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American College of Mortgage Attorneys — Partner with the Best®

Formed in 1974, the American College of Mortgage Attorneys (ACMA) is comprised of over 500 lawyers in North America who are experts in mortgage law.

United States

Colorado

Colorado has a unique form of deed of trust, whereby the trustee in the vast majority of real estate loans is a public official: the Public Trustee of the county or city in which the property is located. Mortgages and deeds of trust to a private trustee, both of which require a judicial foreclosure, are valid but used infrequently. If a private trustee is named, an attorney for the holder of the lien performs the judicial foreclosure. If a deed of trust to the Public Trustee secures an obligation other than a traditional “evidence of debt”, as defined in C.R.S. &sect;&nbsp;38-38-100.3(8), such as a performance guaranty, a judicial foreclosure lawsuit must be filed.

SECURITY INSTRUMENT USED

C.R.S. &sect;&nbsp;38-35-109 requires that documents be recorded to affect the title to real property and that payment of recording fees must be included when recording documents. Furthermore, C.R.S. &sect;&nbsp;30-10-406 delineates certain county form requirements (page dimensions, margins, etc.) that must be fulfilled for proper recording. Colorado statutes also require that the street address or the assessor's schedule or parcel number for the encumbered property be included immediately before or after the legal description. The current legal addresses of the lienor and lienee are also required; however, the failure to comply with these requirements will not affect the the validity of the recording or of the instrument. C.R.S. &sect;&sect; 8-35-122 and 38-35-123.

RECORDING REQUIREMENTS

With respect to residential loans, the homestead exemption is customarily the only statute waived by the borrower in the security instrument. In commercial loans, waivers are sometimes extensive and may include the homestead exemption, jury trials on the note and all equitable defenses. If there are multiple obligors, the obligors should waive their rights under C.R.S. &sect;&sect;&nbsp;13-50-102 and 13-50-103, regarding the effect of the release of one or more obligors.

STATUTES TO BE WAIVED

The priority of future advances in Colorado is governed by C.R.S. &sect;&nbsp;38-39-106, which provides that the lien for a deed of trust will be effective to secure in the same priority all advances, both obligatory and optional, up to the maximum principal amount expressly set forth in the deed of trust. Therefore, the maximum principal amount should be specified, or a number higher than the stated amount of the promissory note can be specified as well. Unless the deed of trust clearly states that it secures a revolving credit arrangement, advances made beyond the stated maximum amount of the indebtedness in the deed of trust will not receive the same priority under the statute. The priority of mechanics' liens is specifically excepted from this statute. The priority provisions under the statute are effective for all deeds of trust and mortgages securing future advances entered into on or after August&nbsp;7, 2002. For deeds of trust and mortgages entered into prior to that date, obligatory advances by the lender are secured by and have the priority of the security instrument's date of recording. Later nonobligatory advances by the lender of a part of the indebtedness described in the security instrument are secured by the instrument but such advances may not have priority over new liens recorded after the lender's security instrument.

SECURING FUTURE ADVANCES

Lender advances of non-obligatory expenses, taxes, insurance or other costs to protect the collateral are secured by the deed of trust regardless of whether such additional amounts, when added to the principal indebtedness, exceed the maximum principal amount stated in the mortgage. C.R.S. &sect;&nbsp;38-39-106(2).

SECURING ADDITIONAL ADVANCES TO PROTECT THE COLLATERAL

Liens on “manufactured homes” (the term is defined in C.R.S. &sect;&nbsp;38-29-102) to be effective as a valid lien against the rights of third parties must be filed for public record and the fact of such filing noted on the certificate of title or bill of sale held by the owner of such mobile home. C.R.S. &sect;&nbsp;38-29-125. The notation and filing must be substantially in the manner provided in C.R.S. &sect;&nbsp;38-29-128. The filing of such mortgage with the authorized agent (as provided by statute) and the notation by that agent of the filing on the certificate of title or bill of sale will constitute notice to all. As to any manufactured home held for sale or lease that constitutes inventory as defined in C.R.S. &sect;&nbsp;4-9-102, however, perfection of mortgages or security interests will be made pursuant to Article&nbsp;9 of Title 4 of the Colorado Revised Statutes.

LIENS FOR MANUFACTURED HOMES

As noted above, Colorado's Public Trustee system is the dominant method of securing real property in Colorado. However, deeds of trust to a private trustee, whether a corporation or individual, are valid in Colorado but must be foreclosed as a mortgage by judicial foreclosure. C.R.S. &sect;&nbsp;38-39-101. For this reason they are seldom used. The customary deed of trust in Colorado does not name a specific individual as trustee, but instead names “the Public Trustee of ___________ County” (or in the case of Denver and Broomfield, “City and County”). For all counties except the City and County of Denver, state law provides that the county treasurer serves as the Public Trustee. C.R.S. &sect;&nbsp;38-37-102. The City and County of Denver assigns the duties of the public trustee to an officer equivalent to a county treasurer under its home-rule charter.

CORPORATE OR INDIVIDUAL

There are no statutory residency requirements for a private trustee.

RESIDENCY REQUIREMENT

Following a default, title evidence is obtained (typically through a title company generated “Foreclosure Guaranty”) to ascertain the current ownership and junior interests of record on the property that may be extinguished by the foreclosure in accordance with C.R.S. &sect;&nbsp;38-38-103(1)(a) (collectively, the “Qualified Junior Interests”). The foreclosing party may choose not to provide notice to certain Qualified Junior Interests. If no notice is given to a Qualified Junior Interest, that party's interest will not be affected/extinguished by the foreclosure. Qualified Junior Interests that benefit the property such as tenants, and grantees of utility easements are often not given notice. The foreclosure is commenced by filing with the Public Trustee of the county (or city and county) in which the property is located a Notice of Election and Demand for Sale (“NED”) together with the original evidence of debt (although certain financial institutions that are “qualified holders” under C.R.S. &sect;&nbsp;38-38-100.3(20) and title companies specified by statute may instead deliver a copy of the evidence of debt and certification of its qualified holder status without production of the original evidence of debt and by doing so agree to indemnify the Public Trustee) and the original or a copy of the deed of trust certified by the clerk and recorder as a true copy of the recorded document (the statutes specify other documents that must be submitted along with the NED). C.R.S. &sect;&nbsp;38-38-101(1). Unless the Public Trustee determines it is not needed, the foreclosing party also must submit to the Public Trustee a combined notice, together with a list of the names and addresses of all Qualified Junior Interests whose interest the foreclosing party wants to extinguish (collectively, the “Noticed Junior Interests”) in connection with the foreclosure. The combined notice must contain the information specified in C.R.S. &sect;&nbsp;38-38-103, and this notice must be mailed by the Public Trustee to all Noticed Junior Interests within 20 calendar days of the recording of the NED. In addition, the foreclosing party must submit a supplemental mailing list for persons entitled by statute to receive that supplemental notice. The combined notice is then mailed again to all such persons no more than 60 calendar days, and no less than 45 calendar days, prior to the first scheduled date of the foreclosure sale. Within 10 business days following the receipt of the NED, the Public Trustee must record the NED with the clerk and recorder of the county or city and county where the property is located, and then commence publication of the combined notice once a week for 5 consecutive weeks. Postage and similar costs are included in the foreclosure costs. During the publication period a summary proceeding is brought in the District Court to obtain an Order Authorizing Sale from the Court. The moving party mails notices to the Noticed Junior Interests regarding the court proceeding, and the issues before the court are limited to (a)&nbsp;whether the owner is in the armed forces and protected under the Servicemembers' Civil Relief Act; (b)&nbsp;whether a default has occurred under the deed of trust; (c)&nbsp;whether the moving party is the real party in interest; and (d)&nbsp;whether the status of any request for a loan modification agreement bars a foreclosure sale as a matter of law. Colorado Rules of Civil Procedure Rule 120. The Rule 120 Motion must be verified by a “person with knowledge of the contents of the motion who is competent to testify regarding the facts stated in the motion.” The Motion also must be accompanied by any “subsequent modifications” to the evidence of debt and the deed of trust and may also include other “documents relevant to the claim of default”. A hearing is held only if an appropriate response is filed in the summary proceeding. A court order authorizing the sale from this Rule 120 proceeding is a prerequisite to the Public Trustee's sale. C.R.S. &sect;&nbsp;38-38-105. Under Colorado law the borrower, owner, any guarantor, and any holder of a junior encumbrance (if the deed of trust being foreclosed was recorded after October&nbsp;1, 1990) whose interests were recorded prior the NED is entitled to cure the default if the default is solely monetary, and if a notice of the intent to cure is filed with the Public Trustee or sheriff conducting the sale at least 15 days prior to the scheduled foreclosure sale. C.R.S. &sect;&nbsp;38-38-104(1). Promptly following receipt of a notice of intent to cure, but no later than 12 days prior to the sale, the Public Trustee or sheriff conducting the sale must request a cure statement from the foreclosing party. C.R.S. &sect;&nbsp;38-38-104(2)(a)(I). The foreclosing party then must provide the cure statement by the earlier of 10 business days after receipt of the request or the 8th calendar day before the sale. C.R.S. &sect;&nbsp;38-38-104(7). The cure statement must state the period for which it is effective with the minimum and maximum periods of effectiveness required by statute. C.R.S. &sect;&nbsp;38-38-104(5). If the request for a cure statement is not given within the time period required, the sale will be continued week to week until such statement is filed but no later than the date that is 12 months from the original designated date in the combined notice. C.R.S. &sect;&nbsp;38-38-104(7). The cure must occur on or before noon on the day before the scheduled sale date. The amount necessary to cure includes all of the Public Trustee's costs and expenses, all costs, expenses, late charges and attorneys' fees incurred by the owner of the indebtedness as of the date of the cure, and all sums due under the loan documents, except any principal on the debt that would not have been due in the absence of an acceleration of the debt. C.R.S. &sect;&nbsp;38-38-104(2)(b). At the scheduled foreclosure sale the property is sold by the Public Trustee to the highest bidder, who is usually the foreclosing lender due to the requirement that any third-party high bidder pay the full amount of its bid on the day of the sale. A Certificate of Purchase is issued by the Public Trustee and recorded. At the expiration of all redemption periods, or if there is no redemption period, 8 business days after the sale, title vests in the holder of the Certificate of Purchase, or, if a redemption has occurred, title vests in the holder of the Certificate of Redemption,. The Public Trustee then issues a confirmation deed in exchange for such Certificate upon request from the holder of such Certificate (but title will be deemed vested in the holder regardless of whether a subsequent confirmation deed is issued and recorded). C.R.S. &sect;&nbsp;38-38-501. Conducting Public Trustee Foreclosure by Electronic Means: Public trustee foreclosure sales may be completed through the internet and other electronic media. Fees may also be collected by electronic transfer. C.R.S. &sect;&nbsp;38-38-110. Typical Length of Procedure: An uncontested Public Trustee foreclosure procedure, not including the redemption period(s) and the issuance of a Public Trustee's deed, takes approximately 110 to 125 calendar days for non-agricultural property and approximately 215 to 230 calendar days for agricultural property to be completed. C.R.S. &sect;&nbsp;38-38-108. The term “agricultural property”, for the purpose of the foreclosure statutes, excludes any real estate that, on the date of the recording of the deed of trust or at the time of the foreclosure sale, in part or in whole, has either been platted as a subdivision or is unsubdivided land that is located within an incorporated town, city, or city and county and that has not been valued and assessed as agricultural land under the assessment laws of the state. C.R.S. &sect;&nbsp;38-38-100.3(1). Foreclosure Bid Requirements: The owner of the indebtedness secured by the deed of trust being foreclosed must submit a written bid before noon on the second business day prior to the scheduled foreclosure sale setting forth a computation of the amount due, including the costs of foreclosure and other amounts authorized by statute. The written bid may be withdrawn or orally amended at the actual sale. The owner of the indebtedness must bid at least the lesser of the amount of the debt owed or a good faith estimate of the fair market value of property being foreclosed less unpaid taxes, senior indebtedness secured by liens against the property, and less estimated reasonable costs and expenses, net of income, of holding, marketing and selling the property. C.R.S. &sect;&nbsp;38-38-106. If the owner fails to bid in the aforementioned manner, this becomes a defense in a suit for a deficiency against the owner, but does not affect the validity of the foreclosure itself. First Nat. Bank v. Blanding, 855 P.2d 324 (Colo.Appp.1994).

BRIEF DESCRIPTION OF THE PUBLIC TRUSTEE FORECLOSURE PROCEDURE

No right of redemption exists for the borrower, owner, or any guarantor. Every holder of a recorded interest in the property foreclosed upon which is junior to the lien foreclosed upon and recorded prior to the NED has a right to redeem. For a holder of any such lien to redeem, the holder must file a notice of intent to redeem with the Public Trustee within 8 business days after the foreclosure sale (with certain limited exceptions specified in the statutes) and otherwise comply with the requirements set out in C.R.S. &sect;&nbsp;38-38-302(1). For lienors entitled to redeem, the holder of the most senior lien that is junior to the one being foreclosed upon can redeem during the period between 15 and 19 business days after the foreclosure sale. Each subsequent junior lienor so entitled to redeem has an additional 5-business-day redemption period, with each such period running from the end of the prior redemption period. The borrower/owner of the property is not entitled to redeem. The price for redemption is the sum for which the property was sold at the foreclosure sale with interest from the date of the sale. The redemption price also includes any taxes or other charges authorized by statute with interest on such charges from the date paid. Interest is chargeable at the default rate specified in the instrument or if no default rate is specified, at the regular rate specified. C.R.S. &sect;&nbsp;38-38-302. The taxes and other charges authorized to be added to the bid price include general and special taxes, ditch or water assessments, premiums on insurance necessary to protect the improvements, reasonable costs and expenses of defending, protecting, and maintaining such property, sums due and paid on prior liens against the property, and other costs authorized by statute. C.R.S. &sect;&nbsp;38-38-301.

REDEMPTION PERIOD AND PRICE

Any waiver of the rights to cure defaults or any agreement to shorten the time period to exercise the right to cure made prior to the date of any default is against public policy and void. C.R.S. &sect;&nbsp;38-38-703.

WAIVER OF CURE RIGHTS; REDUCTION OF CURE PERIOD

To recover a deficiency, the holder of the indebtedness must bid, at minimum, its good faith estimate of the fair market value of the property being sold (less unpaid taxes, prior liens, and estimated reasonable costs and expenses, net of income, of holding, marketing and selling such property). C.R.S. &sect;&nbsp;38-38-106. The holder of the evidence of debt may credit bid all or a portion of its debt (up to its debt), and the difference between the debt and the bid is the deficiency. The action to recover a deficiency is a suit on the promissory note. The statute of limitations on the promissory note is 6 years from the date the cause of action accrues; the suit must be commenced within that period. The amount is determined by the terms of the note, which usually includes a default rate of interest, reasonable attorneys' fees and court costs. In an action to recover on a promissory note either party is entitled to a jury trial unless other issues preclude such an election.

DEFICIENCIES

As part of Colorado's efforts to avoid certain fraudulent or predatory practices against parties, when a foreclosure sale for real property generates an amount above any liens on the property, the excess must be paid to the borrower under the loan facility and not to the title holder.

OVERBIDS

The foreclosing party may treat a lessee whose lease is junior to the lien being foreclosed as junior encumbrances by providing that the lessee receives all notices from the Public Trustee and the court under the foreclosing procedures, thereby terminating the lease at the conclusion of the foreclosure. Under this procedure, if notice of the lessee's interest is recorded, the lessee has the right to redeem and the right to cure the default. The foreclosing party may also omit a junior lessee from the foreclosure process and file with the Public Trustee or the sheriff a document affirming the lessee's interest in the property subject to the terms, conditions and provisions of the lease. By following this course, the lease is not terminated and the lessee does not have the right of redemption or right to cure the default. If any junior interest is not given the foreclosure notices from the Public Trustee and the court, the foreclosing party may proceed in a civil action to terminate such interest, and such interest and the lease may be terminated by the court. In this case, however, the holder of such junior interest must then be given the right to redeem and to cure the default. C.R.S. &sect;&nbsp;38-38-506.&nbsp; Separately, if either a commercial or residential eviction is necessitated at the conclusion of a foreclosure, local rules should be consulted as different jurisdictions or even different regional courts may have special rules still in place following COVID which vary typical remedies and notice provisions.&nbsp;

EFFECT OF FORECLOSURE UPON LEASES

In 2023, the Supreme Court of Colorado held that a bankruptcy court order discharging a borrower's personal liability on a promissory note does not cause the six-year statute of limitations for bringing a claim on a promissory note, including a foreclosure proceeding on an associated deed of trust, to begin to run. In Silvernagel v. US Bank National Ass'n, 528 P.3d. 163 (Colo. 2023), a borrower ceased making payments on a promissory note after his personal liability was discharged in bankruptcy. Seven years later, the lender sought payment and threatened foreclosure on an associated deed of trust. The Supreme Court, reversing the Court of Appeals, held that the statute of limitations had not yet begun to run because the debt had not been accelerated and, thus, each missed payment constituted a new default under the original agreement. The Supreme Court cited its recent holding in Hassler v. Account Brokers of Larimer County, Inc., 274 P.3d 547, 553 (Colo. 2023), which provided that acceleration of debt requires a “clear, unequivocal affirmative act.” In 2022, the Court of Appeals of Colorado held, based on Colorado Supreme Court precedent, that courts do not have the equitable power to create cure rights in foreclosure that are not provided for in the foreclosure statute. C & C Investments, LP v. Hummel, 514 P.3d 328 (Colo. App. 2022). In C & C Investments, a reclusive homeowner was unaware that her homeowners' association had changed management companies and thus failed to update automatic withdrawal information for dues, and the association successfully proceeded with a judicial foreclosure sale. After the homeowner contested the sale, the trial court, in a sua sponte order, gave the homeowner a 15-day period to file a notice of intent to cure. The homeowner entered cure funds and the court entered an order quieting title in the homeowner. After the purchaser appealed, the court of appeals held that, because Colorado's foreclosure statutes provide the timing and conditions for cure and redemption, these rights may not be expanded by judicial interpretation. In reaching this determination, the court of appeals relied on the Colorado Supreme Court's 2018 decision in Oakwood Holdings, LLC v. Mortg. Invs. Enters., LLC, 410 P.3d 1249 (Colo. 2018). In 2022, the Court of Appeals of Colorado held that, for the purpose of providing notice of lien and foreclosure proceedings, an address ceased to be a reasonable known address when mail to that address was returned undeliverable and the party attempting to deliver notice was aware of an alternate address. In Home Improvement, Inc. v. Villar, 524 P.3d 329 (2022), a contactor mailed notice of intent to file a mechanic's lien to the property address listed in its contract with a homeowner, and this mailed notice was returned undeliverable. The contractor was aware that the homeowner also used a post office box, but the contractor mailed notice only to the property address listed in the contract. When the contractor later initiated proceedings to foreclose the mechanic's lien, the process server was unable to serve the defendant in person, so the contractor moved to proceed against the property in rem, mailed notice to the property address, posted notice at the property, and published notice in a newspaper. The defendant did not appear, the contractor was awarded a default judgment, and the property was sold at a sheriff's sale. When the defendant's spouse was served with eviction notices, the defendant moved to set aside the judgment. The Court of Appeals declared the judgment void, holding that the trial court never obtained in rem jurisdiction because the mailed and published notice did not use the defendant's post office box, which was the defendant's reasonable known address for service purposes. The court held that the fact that the defendant had actual knowledge of the lien was immaterial because knowledge of the pendency of a proceeding is not a substitute for service of process. See Weber v. Williams, 137 Colo. 269, 277, 324 P.2d 365, 369 (1958).

RECENT LITIGATION REGARDING FORECLOSURE

The basic usury ceiling is 45% per annum determined at the time of stipulation by mathematical computation, but by case law, may be determined based on the amount actually charged. See Dikeou v. Dikeou, 928 P.2d 1286 (Colo. 1996). This ceiling includes all charges payable directly or indirectly by the debtor, or imposed directly or indirectly by the lender, as an incident to or as a condition of the extension of credit, whether payable by the debtor, the lender or any other person on behalf of the debtor, to the lender or a third person. C.R.S. &sect;&nbsp;5-12-103. Calculation of compliance with the ceiling requires a complex analysis of case law and the statute. For instance, the Colorado Supreme Court has clarified that if fees are charged in addition to interest for a forbearance, renewal or extension of a loan, whether the terms are usurious is determined by analyzing those fees and interest over the term of the extension, not the full term of the loan, thereby increasing the risk of the extension terms violating the usury limit. Blooming Terrace No. 1 V. KH Blake Street, 444 P.3d 749 (Colo. 2019). The basic usury ceiling is applicable to all loans other than consumer loans. Consumer loans are defined in C.R.S. &sect;&nbsp;5-1-301(15) to mean loans to individuals primarily for a personal, family, or household purpose, as evidenced by a written agreement payable in installments or for which there is a filing charge and either the principal amount is no more than $75,000 or the debt is secured by an interest in the land. Consumer loans, however, do not include loans that are secured by a first-priority interest in land. Consumer loans made by one regularly engaged in the making of such loans have a usury ceiling of 12% per annum for unlicensed lenders, other than depository institutions regulated by a federal or Colorado regulatory agency. C.R.S &sect;&nbsp;5-2-201(1). Supervised lenders have a higher usury ceiling calculated as set forth in C.R.S &sect;&nbsp;5-2-201(2). Colorado has opted out of the federal usury preemption.

USURY CEILING

Colorado usury laws do not provide for any exemptions.

USURY EXEMPTIONS

Colorado adopted revised Article 9 of the UCC effective July 21, 2001. Under revised Article 9, the local law of the jurisdiction where the debtor is located governs perfection, the effect of perfection or non-perfection, and the priority of a security interest. C.R.S. &sect;&nbsp;4-301. A debtor is “located” in the state under whose law it is organized, if it is a registered organization, the state where it maintains its chief executive office if it has more than one place of business and is not a registered organization, its place of business if it has only one location and is not a registered organization, and the state of his principal residence, if he is an individual. C.R.S. &sect;&nbsp;4-9-307. If a debtor is located in Colorado, C.R.S. &sect;&nbsp;4-9-501 provides that financing statements should be filed with the Colorado Secretary of State, except where the collateral is timber, as-extracted collateral or a fixture filing in fixtures, in which case a filing should be made with the clerk and recorder of the county (or city and county) in which the real property is located.

LOCATIONS FOR FILING

A mortgage or deed of trust is effective as a financing statement filed as a fixture filing from the date of its recording if the goods are described in the security instrument by item or type, the goods are or will become fixtures related to the real estate described in the security instrument, and if the security instrument is duly recorded and otherwise satisfies the requirements for a financing statement. C.R.S. &sect;&nbsp;4-9-502.

SECURITY INSTRUMENT AS FIXTURE FILING

UNUSUAL PROVISIONS OR REQUIREMENTS

If there are or may be multiple guarantors, waiver of rights that address releases or partial releases of the liability of joint debtors, pursuant to C.R.S. &sect;&nbsp;13-50-102 and 103, is advisable. Such waivers may also be advisable where there may be only one guarantor but the nature of the guaranty is unconditional, such that both the borrower and the guarantor may be viewed as joint debtors/obligors.

Colorado statutes provide that all joint obligations and covenants shall be taken and held to be joint and several obligations. C.R.S. &sect;&nbsp;13-50-101. They further provide that a release of one or more joint obligors shall be taken and held to be payment of the full proportionate share of the debtor or debtors released. C.R.S. &sect;&nbsp;13-50-102, and that in the case of the release of one or more joint debtors, no one of the remaining debtors shall be liable for more than his proportionate share of the indebtedness, with certain exceptions. C.R.S. &sect;&nbsp;13-50-103. As noted above, the benefits of these statutes may be, and typically are, waived by both the borrower and guarantor(s).

SPECIAL PROBLEMS IN ENFORCEMENT OF GUARANTY

If the guarantor's obligations are not released pursuant to the foregoing, the guarantor is subject to the same claim for a deficiency judgment as the maker of the note or other indebtedness. Specifically, this means that pursuant to C.R.S. &sect; 38-38-106(6), a guarantor may assert as an affirmative defense to a guaranty action that the lender failed to bid at the foreclosure sale at least the lender's good faith estimate of the fair market value of the property being foreclosed (less certain enumerated costs that may be deducted by the lender).

Deficiency JUDGMENTS

For a mortgage or deed of trust the statute of limitations is 15 years, subject to the unilateral extension by the lienholder for up to 30 additional years. C.R.S. &sect;&sect;&nbsp;38-39-201; 38-39-202. Because the 15-year period runs from the date on which the final payment or performance of the secured obligation is due as shown by the mortgage or deed of trust (and if not shown, from the date of the instrument or, if undated, from the date of recording), it is advisable to state the maturity date of the obligation in the mortgage or deed of trust. The statute of limitations on the note is 6 years from the date the cause of action on the note accrues. C.R.S. &sect;&nbsp;13-80-103.5. At the same time that the right to commence a suit to enforce the payment of the indebtedness secured by the lien is barred by any statute of limitation, the lien of a mortgage or deed of trust is extinguished. C.R.S. &sect;&nbsp;38-39-207.

STATUTE OF LIMITATION PERIOD

Pursuant to C.R.S. &sect;38-39-202, the lien of a recorded mortgage or deed of trust may be extended without the written agreement of the owner of the property encumbered by such lien by an instrument in writing, signed by the owner of the obligation secured by such lien or by the person, firm, or corporation designated in such mortgage or deed of trust as the trustee for the owner of the obligation, so long as certain requirements are met including describing the date to which the lien has been extended, and recording the extension before the expiration of the fifteen-year period described in C.R.S. &sect;38-39-201(1), and so long as the date to which such lien is extended is not later than fifteen years after the recording date of such instrument.

UNILATERAL EXTENSION OF DEED OF TRUST

In order to release a deed of trust to the Public Trustee, a request for release executed by the holder of the evidence of debt is delivered to the Public Trustee together with the original evidence of debt and the statutory release fee and recording fee. Certain holders of deeds of trust specified by statute (primarily certain financial institutions, referred to in the statute as a “qualified holder”) may obtain a release without production of the original note and by doing so agree to indemnify the Public Trustee from all losses suffered. C.R.S. &sect;&nbsp;38-39-102(3)(a). There are also provisions for the filing by the holder of the evidence of debt of a corporate surety bond in lieu of the original evidence of debt or corporate surety bond. The corporate surety bond must be in the amount of 1&frac12; times the original principal amount and are quite expensive (1% to 2% of the amount of the bond). C.R.S. &sect;&nbsp;38-39-102(3)(b). In addition, title insurance companies are authorized by statute to execute full and partial releases of deeds of trust and by doing so agree to indemnify the Public Trustee from losses suffered, but the circumstances under which they will do so are very limited. C.R.S. &sect;&nbsp;38-39-102(3)(c). The lender must release the security instrument within 90 days after the indebtedness has been satisfied and the lender has received the reasonable costs of procuring and recording the release. C.R.S. &sect;&nbsp;38-35-124. Failure to comply with the release provisions may result in liability for actual economic loss and attorneys' fees. C.R.S. &sect;&nbsp;38-35-124.5(2).

REQUIREMENTS FOR RELEASE OF LIEN

A property occupied as a home by the owner or his or her family is exempt from executions and attachments not exceeding the sum of $250,000. In the case of a property occupied as a home for an elderly or disabled owner, an elderly or disabled spouse of an owner, or an elderly or disabled dependent of an owner, the property is exempt from executions and attachments not exceeding the sum of $350,000. C.R.S. &sect;&nbsp;38-41-201. Unless the owner or the spouse of the owner records a declaration of homestead in the real estate records of the county or city and county in which the property is located, the record owner may convey or encumber the property free and clear of the homestead rights and no signature other than that of the record owner is required on the deed or encumbrance. C.R.S. &sect;&nbsp;38-41-202.

HOMESTEAD ISSUES

Colorado is not a community property state.

COMMUNITY PROPERTY

Colorado does not levy or assess any taxes on mortgages or deeds of trust.

MORTGAGE TAX

There is a documentary fee for the recording of a conveyance in the amount of 1&cent; per $100 of the actual consideration for the purchase, which amount is not reduced by any debt that is assumed or to which the property is subject. C.R.S. &sect;&nbsp;39-13-101 et seq. Note: There is no documentary stamp tax or other similar tax on the note, deed of trust or mortgage under Colorado law. On Foreclosure Sale or Deed in Lieu of Foreclosure: A Public Trustee's or sheriff's deed is exempted from the documentary fee but a deed in lieu of foreclosure is not.

DOCUMENTARY STAMP TAX

There is no state transfer tax on the conveyance of real estate in Colorado. Several municipalities in the state, primarily in the mountain resort areas impose a transfer tax. Additionally, the covenants for various common interest communities in the state impose transfer assessments on the sale of lots or units within the community. Any such private transfer assessments may not exceed three percent (3%) of the sales price of the property. C.R.S. &sect;&nbsp;38-33.3-207(4). On Foreclosure Sale: Usually exempt from the municipal transfer taxes. On Deed in Lieu of Foreclosure: The municipalities that levy transfer taxes usually require the tax be paid on deeds in lieu of foreclosure.

TRANSFER TAX

Consistent with the Restatement (Second) Choice of Laws, choice of law provisions are generally honored by the courts of Colorado provided that the jurisdiction chosen has at least some contacts with the transaction and the choice does not violate the public policies of the state.

ENFORCEABILITY OF AGREEMENT OF BORROWER AND LENDER AS TO CHOICE OF LAW PROVISIONS

In connection with an action or proceeding commenced to foreclose an instrument securing an indebtedness, the court must appoint a receiver upon application if it appears that the security is clearly inadequate or in danger of being materially injured or reduced in value. C.R.S. &sect;&nbsp;38-38-601. Though not provided for by statute, courts may exercise their equitable powers to appoint a receiver after default without regard to the adequacy of the security and without notice, upon ex parte application, if the parties have expressly agreed to such appointment in the loan documents on that basis.

RECEIVER AVAILABLE

Colorado requires that a mortgage loan originator's disclosures comply with all federal mortgage loan disclosure laws including without limitation the Real Estate Settlement Procedures Act and the Truth in Lending Act. C.R.S. &sect;&nbsp;12-10-725.

ANY PROHIBITION OR SPECIAL RULES REGARDING LOAN APPLICATION, LOAN FEES OR COMMITMENT FEES

There are no special licensing requirements for lenders to make loans in Colorado. All mortgage loan originators, brokers and mortgage companies conducting business in Colorado must be registered with the Colorado Division of Real Estate.

LENDER QUALIFICATION AND/OR LICENSURE

There are no unusual provisions or requirements for modifications of existing deeds of trust or mortgage liens.

MODIFICATION

The Colorado Department of Public Health and Environment is the principal agency in the State for enforcement of federal and state environmental laws. Although the State has authority to impose liens on real property pursuant to costs incurred by the State in connection with actions under CERCLA, Colorado law does not generally provide for environmental liens against real estate with respect to actions brought under state statutes. Certain Colorado statutes, including the Colorado Mined Land Reclamation Act (C.R.S &sect;&nbsp;34-32-101 et seq.), the Colorado Oil and Gas Conservation Act (see C.R.S &sect;&nbsp;34-60-106(13)(f)), and the Colorado Land Reclamation Act for the Extraction of Construction Materials (C.R.S &sect;&nbsp;34-32.5-101 et seq.), provide for a requirement of a “performance warranty” or “performance guarantee,” which may include a consensual lien (deed of trust) on real estate as collateral under such performance warranty.

ENVIRONMENTAL LIEN LAW ISSUES

The Colorado Bar Association has not published a report articulating standard accepted procedures and protocols in the area of opinion letter practice.

LEGAL OPINIONS

LABOR AND MATERIAL LIEN CLAIMS (“MECHANIC'S LIEN”)—PRIORITY ISSUES

Colorado has one of the most liberal relation-back doctrines in the country. All mechanics' liens for a project relate back in time and take priority as of the date of commencement of the first work under the contract between the owner and the first contractor and, if not in writing, to the date of the first work on the structure or improvements. No certificate of commencement is provided or required by statute. Colorado courts have considered the architect's commencement of plans, surveyor's commencement of work, and delivery of materials as the date of first work. Consequently, lenders should note that physical inspection of the property will not conclusively determine whether work has commenced. Lenders making construction loans where the funds will be disbursed periodically are required to record a notice of disburser containing the information specified by statute prior to making the first disbursement under that loan. C.R.S &sect;&nbsp;38-22-126(2). Based on information in that recorded notice, a lien claimant can provide notice to that disburser and that disbursing agent then has a duty set forth in the same statute. C.R.S. &sect;&nbsp;38-22-126(4) through (7). A mechanic's lien for work or materials for an entire structure (new construction as opposed to remodeling or addition work) is generally superior to a prior purchase money deed of trust on the improvements, and so much of the land as is necessary for the convenient use and occupation of those improvements. C.R.S. &sect;&nbsp;38-22-103. The lien claimant must file a mechanics lien within 4 months of the lien claimant's last work on the property, C.R.S. &sect;&nbsp;38-22-109, and a lien foreclosure action must be filed within 6 months of the earlier of any party's last work on the improvements or completion of the improvements. C.R.S. &sect;&nbsp;38-22-110. In addition, the lien created by the recording of a mechanics lien will automatically expire one year from recording unless either (i)&nbsp;an action to enforce the lien has been commenced within the time frame set forth above or (ii)&nbsp;within 30 days after the annual anniversary of recording, an affidavit is recorded confirming that the improvements on the subject property have not been completed. C.R.S. &sect;&nbsp;38-22-109(8).

INCEPTION OF MECHANIC'S LIEN (Priority of Lien of Deed of Trust)

Colorado's mechanic's lien laws are extraordinarily contractor friendly. Owner or lender retainage from contractors or subcontractors is now limited to no more than 5% of the completed work being billed, and payment to a given party can only be conditioned on delivery of lien waivers if such condition is expressly stated in the agreement with such party. C.R.S. &sect;&nbsp;38-46-101 et seq.

OTHER MECHANIC'S LIEN ISSUES

Priority of a mechanic's lien for lienable fixtures would be subject to the same provisions and relation-back doctrine as other lienable items. With regard to purchase money security interest priority, a construction mortgage prevails over a purchase money security interest otherwise entitled to priority if the mortgage is recorded before the goods become fixtures and the goods become fixtures before the completion of construction. C.R.S. &sect;&nbsp;4-9-334.

PRIORITY AS TO REMOVABLE FIXTURES (Priority of Lien of Deed of Trust)

The 2021 ALTA form with appropriate endorsements is the standard form of commitment utilized in Colorado. Current ALTA forms are issued for residential loan policies and these typically provide few, if any, endorsements.

FORM REQUIRED BY LENDER

Endorsements to title insurance policies issued in Colorado are approved by the State Insurance Commission and are typically available from Colorado title insurers. There are many different types of endorsements available to lenders, rendering the type, character, and features of a property the determining factors in requiring specific endorsements. Most, if not all, of the ALTA endorsement forms are available, and in addition, there are a number of Colorado issued forms that are available in certain circumstances, a few of which are referred to below. Lenders typically require ALTA Form 9.3 (Colorado Form 100), a comprehensive endorsement insuring against covenants, conditions and restrictions under which the lien of the mortgage or deed of trust could be cut off, subordinated, or otherwise impaired. Other requested endorsements are dictated by the character of the specific property; however, zoning (Colorado Forms 123.1 or 123.2 or ALTA Forms 3 or 3.1); mineral estate, insuring against damage to existing improvements resulting from mineral related activities (Colorado Forms 100.29, 100.30, or 100.31); encroachment, insuring against removal of encroachment onto adjoining property (Colorado Form 103.2); and improvement and location endorsements, insuring the identity and address of improvements and recorded location and dimensions of property (Colorado Form 116) are commonly required. Endorsements for general, limited or specific mechanics lien coverage may be available, but the issuance of them is becoming increasingly restricted by underwriting approval and is quite expensive. The full deletion of standard exception No. 4 on title policies for construction loans is generally not available. Title companies in Colorado will no longer issue creditor's rights coverage. &nbsp;

Colorado

Mortgage Law Summary

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Mortgage Law Summary for Colorado

Colorado

Mortgage Law Summary

Continue reading theMortgage Law Summary for Colorado

Continue reading the
Mortgage Law Summary for Colorado