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 state statutes require that sellers of residential property disclose the following to the buyer:
Further, sellers’ brokers have certain obligations to buyers, which are not discussed in this article.
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 you 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 available online through Google Drive for your use in making this disclosure. Note that as a practical matter, many sellers will provide this form even if their house was built post-1978 – even though it is not required – so do not be surprised to see the form if you are purchasing a newer property.
It is important to note that the Colorado Contract to Buy and Sell requires the Lead-Based Paint Disclosure form to be completed and fully executed prior to the time the contract is signed by all parties, including the brokers. If this does not occur, the Contract to Buy and Sell is considered void. (See CBS1-8-13 Colorado Contract to Buy and Sell, Residential, section 10.10).
Now let's turn to the forms that are required under Colorado state law.
Standard Seller’s Property Disclosure Forms
The Commission has created standardized forms for sellers’ use in making disclosures. Use of these forms is not mandated by statute, but by completing them a seller will ensure that they have disclosed the relevant information that is required by statute, regardless of the manner in which it is disclosed.
The main standard disclosure form is entitled “Seller’s Property Disclosure.” There are two forms of “Seller’s Property Disclosure” – a Seller’s Property Disclosure (All Types of Properties), and a Seller’s Property Disclosure (Residential). A seller of a residential property can use either form.
(A seller of any form of property that isn't a residential home should use the form labeled “All Types of Properties,” as it addresses potential issues that may arise in non-residential property not discussed by the residential-specific property form.)
Generally speaking, these standard Seller’s Property Disclosure forms ask 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 these disclosure forms 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 are you required 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 disclosure forms, so that they can fix some of the issues and avoid surprises when the buyers do their inspections.
Green Disclosure Form
The Green Disclosure (Energy) form is a relatively new addition to the list of Colorado disclosure forms. The form states specifically that it should be completed by the seller, not the seller’s broker.
The purpose of the Green Disclosure form is to inform the buyer about the seller’s current, actual knowledge of the energy-related features of the property. For example, the form lists options regarding sustainable materials, indoor air quality, construction type, and ENERGY STAR appliances, among other things. By filling out this form, the seller is completing one of the steps which will allow his or her broker to market the property as “Green” on the Multiple Listing Service (“MLS”).
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 for each of these. (C.R.S.A. § § 38-35.7-101(1) and 38-35.7-101(2)).
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 if it has not been remediated accordingly, 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, and, as discussed above, the form must be executed by all parties and returned to seller prior to the execution of the sales contract.
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.
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:
As of this writing, the disclosure of oil and gas activity requirement shall apply to all “residential real property that is subject to the commission’s jurisdiction.” (C.R.S.A. § 38-35.7-108(1)(a)).
To obtain Colorado real estate disclosure forms, other form documents (including sales contracts) and additional information, see the Colorado Department of Regulatory Agencies Division of Real Estate’s Contracts and Forms page. 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.