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Colorado Foreclosure Law and Your Association's Superlien

By Lawrence B. Leff, Mark K. Payne, Suzanne M. Leff, Stan V. Jezierski

As part of the changes to Colorado’s foreclosure law that become effective January 1, 2008, C.R.S. §38-38-103(1)(c) will read:

If a recorded instrument does not specify the address of the party purporting to have an interest in the property under such recorded instrument, the party shall not be entitled to notice and any interest in the property under such instrument shall be extinguished upon the execution and delivery of a deed pursuant to section 38-38-501.

Meaning, if your association’s current contact information is not listed in your Declaration, a lender foreclosure could extinguish your association’s super priority lien.

Arguably, C.R.S. §38-33.3-319, which establishes that the provisions of the Colorado Common Interest Ownership Act (“CCIOA”) shall control in the event of a conflict with other statutes, would allow the statutory lien rights and priorities in section 316 of CCIOA to override this new statute. However, rather than spending the time and money to make that argument in court, your association can take two simple steps now to comply with the new statute and protect the association’s rights.

1. Add the association’s contact address to every Notice of Lien that the association records. Placing the association’s name, along with the address of its management company, on the recorded lien should satisfy the new law. If we are currently filing your association’s Notices of Assessment Liens, we will now include the association’s mailing address on the notices. As foreclosures in Colorado remain prevalent, we recommend that association’s file their lien notices as soon as possible after a homeowner becomes delinquent. This approach may require revising your association’s current collection policy because it may state that the association will wait at least ninety days from the date of delinquency before recording a Notice of Assessment Lien. We can help you evaluate the cost effectiveness of revising your collection policy to protect your association’s interest.

2. Record a Notice of Address that refers to the association’s Declaration and its recording information. Rather than undertaking a costly amendment of your current Declaration, this simple process should protect your rights under the new law. Under C.R.S. § 38-35-108, a Notice of Address, with reference to the Declaration, which is already recorded, puts the lenders on notice of the association’s address, as required by statute, and allows the lender to locate the source of the association’s interest in the property at issue. Associations must record a new Notice of Address every time a change in management companies and/or address occurs.   Winzenburg, Leff, Purvis, & Payne can prepare and file the Notice of Address for a flat fee.

Full post as published by Colorado Homeowners Association Law Blog on October 05, 2007 (boomark / email).