Before you finalize your house sale in Colorado, a prospective buyer will want to know as much as possible about the property’s physical condition and any problems that could affect the house’s value, use, or desirability. Unlike in the past, when sellers were allowed to stay silent until asked about problems under the doctrine of “caveat emptor” (buyer beware), Colorado now requires sellers to actually tell prospective buyers about certain conditions on the property being sold.
Failure to comply with seller disclosure laws may result in your being held liable for costs and fees associated with the nondisclosure.
Colorado’s Disclosure Laws
Colorado state statutes require that sellers of residential property disclose the following to the buyer:
- if true, that the property is part of a common interest community, which the buyer will be obligated to become a member of and pay assessments to (see the Colorado Revised Statutes Annotated “C.R.S.A.” § 38-35.7-102)
- if true, that the property has been used as a methamphetamine laboratory , unless it has been fully remediated (C.R.S.A. § 38-35.7-103)
- the home’s source of potable (drinkable) water (C.R.S.A. § 38-35.7-104)
- any proposed transportation projects (such as a light rail project) that may affect the property (C.R.S.A. § 38-35.7-105), and
- that the property may be in a special taxing district, and where the buyer can go to find out whether the property is, in fact, within such a district (C.R.S.A. § 38-35.7-101).
Further, sellers’ brokers have certain disclosure obligations to buyers, which are not discussed in this article.
Federal Disclosure Requirements
Before we get to Colorado's state disclosure laws, you should realize that every home buyer across the U.S. needs to comply with any applicable federal law. The main one likely to affect you requires sellers of property built prior to 1978 to disclose the existence of lead-based paint on the property. (42 U.S.C.A. §§ 4851-56.)
If your house was built back then, you will need to supply prospective buyers with a copy of the pamphlet “Protect Your Family From Lead In Your Home,” available for free download from the U.S. Environmental Protection Agency. The Colorado Real Estate Commission (Commission) has created a form for your use in making this disclosure, which can be found on its “Real Estate Contract and Forms” page, under the name “Lead-based Paint Disclosures (Sales).”
Using the Colorado Disclosure Form
The Commission has created a standardized form for sellers’ use in making disclosures, called the "Seller’s Property Disclosure (Residential)." While use of this form is not mandated by statute, it's helpful for ensuring that you are giving full disclosure.
The standard seller’s property disclosure form asks the seller to make the state-required disclosures (listed above), provides a checklist of items for seller to describe the condition of or comment on, such as appliances, systems (electrical, heating, plumbing, roof, structure, and the like), and has space for sellers to supply other information, such as the existence of boundary disputes or zoning violations.
The purpose of the disclosure form is for the seller to inform buyers of known conditions on the property. If you are selling a home, you are required to disclose only facts actually known to you. In other words, you are not required to disclose facts about the property that you “should have known,” nor to commission any inspections of your property in advance of filling out the form. Nevertheless, many sellers choose to have their property inspected in advance of filling out this form, so that they can fix some of the issues and avoid surprises when the buyers do their inspections.
Method and Timing of Colorado Disclosures
How and when sellers must disclose information about their house to buyers depends on the subject matter being disclosed. Both the disclosure that the property is within a common interest community and the language regarding special taxing districts must be made within the contract for the sale of the property. In fact, the contract will need to contain precise, statutorily defined language in bold-face type for each of these. (C.R.S.A. §§ 38-35.7.102 (1) and 38-35.7-101 (1).) The home’s source of potable water must be disclosed in the listing contract, contract of sale, or seller’s property disclosure and must include certain statutorily described information. (C.R.S.A. § 38-35.7-104 (1)(a)(I).)
If any proposed transportation projects may affect the property, these must be in the seller’s property disclosure for real property, though the law doesn’t mandate any specific language. (C.R.S.A. § 38-35.7-105.) Further, if a methamphetamine laboratory existed on the property, you must disclose this in writing to the buyer, but the law requires no specific language. (C.R.S.A. § 38-35.7-103 (3)(a).) Finally, you must use the form approved by the Commission to disclose lead paint on the property.
Regarding the timing of general disclosures of the physical condition of the property to the buyer, the contract to purchase the property will generally establish the disclosure (and inspection) window. Buyers and sellers can negotiate those dates.
Property Covered by Colorado Disclosure Rules
Is your property among the types covered by these disclosure laws? The statute doesn’t provide any one definition. It does, however, define “residential real property” in two specific contexts, which are a good indication of the state’s approach:
- Residential real property (for purposes of whether sellers need to disclose a meth lab) includes: manufactured home; mobile home; condominium; townhome; home sold by the owner, a financial institution or the federal Department of Housing and Urban Development (HUD); rental property (including an apartment); short-term residence such as a motel or hotel. (C.R.S.A. § 38-35.7-103 (5).)
- Residential real property (for purposes of whether sellers need to disclose the property’s source of potable water) includes: residential land and residential improvement other than hotels and motels; mobile home or manufactured home if permanently affixed to a foundation. C.R.S.A. § 38-35.7-104 (3).
More Information on Colorado Real Estate Disclosure Laws
To obtain Colorado real estate disclosure forms, other form documents (including sales contracts) and additional information, see the state Division of Real Estate website at www.colorado.gov/DORA. Also be sure to consult with an attorney if you have questions related to your disclosure requirements and other legal aspects of your home sale.