Friday, March 24, 2017

The Importance of Marketable Title in Real Estate

There are a number of key elements that an individual has to consider when starting the search to purchase a home. After you have found a home that interests you and an offer has been accepted, but before you sign the final contract, it is important that you secure marketable title and that the home passes inspection. Home inspection allows the potential buyer to come into the home with a certified third-party inspector who will examine a number of qualities about the house and make a determination of whether the house is livable and worth purchasing. Marketable title on a house is given to show that the title is free of liens or defect.

Marketable Title

If it is found that a house has marketable title, a factor on which the contract for buying a home is usually contingent, it will force acceptance of the contract and purchase of the home. Marketable title is given at the closing of the home, but can be requested prior to closing. A title examination is performed by a licensed attorney or by a title insurance company. Title insurance companies specialize in finding defective titles, titles with a mortgage or lien against them, as well as titles with conveyance issues such as right of way or easements. Additionally, you will get a chain of title, which outlines previous ownership of the property, giving you an idea of how many previous owners there were and the nature of its use.

It is not uncommon for a title to come up with something on it, such as an easement or a right of way. When this happens, it is generally not grounds for cancellation of the contract. The current owner will be given a good faith attempt to have the mark on the title removed, whether by contacting his or her bank, the previous landowner, or the individual with whom a land use agreement was made. Once a title is cleared for marketability, the bank can proceed with closing, assured that the purchase will be a legitimate, clean title to a new home.

Upon closing, the new owner will be given a few things in order to secure title. A title commitment is given, which contains the type of insurance policy being submitted, who the buyer and seller are, the legal description of the property in question, as well as a list of items that must be verified as correct in order for the policy to be issued, and any exceptions or items not covered under the title commitment. Once that is accepted, the buyer has a new home.

Considering Home Ownership?

The purchase of property is a monumental step in many people’s lives. If you or someone you know is purchasing a home and seeks the assistance of an experienced real estate attorney, our office can help. Please reach out to attorney Nesbitt by phone at 303-741-2354 or using our website.

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website

Wednesday, November 23, 2016

Colorado Water Rights

Water is a finite and valuable resource. When developers seek to build, be it commercial or residential, they must obtain water rights. Due to its finite nature and importance, obtaining water rights is not easy.

Basic Water law

The Colorado Constitution mandates the framework establishing Colorado water law. It is known as the prior appropriation system and it regulates river water rights in Colorado. Water rights include the use of surface water in rivers or tributary groundwater connected to a river basin.

Usufructuary Right

While water, like real estate, is a private property right, it is a special type of right called a usufructuary right. This means that water rights are a right to use water, not to possess or own water. It is misconception that a water right in Colorado grants its owner a certain amount of water to use in any way the owner of that right wants. In fact, a water right does no such thing. Instead, a water right allows its owner to divert water for a “beneficial use” only. Colorado law defines beneficial use broadly to include a variety of applications, from municipal and industrial, to environmental and recreational.

Obtaining Water Rights

To be granted a water right, one must petition the Water Courts for such a right. Water Courts are unique to Colorado and exist because Colorado is a semi-arid state and water is crucial to human existence. As such, attaining a water right is not an easy task. Furthermore, nearly every river in the state is over-allocated so that the combined rate of all established and vested water rights exceed the available flow of the river being appropriated.

Tracking water rights is unique in Colorado. Water rights are generally conveyed like real estate and recorded as a deed within the county where the rights are located.

As mentioned, the “beneficial use” requirement is construed broadly. However, all beneficial uses in Colorado come with two explicit limitations: the prohibitions against waste and speculation. For waste, a water right may only be used in the amount necessary to accomplish its purposes using reasonably efficient practices. For speculation, there must be a present demand for the water delivered by the water right, one cannot divert and hoard water, without some immediately apparent need.  

Consider how much water is used daily and how often it rains. While Colorado receives significant snowpack, 10 inches of snow equals just one inch of water. Thus, Colorado requires special water rules to assure that it allocates water correctly.

Court System

Another unique aspect of Colorado water laws is the judicial system. For other courts, those seeking an appeal of a lower court appeal to an intermediate court. Regarding Water Courts, those appealing the ruling of a Water Court appeal directly to the Colorado Supreme Court.

If you are a real estate developer, you already know that water rights in Colorado are complicated. Before embarking on a new project, you should consider contacting an attorney who specializes in Colorado water law issues.  

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website

Tuesday, October 11, 2016

Power of Sale Foreclosure

Generally, mortgage lenders holding a claim against a defaulting mortgage borrower will go to court to enforce their rights. Under the watchful eye of a court, the lender will start the foreclosure process, which is regulated under Colorado law. This is known as a judicial foreclosure, the most common form of foreclosure.

Under Colorado law, there is also non-judicial foreclosure, better known as power of sale foreclosure. Like judicial foreclosure, power of sale foreclosure is regulated by state law. Being non-judicial, it needs not be administered by a judge.

The Power of Sale Provision

A power of sale provision is a clause in the deed of trust or mortgage wherein the borrower, upon default of a mortgage payment, authorizes a sale of the property to pay off the balance of the loan. This provision must be contractual, or else the lender must utilize judicial foreclosure.

To administer power of sale foreclosure in Colorado, the governor appoints a "Public Trustee" for each county in the state. The Public Trustee’s charge is to act as an impartial party when handling a power of sale foreclosure.

Here is the process:

1.     The lender or an attorney representing the lender files the required documents regarding the power of sale foreclosure with the Office of the Public Trustee of the county where the property is located.
2.     The Public Trustee files a "Notice of Election and Demand" document with the county clerk and recorder of the county.
3.     Once recorded, the notice must be published for five consecutive weeks in a newspaper that circulates within the county.
4.     The Public Trustee must mail, within ten days after the publication of the notice of election and demand for sale, a copy of the notice of sale, as published in the newspaper, to the borrower and any owner or claimant of record, at the address given in the recorded instrument. The Public Trustee must also mail, at least 21 days before the foreclosure sale, a notice to the borrower describing how to redeem the property.
5.     The borrower/property owner of the property may stop the foreclosure proceedings by filing an "Intent to Cure" document with the Public Trustee's office at least 15 days prior to the foreclosure sale and then, before noon the following day, pay the necessary amount to bring the loan current.
6.     The foreclosure sale must occur between 45 and 60 days after the recording of the election and demand for sale with the county clerk and recorder. The Public Trustee may hold the sale at any entrance to the courthouse, unless otherwise stipulated in the deed of trust or other mortgage document.

Provided that the process is followed, a foreclosure sale will occur. After the sale, the lender has the option to file for a deficiency suit to recoup any deficient amount not covered by the sale of the property. Concurrently, the borrower has 75 days after the foreclosure sale to redeem the property by paying the foreclosure sale amount, plus interest.

If you are facing foreclosure, do not do it alone. Contact the law office of Eric Nesbitt, a seasoned Colorado foreclosure and real estate attorney.

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website

Wednesday, August 31, 2016

Purchasing a Home? Know about the Construction Defect Claim Law in Colorado

In June 2015, the state of Colorado reported record sales, with the average residential property being sold for $377,550. That year, the real estate market broke records by posting $20.16 billion in home sales for the year. This reflects an increase of 14.5 percent over 2014, according to a report from the Denver Metro Association of Realtors. “The Denver metro area continues to be the number one real estate market in the country,” said Anthony Rael, a real estate professional familiar with Denver real estate market trends.

The super-hot real estate market spurred significant growth within the construction industry. New construction in Colorado is way up. With that, purchasers should know about the Construction Defect Action Reform Act, or CDARA.

The Statute of Limitations for Construction Defect Claims

CDARA limits the time for homeowners and homeowners associations to bring lawsuits for construction defects against “construction professionals.” A construction professional includes developers, general contractors, builders, engineers, architects, other design professionals, inspectors, and subcontractors.  Specifically, CDARA requires those claiming construction defects to file suit within two years “after the claim for relief arises.”  A claim for relief arises when a homeowner or association discovers, or reasonably should have discovered, a physical manifestation of a construction defect.

The Smith Case

In Smith v. Executive Custom Homes, Inc., the plaintiff homeowner suffered a serious injury when she slipped on ice that had accumulated due to a leaking gutter. When the plaintiff initially noticed the leak she reported it to her property manager, who reported it to the builder.  The builder attempted to repair the gutter, unsuccessfully. The plaintiff did not notice further problems until approximately one year after she first observed the leak when she fell and suffered serious injury.  The plaintiff sued the builder within two years of her injury, but nearly three years after she first learned of the leak. The builder sought to dismiss the case because it was outside the two-year CDARA statute of limitations.

The Colorado Supreme Court dismissed the plaintiff’s claims as untimely under CDARA, reasoning that the two-year statute of limitations started to run when the plaintiff homeowner first observes the physical manifestation of the defect, regardless of a resulting injury.

The builder’s inadequate attempt to make repairs to the leaking gutter was not relevant.  Citing longstanding Colorado case law, the two-year period for bringing a lawsuit was tolled (extended) during the period when repairs were made, but continued running once the repairs were finished.

Effects of the Case

The effects of the Smith ruling might be significant to new construction home buyers. With higher demand for new construction comes demand for completing projects on time. A quicker turnaround allows for more mistakes, making the occurrence construction defects more likely. Thus, those purchasing new construction homes should open their eyes and be on the lookout for construction defects. A plaintiff homeowner’s timeframe to sue a builder or other professional for defects is very tight.

If you are in the real estate business or a home purchaser, contact the Law Offices of Eric L. Nesbitt PC, a firm experienced with Colorado real estate law.

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website

Friday, July 15, 2016

Back to the Basics - Understanding Foreclosure in Colorado

Colorado is a nonjudicial foreclosure state, meaning that the lender does not have to go to court to foreclose on your home. In other words, the foreclosure can proceed more quickly through a public trustee or county treasurer. Initially, when obligating yourself, you signed two core documents when you bought or refinanced your home: a promissory note and a deed of trust. The deed of trust turns the promissory note into a debt secured by a lien (legal claim) on your home. The deed of trust authorizes the lender to foreclose on the property if you default. The deed of trust allows the foreclosure to occur outside of court, under state law.

While homeowners facing foreclosure have the right to be heard under a Rule 120 hearing, such a hearing does not provide much protection. The issues discussed during a Rule 120 hearing are whether borrowers are delinquent and whether the borrower is an active-duty member. The Judge will not listen to any other arguments. Motions for injunctive relief are commonly raised at this hearing, and just as commonly dismissed. However, if a Borrower believes that the delinquency figures are incorrect, or that payments have not been properly applied, this is where that argument needs to be made.

"Show Me the Note" Defense
The "show me the Note" defense fails in Colorado Courts and is irrelevant to a Rule 120 hearing. Prior to 2006, a lender, to succeed on a foreclosure action, had to produce the original Promissory Note or a certified copy to the Public Trustee in order to foreclose on the Note. As such, a “show me the Note” defense would succeed. However, the legislature changed this requirement in 2006. Now, all that is required is a statement from the attorney handling the foreclosure on behalf of the lender that the Lender is the proper party to conduct the foreclosure, either as the Owner or as an agent of the owner. There is no longer any legal requirement to produce the actual Note or a certified copy before the foreclosure commences. In sum, this defense will fail in Colorado.
MERS and Foreclosure

Mortgage Electronic Registration System, Inc. (MERS) is a company created by the mortgage banking industry to simplify the assignment process. In many mortgage transactions, the mortgage company will designate MERS as a nominee for the lender. MERS then acts as an agent for the owner of the loan, but it does not actually possess a beneficial interest in the note. Rather, MERS simply tracks the mortgage for its members while the mortgage is transferred from bank to bank. Once assigned to MERS, the loan can be bought and sold numerous times without recording an additional assignment.
While Colorado law has not specifically addressed this issue, Colorado courts have routinely held that the absence of a proper assignment of mortgage will not stop a foreclosure. If the foreclosing party is clearly entitled to enforce the promissory note secured by the mortgage, the court would likely allow the foreclosure to proceed, regardless of a proper assignment, because of the general rule that “a mortgage follows the note.”
If your house is in foreclosure, contact the Law Offices of Eric L. Nesbitt, P.C. We know local foreclosure rules and will fight to keep your home.

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website

Friday, July 1, 2016

The Basics - Understanding Commercial Real Estate Developer Financing

Commercial real estate developers are visionaries and dreamers. What the average person sees as a barren field or wasteland, a developer sees as a new community or high-rise development. What others see as urban blight a developer sees as the next business center. To make the dream into a reality, a developer needs to be passionate and bold.

Although a commercial real estate developer may be armed with the best construction crew, machinery, and materials, success is still at the mercy of market forces. The intervening time between eying the property until procuring final approvals can see significant economic shifts. These shifts can take what was a surefire success and make it into an abysmal failure. Thus, despite a commercial real estate developer’s aggressive plan and strong track record of accomplishment, market conditions often dictate a commercial development’s success.

The Risks

Furthermore, real estate development is an example of the Anna Karenina principle, wherein just one failure of a number of factors dooms a project. Leo Tolstoy’s book Anna Karenina begins with "[h]appy families are all alike; every unhappy family is unhappy in its own way."  This means that every happy family has all conditions, i.e. finances and children, in place. In contrast, unhappy families need to be missing only one factor to feel unhappiness. The same for commercial real estate development, a number of a variety of factors must be in place; if one is not in place then the project will be a failure.

As mentioned, the economic climate of an area often is the biggest factor determining a commercial real estate development’s success. Another significant factor is construction delays, which can trigger other issues. Often times, a commercial real estate developer needs to secure financing to complete the project. While a perceptive developer contemplates possibilities and scenarios that may affect the future completion of a project, a developer also knows that it is not possible to consider every possibility. Therefore, when unexpected issues arise, a developer may have to seek additional financing to complete the task.

To secure financing, a developer will often need to sign a personal guarantee.  A personal guarantee is perhaps the most dreaded concession a developer can make when trying to secure a loan. However, upon building a portfolio of successful development, lenders are more amenable to lending absent personal guarantees. Even so, a developer currently in the building process and foresees or is experiencing cost overruns may need additional financing to finish the job. At that point, a lender who prior to construction commencement would lend absent a personal guarantee may require a personal guarantee when a developer seeks such funding.

Contact a Real Estate Attorney

Currently, there is strong demand for commercial real estate in the Denver area. Lease rates are increasing, suggested increased interest in commercial space. Developers seeking to capitalize on the strong Denver commercial real estate market should contact the experienced attorneys at the Law Office of Eric Nesbitt, Esq. These attorneys understand the challenges real estate developers face and know how to negotiate with banks on their clients’ behalf.

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website

Tuesday, April 28, 2015

How Changes to Colorado’s Foreclosure Laws Can Benefit You

“Foreclosure” is a word that no homeowner ever wants to hear. Foreclosures occur when you’re no longer able to make payments on your home, often due to circumstances outside your control, like job losses or medical bills. The consequences of a foreclosure can be life-changing. If you’re facing a foreclosure, you’re at risk of incurring astronomical fines and fees, damaging your credit score, and even losing your home.
However, it’s important to understand that you have more protections than ever before thanks to recent changes to Colorado’s foreclosure laws. Becoming familiar with these changes can help you minimize many of the harshest consequences of a foreclosure, and might even allow you to keep your home. Here are the most important changes you should know about if you’re facing foreclosure on your home.

Colorado House Bill 07-1157

Colorado House Bill (HB) 07-1157 went into effect in January 2008. This bill represents an extensive effort to streamline and modernize the foreclosure process in Colorado. Many of these changes focused on the “cure period,” or the time between the start of a foreclosure case and the initial sale of the foreclosed home.
The 2008 law lengthened the cure period from 45-60 days to 110-125 days, and his change has proven overwhelmingly beneficial to homeowners facing foreclosure. You now have almost twice as long to work with lenders, foreclosure attorneys, and credit counselors to “cure” your default through a loan modification or payment plan. As a result, you may be more likely to receive an interest rate adjustment or an extension on your loan. Your lender might also be willing to delay the foreclosure altogether, a move known as “forbearance”.
The fact is, most lenders would prefer to avoid foreclosure because they often end up losing money on the re-sale foreclosed homes. The extended cure period encourages lenders to seek alternate resolutions that may be more beneficial to both you and the lender.

HB 07-1157: No More Redemption

Not all of the 2008 changes to Colorado foreclosure law work explicitly in homeowners’ favor, however. Some changes, like the repeal of Colorado’s redemption laws, made it much more difficult—if not impossible—for homeowners to reclaim ownership of their home after the foreclosure sale is complete.
Prior to 2008, a former owner had 75 days to “redeem” his or her home by paying the new owner the total price of the home, including any foreclosure fees and interest incurred. HB 07-1157 did away with this process altogether, meaning once a home has been sold, the former owner has no opportunity to get it back.
This change may seem harsh, but many argue that removing the redemption period actually protects foreclosed homeowners. Redemption was a difficult process even before 2008, since a foreclosure on your credit report makes it difficult to receive a new loan. This left many former homeowners vulnerable to “credit vultures” who preyed on borrowers’ desperation by providing predatory loans that were difficult, if not impossible, to ever repay.  The truth is that very few homeowners ever regained their homes through redemption prior to 2008. Getting rid of this option shifted the focus to the cure period, which is a far more attainable way to regain ownership of your home.

Changes in 2015: Good News for Homeowners

When the foreclosure crisis of 2009 steamrolled the U.S. housing market, many lawmakers realized the pressing need for extensive change.  While federal investigations continue to target predatory lending practices, Colorado made several direct changes to state law to help homeowners stay in their homes.
This is an ongoing process that’s likely to continue into the future, but several major changes already went into effect on January 1, 2015. Two of the biggest changes include those outlined in HB 14-1130 and HB 14-1295, which Governor Hickenlooper approved just last year.

House Bill 14-1130

Though HB 07-1157 helped homeowners by lengthening the cure period, it does little to protect you from being overcharged by unscrupulous lenders while seeking to repay what you owe on your home.
In Colorado, a homeowner can stop the foreclosure process by requesting a “cure statement” that details how much you must pay to cure the default. Cure statements often include fees for a Rule 120 hearing, which is when the judge authorizes the sale of a foreclosed home. Despite the fact that many “cured” foreclosures never reach a Rule 120 hearing, the cure statement may charge Rule 120 fees anyway—forcing you to pay for a hearing that never happened.
This is just one example of the many ways you can be overcharged on a cure statement. But thanks to HB 14-1130, cure statements must now be 100% accurate, and your lender’s attorney must verify that all costs and fees are both real and exact. In fact, any charges outlined in the cure statement must be backed up with receipts that prove the costs billed to the homeowner. If you suspect foul play, you are now entitled to receive copies of these receipts through a written request filed within 90 days of paying the cure amount.
Additionally, if it turns out that you have overpaid, the trustee must return the excess payment directly to you, the homeowner. This may seem like common sense, but prior to January 1, 2015, the law didn’t explicitly require refunds, so many lenders and their attorneys would simply keep the overage.

House Bill 14-1295

Colorado’s new foreclosure laws also provide extra protections for homeowners seeking alternatives to foreclosure. Though this law applies only to single-family homes and small multi-family properties that serve as the homeowner’s primary residence, it has the potential to help many homeowners keep their property and avoid foreclosure proceedings for good.
The first thing HB-14-1295 does away with is the practice of dual tracking. Dual tracking happens when a homeowner pursues loss mitigation option, such as a loan modification, but the lender continues the foreclosure process anyway. The case is therefore on two “tracks” at once.
Prior to this law, homeowners were forced to race against the clock to keep their homes from being foreclosed on. If the loss mitigation process wasn’t complete by the time the foreclosure process ended, the homeowner would be forced to foreclose despite his or her best efforts.
Under the new law, the public trustee in charge of your foreclosure case can stop the process if you’re in the middle of loss mitigation proceedings. If you’re applying for an alternative to foreclosure or have already accepted a loss mitigation option, you can write to the trustee to ask for the foreclosure to be postponed. Though postponement is left up to the trustee’s discretion, this law will help many homeowners complete the loss mitigation process in time to keep their homes.
Another major change implemented by HB 14-1295 is the designation of a single point of contact. This law requires lenders to provide a single point of contact for the homeowner to call regarding loss mitigation options, deadlines, and requirements. Thanks to this change, you can get a straight answer to your questions instead of relying on potentially inaccurate or incomplete information provided by someone who isn’t familiar with your case.  

How Changes to Foreclosure Laws Affect You

The recent changes to Colorado’s foreclosure laws are good news for homeowners facing this difficult situation. However, many of the new laws that benefit homeowners aren’t common knowledge, especially among homeowners attempting to navigate foreclosure on their own. If you’re not aware of these changes, you could miss out on the opportunity to reduce your payments, protect your credit, or even keep your home.
Foreclosure is an especially complex and stressful type of case. With your family’s home at stake, it’s all too easy to fall prey to lenders looking to exploit your vulnerable situation. That’s why our compassionate legal team is dedicated to pursuing the best possible outcome for your case, no matter how difficult your situation may seem. We specialize in staying abreast of all changes to Colorado’s foreclosure laws, so we can invoke every protection available to help you keep your home.
If you’re facing an upcoming foreclosure or your foreclosure proceedings have already begun, make sure to call our office at (303) 741-2354 to find out how we can help you in this difficult time.

Eric L. Nesbitt, Esq.
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website