This article in today's Denver Post discusses how, despite some regional variation in vacancy rates and rents, the statewide trends suggest optimism among property managers and landlords concerning future demand.
The recent uptick in multi-family housing construction in some parts of Colorado indicates that developers may be feeling the same way.
It will be interesting to watch whether this results in sustained multi-family growth.
To update our previous post, Colorado Senate Bill 12-181 regarding construction contracts failed today in the Senate Business, Labor and Technology Committee by a vote of 6-1.
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:
It has been a little over a year since the requirement that Colorado property owners' associations register with the newly created HOA Information and Resource Center went into effect. The center’s 2011 annual report is out (and a copy of it is provided below). According to the annual report, in 2011, 8,037 property owners’ associations registered, comprising a total of 838,211 units.
As reported here earlier, the registration requirement went into effect on January 1, 2011, but an emergency rule was enacted automatically registering all such associations through March 1, 2011. As we reported last year, if a property owners' association fails to register, its assessment lien power and right to enforce such liens are suspended. Most associations registered sometime in the first quarter of 2011, and so the time to renew those registrations is now. This is an annual requirement, and the ramifications of non-renewal are the same as if an association did not register in the first instance.
The legislation is not clear on whether the registration requirement applies to all property owners' associations in Colorado or only property owners' associations subject to the Colorado Common Interest Ownership Act (CCIOA). In 2011, legislation was introduced that would have clarified this point, but the legislation failed. The Division of Real Estate has promulgated a position statement clarifying that pre-CCIOA associations (associations formed prior to July 1, 1992) are not subject to registration unless that association has elected treatment under CCIOA. The position statement is authoritative but not binding, and so pre-CCIOA associations may still want to register despite the position statement.
A complaint form is now on the HOA Information and Resource Center’s website. The center has no investigative or enforcement capabilities, and the complaint form states that clearly on its face. However, the center tracks complaints and reports on them .The annual report includes, among other things, the report on complaints received which cover a variety of topics ranging from pets and parking to conflicts of interest and transparency. The annual report also comments on the ongoing confusion related to the center's power and authority to deal with complaints. For people involved with property owners' associations, whether in a development, management, board or ownership role, this information is instructive as to what the hot button issues are with owners. Whether or not it leads to further regulation of property owners' associations remains to be seen.
2011 Annual Report of the HOA Information and Resource Center Office.pdf
Developers often secure FHA approval for their condominium projects, enabling buyers to obtain FHA loans. Whether or not those approvals remain in place is left to the owners’ association for the project. As investors continue to snap-up condominium units one at a time or in bulk, it is important to review the status of the FHA approval for the project. As highlighted in a recent Denver Post article, the FHA backs nearly one-third of all mortgages in the United States, up from 5% in 2005. The article also reports that nearly two-thirds of Denver metro-area condominium projects have rejected or expired FHA approvals. As the article suggests, this could be the result of many factors, including FHA’s limit on the number of renters in a project. Even for those projects with intact FHA approvals, investors should talk to the association to understand the association’s plans for renewing the registration and assuring that all the FHA requirements (such as the limit on renters) are satisfied. The association’s plans (or lack thereof) with respect to FHA registration could have serious implications for the investor’s ability to rent the condominium units or sell them to consumers.
Photo by Butterbean Man (Flickr)
Negotiations occurring over e-mail may, in certain circumstances, create a binding contract. Two cases out of New York have held that where a meeting of the minds is evident through email correspondence, a contract can arise.
In reaching these decisions the Supreme Court of New York relied on the federal Electronic Signatures in Global and National Commerce Act (“ESIGN”) and a New York statute similar to the Uniform Electronic Transactions Act (“UTEA”), a version of which has been enacted in Colorado.
Although Colorado courts have not yet interpreted ESIGN and Colorado’s adopted form of the UTEA yet, these cases are noteworthy because of their impact on interstate business transactions (and in particular transactions with parties in New York). Further, Colorado’s version of the UTEA could provide a basis for similar rulings in Colorado.
For more information, please click here for full client alert.
In October of 2009, the United States Department of Justice issued a memorandum (the "Ogden Memo") stating that scarce federal resources should not be focused "on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana." The Ogden Memo also emphasized the federal commitment to enforcing federal drug laws and that marijuana remained illegal, but it was widely perceived as marking a significant decrease in the risk of federal criminal prosecution of state-sanctioned medical marijuana activities. This perception was arguably the catalyst that sparked the rapid development of Colorado's commercial medical marijuana industry, which started toward the end of 2009.
In reaction to the development of the industry, the State of Colorado has spent the last eighteen months developing and implementing the most comprehensive medical marijuana regulatory system in the country. Operating under this regime is quite onerous for the regulated businesses, but the extensive amount of oversight involved, as well as the resulting elimination of more "amateur" businesses, has also tended to increase the perceived legitimacy of the industry. In turn, the development and institutionalization of medical marijuana as a legitimate, regulated industry has had a significant impact on real estate in Colorado, perhaps most notably by creating new demand for warehouse and retail space.
However, largely in reaction to the increase in the scope of the commercial cultivation, sale and distribution of medical marijuana, the DOJ issued a new memorandum in June of this year. It stated that the Ogden Memo was intended to refer to sick individuals and the individuals who care for them, and not to commercial medical marijuana operations. As such, the new memorandum stated that persons "in the business of cultivating, selling or distributing marijuana, and those who knowingly facilitate such activities," are in violation of federal criminal drug laws. Those who "knowingly facilitate such activities" could include, for example, landlords that lease property to persons engaged in these illegal activities. The new memorandum also made clear that these activities should not be considered "shielded" by the Ogden Memo, and are properly the subject of federal prosecution.
Thus far, the federal government's hands-off approach in Colorado has not changed. However, the new policy makes explicit that the participants in Colorado's medical marijuana industry face a very real risk of federal criminal prosecution. This includes those who "knowingly facilitate" the business of cultivating, selling or distributing marijuana. Especially given the recent federal pronouncement, it is important for property owners to understand and recognize the risks associated with their participation in the medical marijuana industry. Though federal authorities have not clamped down on Colorado's medical marijuana industry to date, landlords of medical marijuana businesses could face federal criminal liability (for example, through "aiding and abetting" federal criminal statutes), and their properties could be subject to forfeiture.
Photo by Tony Webster (flickr)
By: James T. Johnson and Kimberly A. Martin
In May of this year, Governor Hickenlooper signed into law House Bill 11-1146, which amends the statutory definition of “agricultural land” for property tax purposes. Historically, land underlying a residence located on a parcel of property that otherwise was classified as “agricultural land” was also classified as agricultural land for property tax purposes. This classification resulted in the residence being qualified for more favorable “agricultural” property tax treatment as compared to the residential classification.
Under House Bill 11-1146, now excluded from the classification of “agricultural land” is up to two acres of land upon which a “residential improvement” is located if the residential improvement is not “integral to an agricultural operation” conducted on the land. Any such excluded land will be classified as “residential land” for property tax purposes, but the remainder of the property would retain its agricultural classification. If the residence is integral to the operation of a farm or ranch, the classification does not change. Further, vacant land or any other land upon which a residence is not located, whether or not subdivided, is not affected by this legislation.
House Bill 11-1146 will apply to the 2012 property tax year and all subsequent tax years. For a more complete discussion of this new law, see our Client Alert on the topic.
In May, Governor Hickenlooper signed into law Senate Bill 11-234 - Concerning Residential Real Property Transfer Fee Covenants. The bill is targeted at prohibiting fees payable upon the transfer of residential real property to individuals and entities where such fees do not touch and concern the real property. The common law likely already prohibited such fees. Nevertheless, the bill became effective immediately, the General Assembly having determined that such was necessary "for the immediate preservation of the public peace, health and safety." Apparently, the General Assembly identified a rising popularity trend for such fees, and it wanted to thwart their growth in Colorado.
The bill does essentially four things. First, it prospectively prohibits fees payable upon the conveyance of residential real property, except for transfer fees that touch and concern residential real property, including payments to lenders, brokers, lessors, governmental and quasi-governmental entities, homeowner's associations, and certain non-profit entities. Second, it narrows the circumstances under which prohibited fees established prior to the effective date of the bill are payable. Third, it provides penalties for recording documents requiring the payment of such fees. And fourth, under certain circumstances, it provides a quick mechanism for removing covenants requiring the payment of such fees.
For a more complete discussion about the bill, please see my Client Alert on the topic. Any individuals or entities that have either considered or implemented a transfer fee should be aware of the enforceability issues raised by this bill.
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