo.com.

Photo by cliff1066™ (Flickr).