Five Things to Know About the Warranty of Habitability

By Craig Chambers, Attorney At Law

The Littleton Lawyer

Vol 1.84    March 17, 2019

As a real estate attorney practicing in Littleton, Roxborough, Ken Caryl, Highlands Ranch, Denver, Centennial, Lakewood, and the surrounding areas, I often deal with the warranty of habitability which exists for rental properties under Colorado law.

First, the “Warranty of habitability” under C.R.S. 38-12-503 et seq. means that the landlord has responsibility to ensure that the rental property is “fit for human habitation.”

Second, the warranty of habitability This exists in every residential lease. It can’t be waived. In other words, a tenant has a right to live in a habitable property.

Third, a residential  premises is deemed “uninhabitable” for problems with water intrusion, plumbing or gas facilities, lack of running water, sewage disposal , lack of eat, unsafe electrical  components, inappropriate extermination of rodents or vermin, unsafe stairs or railings, insufficient locks or security and similar safety hazards.

The actual definition of inhabitability is that the condition of the premises materially and substantially limits the tenant’s use of his or her dwelling.

Fourth, a tenant must give the landlord  notice of the problems with the unit and allow the landlord 5 business days to cure the problem with the property. If the landlord fails to cure the problems, the tenants can consider the lease terminated, withhold rent, and  vacate the home.

The tenant must prove two things: the premises are uninhabitable within the meaning of the statute; and the tenant gave the landlord notice and the landlord failed to correct the problems within 5 business days. Therefore, documenting both the problems with the dwelling and your communication with the landlord are crucial to winning your case.

Fifth, a breach of the warranty of habitability, if you can prove it, is a defense to an eviction FED proceeding; if you list the breach of the warranty of habitability as an affirmative defense,  a court would determine if the tenant was justified n terminating the lease and/or if the landlord breached the warranty of habitability, justifying the withholding of rent and terminating the lease.

FIVE THINGS TO KNOW ABOUT REAL ESTATE SALES COMMISSIONS

By Craig Chambers, Attorney At Law

The Littleton Lawyer

October 31, 2018, Vol 1.83

As a real estate lawyer practicing  in Littleton, Roxborough, Ken Caryl, Highlands Ranch, Denver, Lakewood, and the surrounding areas, I often provide real estate transaction services for For Sale By Owners or FSBO’s. Here are 5 things to know about real estate commissions in the current Denver Metro area real estate market.

First, if the property is not listed with a listing broker, or the buyer has not signed an agreement with his or her broker, no real estate commission is owed.

There is no “automatic” commission. In fact, if you find your own buyer (or you are a buyer and find your own property) you may be better of with just hiring a lawyer to do the paperwork and to follow-up with the transaction.

This could result in a considerable savings because a lawyer charges by the hour, not a real estate commission based on a percentage of the selling price.

Second, if there is a commission, it is basically two commissions.

It’s true:  there is the total commission paid by the Seller to the Listing Broker as per the listing agreement, which  is the listing broker’s portion of the commission. This is typically 2-3% of the purchase price  to the listing broker. Then there is the Selling Broker’s commission, typically 2.8% of the purchase price, which is also usually paid by the Seller at the closing for the benefit of the Buyer.

This “Success fee” or “Co-op Fee” is deducted from the total commission and offered by the Listing Broker to other brokers in the Multiple Listing Service (MLS) for bringing the buyer to the transaction.

Third, both of these commissions are negotiable. Yes, there is no set real estate fee. In fact, if real estate companies collude to fix the costs of a real estate sale, that’s against anti-trust laws.

Fourth, these commissions have gone down.

Gone are the days of a 6% or 7% commission. With the home listings now being distributed openly and freely on the internet, the real estate commissions have come down considerably. Aside from the lower fees, some companies offer discounts if you purchase another home through the broker or if the broker brings his own buyer.

On the other hand, some firms add a “transaction fee” to the deal, on top of the commission. All of these commissions and fees need to be disclosed and agreed to in writing.

In addition, while it common to negotiate down the listing broker’s portion of commission, substantially reducing the selling broker’s commission could make the home less marketable on the open market; however, nothing prevents the Selling Broker (who is working with the Buyer) to reduce the 2.8% commission or to pay the broker himself instead of the Seller paying the Buyer’s broker to make the offer more competitive.

Fifth, Companies that claim they offers thousands of dollars in savings from traditional real estate firms are not exactly being honest because they don’t know what the traditional firm charges.  That’s up to each individual broker. Real estate companies misrepresent themselves to get your business. The two most important things in a real estate transaction are transparency and trust

Best Advice: a real estate commission through a broker may not be necessary if the property is not listed or if the buyer has not signed an agreement with a broker.

If you are going to use a broker, interview three different real estate brokers before choosing one, thoroughly read the listing agreement, and don’t hesitate to discuss and negotiate the real estate commission.

5 Tips on Legally Funding the Repairs on a Fix and Flip

by Craig Chambers, Attorney At Law

The Littleton Lawyer

September 2, 2018, Vol 1.82

As a lawyer specializing in real estate and property law in Littleton, Englewood, Centennial Ken Caryl, Highlands Ranch, Lakewood, and the Denver Metro area, here are few tips on how to legally fund the repairs for a fix and flip property.

First, if you find a true fix and flip, there are a lot of financial issues for the  repairs to consider. Please please have the home inspected. Also, please check the zoning department and make sure that the property is zoned for purpose for which you intend use it. Check with the Homeowner’s Association, if there is one, to see what kinds of approvals you need prior to doing the work on the property.

Repairs such as roofs, radon, sewer repairs, electrical and plumbing repairs are health and safety issues you should usually insist on the Seller repairing at his expense.  If the deal dies, now that the Sellers knows about them, he will have to disclose the problems to the next buyer. A typical buyer will insist on the home being a safe place to live.

Don’t count on the lender catching any of these problems. The lender does not usually inspect the home; the lender orders an appraisal which is not an inspection. The appraiser can make conditions such as roof repairs,   but his purpose is to ascertain he value of the home as security for the loans.

As for repairs on the home, you need to assess your skill set and find reliable contractors to do what you can’t and don’t have time to do!  Also, the Seller can’t give money back to the buyer. It affects the lenders loan-to-value ratio.

Neither can your real estate broker. The lender is entitled to know what the true terms of the deal are and make its loan accordingly. Side deals could be construed as loan fraud and the lender could call the loan due as well.

Here are a five ways to get the money to pay for the repairs.

  1. Seller paying your closing costs. This is by far the easiest  way to get money for the repairs. Take a closing cost credit lieu of the repairs. If the repair costs are greater than the lender’s actual closing costs, the extra funds can be applied to points to reduce the interest rate of the loan.  The credit can include title costs and HOA costs as well so long as NONE of the money goes directly back to you as the buyer. There’s a limit on the amount that the Seller can pay, though. Usually a percentage of the purchase price. You need to find out what that limit is from your lender.
  2. Reduce the price.  That simply gives you more equity in the home but no cash for the repairs. If you are planning on drastically reducing the price, paying for the fix-up with a  credit card or private loans, and then refinancing at the higher price after the fix-up to pay off the debt, the lender will make you wait six months before you can do the cash-out refinance.
  3. FHA  203K loans or similar loans. These are loans where the lender funds the fix-up as part of the deal. They can be difficult because the lender will inspect everything as the work is done. Can’t say I’ve had much success with these, most of us don’t want the lender involved, but those loans are out there.
  4.  A fourth  way is for the Seller to do the work before closing but then the warranty and/or relationship with the contractor is between the Seller and the contractor, not with you. Depending on the type of work, it is usually better if you choose and control the contractor. You could insist on the Seller doing the work with your contractor so you have some say in who does the work. Beware if the seller wants to do the work himself, he might do a crappy job.

You should get several written bids, though because the costs of labor varies enormously between contractors.

  1.  As a fifth alternative, you could get bids from the contractors and the money is paid directly to the contractor and/or escrowed at closing. Some lenders and title companies won’t allow the escrow so that means the check gets paid directly to the contractor from the title co. Check with the lender and title company to see if that’s possible. Anyone can be the contractor (so long as its not the buyer). The check could be paid to a third party, doesn’t matter who.

What a Seller will do depend on the motivation of the seller and how strong the market it.  It almost always takes longer than you think and costs more than you estimate because you will find additional problems as you go along.

A project like this can be financially rewarding.

 

3 Things to Know About a Partition Action

Real Estate Law Blog, Vol.1.80

February 19, 2017

by Craig Franklin Chambers, Esquire

The Littleton Lawyer

As a real estate lawyer practicing  in  Littleton, Roxborough, Ken Caryl, Highlands Ranch, Denver and the surrounding areas, I am often retained to do a partition action.

A partition  action – which is made pursuant to C.R.S.  38-28-101 (and the following statutory provisions) is  the claim for relief you make to resolve disputes between co-owners of real property.  This situations occurs, for example, if siblings inherit a piece of property and the heirs  can’t agree on whether to sell the property,  how to sell the property, how to divide the proceeds, or the terms of sale.

In filing the partition action, the first thing to remember is that all parties of interest need to be joined in the action. That includes the Homeowner’s Association, lenders, etc.  If a party is not jointed, the case will likely be continued until all of the parties are joined.

The second thing, once the parties are joined, the court will first determine if the property can be divided equally and fairly, without manifest prejudice to the parties.  If the property cannot be divided fairly – for example, in the case of a  residential  home or a condo – the court will order the property sold and the proceeds divided in proportion to the parties’ interest in the property.

The third thing, along with the proceeds being divided in accordance to the parties interest in the property, the court will make adjustments to the parties proceeds based on contributions that the made to preserve and protect the property.

These adjustments can be contentious. One party may claim the repairs made to the home by the other were unnecessary or too costly.  Because of this, although a partition action is  usually a question of math as to who contributed what to the property, the cases can be expensive. My best advice is to cooperate with the other co-owners and agree on a realtor to sell the property

The court can’t change the proportional interest you have in the property. The court can’t refuse to sell the property if you have an interest in the property. All the judge  can do is either divide the property or order it sold, making adjustments for the parties contributions as the court deems fairs and equitable.

In most case, the cost of the partition action will far exceed the benefits you might receive from the court.

Furnace and Roof Law

Three Problems with Roof and Furnace Certifications

Real Estate Law Blog(Vol I.79)

by Craig Franklin Chambers, Esq. The Littleton Lawyer.

January 14, 2017

In my role as a real estate  attorney in Littleton, South Jeffco, Roxboough Park, Ken Caryl , Denver, Highlands Ranch,  and the surrounding areas, there are 3 reasons to be concerned with roof and furnace “certifications.”

If there is doubt as to the condition and the future longevity  of a component of a home–usually the roof or the furnace–a home inspector will suggest –or a lender, as a condition of the appraisal–will require–a  five year “certification” of that component.  The five year certification requirement is the general practice of lenders to require that a roof or a furnace have five years of life remaining in order to give the buyer a loan.

Licensed contractors charge to inspect either the roof or the furnace and certify that it has five years of life remaining.  The problem is that buyers are often misled to believe the certification is a warranty. While the buyer believes the “cert” is a warranty, the lender and the real estate brokers treat the certification as just another form for the file.

First, a “certification” is not a replacement for a home inspection. The Colorado Real Estate Commission-approved  contract for the purchase of a home allows the buyer to conduct a home inspection. Under the residential real estate contract, a buyer can have as many types of inspections as the buyer feels are appropriate given the age and condition of the home.

Second, in a residential real estate transaction, it is important to know what you are buying. A professional, experienced, and detached set of eyes is useful in determining if the buyer should proceed with the transaction. If the home fails inspection, the buyer’s recourse is to terminate the contract, waive the inspection defect, or renegotiate the real estate transaction.

Third, a certification is not a warranty. It is an opinion by a licensed contractor for a fee that the component is functioning properly on the day of inspection. Although the “certification” is for five years, the buyer has no recourse against the contractor should the component fail within five years.

The buyer should be aware that if a certification is required or suggested, the component is likely towards the end of its lifespan; the roof or furnace is probable, if not certain, to fail in the near future. The five year rule is merely a lender guideline.  A buyer is certainly free to re-negotiate with the seller for a new roof or furnace regardless of whether a contractor opines the roof has a remaining life of five years.

At the very least, the buyer should conduct further investigation and not rely on the certification as any type of warranty. And the buyer should go into a residential real estate transaction eyes open, fulling understanding all the terms of the real estate transaction.

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