4 Colo. Code Regs. § 725-6, ch. 2

Current through Register Vol. 47, No. 22, November 25, 2024

Chapter 2 - Application for Registration

2.1. Registration Requirements for an Initial Developer's Certificate

A. If an Applicant is:

1. A corporation, a director or an authorized officer must apply on behalf of said corporation.

2. A partnership or limited partnership, one of the general partners must apply on behalf of the partnership or limited partnership.

3. A joint owner of the Subdivision, such owner may apply on behalf of all joint owners of such Subdivision.

4. A limited liability company, one of the managers or member-managers must apply on behalf of the company.

5. With respect to any other type of Developer that is other than a natural person, a person authorized to act on behalf of such entity, as demonstrated by such documents in a form satisfactory to the Commission, will apply on behalf of that entity.

B. In addition to section 12-10-503, C.R.S., the Applicant for a Developer Certificate must provide the Commission with the following information concerning each Subdivision to be registered:

1. The address or actual physical location of each Subdivision from which sales are intended to be made;

2. Copies of a recorded deed or other documents evidencing the Developer's title or other interest in the Subdivision and a title commitment, policy or report, abstract and opinion, or other evidence acceptable to the Commission documenting the condition of such title or interest;

3. Sample copies of the Consumer Agreement, notes, deeds, and other legal documents prepared by the Developer or an attorney representing the Developer which are to be used to effectuate the sale or lease of the Subdivision or any part thereof. The Commission may disapprove the form of the documents submitted and may deny an application for registration until such time as the Applicant submits such documents in forms that are satisfactory to the Commission;

4. In compliance with section 12-10-503(3)(e), C.R.S., a Developer registering a Subdivision that incorporates Time Share use and is subject to one or more blanket encumbrances must submit to the Commission a Nondisturbance Agreement by which the holder of each blanket encumbrance against the Subdivision agrees that its rights in the Subdivision will be subordinate to the rights of the time share use purchasers. From and after the recording of a Nondisturbance Agreement, the holder of the blanket encumbrance executing the same, such holder's successors and assigns, and any person who acquires all or part of the Subdivision through the subject blanket encumbrance, will take the property subject to the rights of the Time Share use purchasers. Every Nondisturbance Agreement must contain the covenant of the holder of the blanket encumbrance that such person or any other person acquiring all or part of the Subdivision through such blanket encumbrance will not use or cause the Subdivision to be used in a manner which would prevent the Time Share use purchasers from using and occupying the Subdivision in a manner contemplated by the Time Share use plan. Any other trust or escrow arrangement which fully protects the Time Share use purchasers' interest in the Subdivision as contemplated by section 12-10-503(3)(e), C.R.S., may be approved by the Commission;

5. If the Developer is other than a natural person, proof of formation and registration in accordance with state and local requirements must accompany the Application; and

6. Copies of the recorded declaration of the Subdivision.

C. Copies of required information and disclosures as set forth in Rules 2.3 ., 2.4., 2.5., and 2.6. as applicable.

D. Registration of Developers Regulated in Another State

Pursuant to section 12-10-503(1), C.R.S., the Commission in its sole discretion may accept an Equivalency Filing from a Developer as an application for a Developer Certificate. The Developer may be deemed to have fully or partially satisfied, and be in compliance with, sections 12-10-503(2) and 12-10-503(3), C.R.S., and Rules 2.1, 2.3 ., 2.4 ., 2.5., 2.6., 4.2., and 4.3. as determined by the Commission.

2.2. Addition of a Subdivision to an Existing Developer Certificate

A Developer may add an additional Subdivision to an existing Developer Certificate by completing the Division created supplemental application and submitting the following information:

A. The Developer must provide the information pursuant to section 12-10-503(3), C.R.S., and Rules 2.1, 2.3., 2.4., 2.5., and 2.6. as applicable; or

B. In connection with an Equivalency Filing, the Developer must provide the information that was required at time of initial registration as set forth in Rule 2.1 (D). as applicable.

2.3. Copies of Written Disclosures

Pursuant to sections 12-10-506(6)(a), C.R.S., and 12-10-506(7), C.R.S., the Developer must supply the following information to the Commission in addition to the required information set forth in Rule 2.1 and prior to contracting with the public must disclose this information to prospective purchasers in the Consumer Agreement or in a separate written disclosure document:

A. The name and address of the Developer and of the Subdivision lots or units.

B. An explanation of the type of ownership or occupancy rights being offered.

C. A general description of all facilities, amenities and accommodations. As applicable for any uncompleted Subdivision, the Developer must also supply the provisions for and the availability of legal access, roads, sewage disposal, public utilities (including water, electricity, gas, internet and telephone) and other promised facilities in the Subdivision. The disclosure must identify and describe the specific amenities promised, the ownership of such amenities, the projected completion date of any amenities not completed, a statement setting forth the type of financial arrangements as set forth in Rule 2.10.A ., and the allocation of the amenity expense among the Developer, the purchaser and any third party.

D. In compliance with section 12-10-505(1)(h), C.R.S., a statement in bold print immediately prior to the purchaser's signature line on the Consumer Agreement disclosing the rescission right available to purchasers and that the rescission right cannot be waived; the minimum allowable rescission period in Colorado is five (5) Days after execution of the Consumer Agreement.

E. A general description of all judgments and administrative orders issued against the seller, Developer, homeowners' association or managing entity which are material to the Subdivision development and operational plan.

F. Any taxes or assessments, existing or proposed, to which the purchaser may be subject, or which are unpaid at the time of contracting, including obligations to special taxing authorities or districts.

G. A statement that sales must be made by brokers licensed by the State of Colorado unless specifically exempted pursuant to section 12-10-201(6)(b), C.R.S.; the Consumer Agreement must disclose the name of the real estate brokerage firm and the name of the broker establishing a brokerage relationship with the Developer.

H. When a separate document is used to make any of the disclosures as set forth in this Rule and Rules 2.4 ., 2.5 ., and 2.6., this statement must appear in bold print on the first page of the document and preceding the disclosure: "The Colorado Real Estate Commission has not prepared or issued this document nor has it passed on the merits of the subdivision described herein.".

I. A statement that all funds paid by the purchaser prior to delivery of the lease, deed or other instrument purporting to convey any interest in the site, tract, lot, divided or undivided interest from a Subdivision will be held in trust by the licensed real estate broker named in the Consumer Agreement, or a clear statement specifically setting forth who such funds will be delivered to, when such delivery will occur, the use of said funds, and whether or not there is any restriction on the use of such funds.

J. Where a deed is issued, a statement that, immediately following the date of closing, the purchaser's deed will be delivered to the appropriate county Clerk and Recorder's office for recording, or a clear statement specifically setting forth when such delivery and recording of the deed will occur; for the purposes of this Rule, the date of closing is defined as the date the purchaser has either paid the full cash purchase price or has made partial cash payment and executed a promissory note or other evidence of indebtedness for the balance of the purchase price. A statement that a title insurance policy will be delivered at no expense to the purchaser within sixty (60) Days following recording of the deed or the closing, whichever is earlier, unless specifically agreed to the contrary by the parties in the contracting instrument.

K. A Consumer Agreement which requires the execution of a promissory note or other evidence of indebtedness that accrues interest or requires payments prior to the recording of a deed, will be deemed to be an installment contract pursuant to section 12-10-503(3)(g), C.R.S. where an installment contract is used:

1. A statement whether or not the purchaser's deed is escrowed with an independent escrow agent and if so, the name and address of the escrow agent;

2. The amount of any existing encumbrance(s), the name and address of the encumbrancer, and the conditions, if any, under which a purchaser may cure a default caused by non-payment;

3. A clear statement that a default on any underlying encumbrance(s) could result in the loss of the purchaser's entire interest in the property;

4. A clear statement advising the purchaser to record the installment contract; and

5. Pursuant to section 12-10-503(3)(e), C.R.S., an agreement by which the holder of any blanket encumbrance against the Subdivision agrees that its rights and the rights of its successors or assigns in the Subdivision will be subordinate to the rights of purchasers, or any other trust, escrow or release arrangement which fully protects the purchasers' interest in the Subdivision.

2.4. Copies of Written Disclosures If the Subdivision Has a Homeowners' or Similar Association

A. Whether membership in such association is mandatory;

B. An estimate of association dues and fees which are the responsibility of the purchaser and the Developer, respectively;

C. A description of the services and amenities provided by the association;

D. Whether the Developer has voting control of the association and the manner in which such control can or will be transferred; and

E. Whether the Developer has any financial interest in or will potentially derive any income or profit from such association, including the Developer's right to borrow or authorize borrowing from the association.

2.5. Copies of Written Disclosure If Time Share Sales are to be Made from a Subdivision:

A. Information and disclosures as set forth in Rules 2.3. and 2.4.;

B. A description of the Time Share units including the number of Time Share units, the length, type and number of Time Share interests in each unit, and the Time Share periods constituting the Time Share plan;

C. The name and business address of the managing entity appointed by the Developer or homeowners' association, a description of the services that the managing entity will provide, a statement as to whether the Developer has any financial interest in or will potentially derive any income or profit from such managing entity, and the manner, if any, by which the purchaser or Developer may change the managing entity or transfer the control of the managing entity;

D. An estimate of the dues, maintenance fees, real property taxes and similar periodic expenses which are the responsibility of the purchaser and the Developer, respectively, and a general statement of the conditions under which future charges, changes or additions may be imposed. Such estimate must include a statement as to whether a maintenance reserve fund has been or will be established; the manner in which such reserve fund is financed; an accounting of any outstanding obligations either in favor of or against the fund; the Developer's right to borrow or authorize borrowing from the fund; and the method of periodic accounting which will be provided to the purchaser;

E. A description of any insurance coverage(s) provided for the benefit of Time Share owners;

F. A statement that mechanic's liens law may authorize enforcement of the lien by selling the entire Time Share unit;

G. A statement on whether the Time Share interest is perpetual or for a term of years and, if for a term of years, the length and expected termination date of the term;

H. A statement as to the effect a voluntary sale, by the Developer to a third party, will have on the contractual rights of Time Share owners;

I. A statement that an involuntary transfer by bankruptcy of the Developer may have a negative effect on the rights of the Time Share owners; and

J. A statement that a Federal or State tax lien could be enforced against the developer by compelling the sale of the entire Subdivision.

2.6. Copies of Written Disclosures If Time Shares are to be Sold from a Subdivision Which: Contains Two (2) or More Component Sites Situated at Different Geographic Locations or Governed by Separate Sets of Declarations, By-Laws or Equivalent Documents; and Does Not Include a Guaranteed, Recurring Right of Use or Occupancy at a Single Component Site:

A. For each component site, the information and disclosures as set forth in Rules 2.3., 2.4., and 2.5.;

B. A general description of the Subdivision;

C. A clear description in the Consumer Agreement of the interest and term of usage being purchased and a definite date of termination of the purchaser's interest in the Subdivision, which date will be not later than the termination date of the Subdivision's interest in a specifically identified component site;

D. A clear disclosure and description of any component site which is not legally guaranteed to be available for the purchaser's use for the full term of the purchaser's usage interest;

E. The system and method in place to assure maintenance of no more than a one- to-one ratio of purchasers' use rights to the number of total use rights in the Subdivision for each term of usage being offered for sale, including provisions for compensation to purchasers resulting from destruction of a component site or loss of use rights to any component site;

F. A description of the system or program by which a purchaser obtains a recurring right to use and occupy accommodations and facilities in any component site through use of a reservation system or otherwise, including any restrictions on such rights or any method by which a purchaser is denied an equal right with all other users to obtain the use of any accommodation in the Subdivision;

G. A description of the management and ownership of such reservation system or program, whether through the Developer, a homeowners' association, a club or otherwise, including the purchaser's direct or indirect ownership interest or rights of control in such reservation system;

H. Whether the Developer, club or association which controls the reservation system or any other person has or is granted any interest in unsold, non-reserved or unused use rights and whether the Developer, club, association or other person may employ such rights to compete with purchasers for use of accommodations in the Subdivision or any component site and, if so, the nature and specifics of those rights, including the circumstances under which they may be employed;

I. The method and frequency of accounting for any income derived from unsold, non-reserved or unused use rights in which the purchaser, either directly or indirectly, has an interest;

J. The system and method in place, including business interruption insurance or bonding, to provide secure back-up or replacement of the reservation system in the event of interruption, discontinuance or failure;

K. The amount and details of any component site, reservation system or other periodic expense required to be paid by a purchaser, the name of the person or entity to which such payments will be made, and the method by which the purchaser will receive a regular periodic accounting for such payments;

L. If component site expenses are included in those periodic payments made by a purchaser, a statement for each component site from the homeowners' association or other responsible entity acknowledging that payment of such expenses as taxes, insurance, dues and assessments are current and are being made in the name of the Subdivision;

M. Evidence that an escrow system with an independent escrow agent is in place for receipt and disbursement of all moneys collected from purchasers that are necessary to pay such expenses as taxes, insurance and common expenses and assessments owing to component site homeowners' associations or others, or a clear description of the method by which such funds will be paid, collected, held, disbursed and accounted for;

N. A clear statement as to whether a purchaser's rights, interests or terms of usage for any component site within the Subdivision can subsequently be modified from those terms originally represented and a description of the method by which such modification may occur;

O. If the Subdivision documents allow additions or substitutions of accommodations or component sites, a clear description of the purchaser's rights and obligations concerning such additions or substitutions and the method by which such additions or substitutions will comply with the provisions of this rule; and

P. A clear description of any existing incidental benefits or amenities which are available to the purchaser at the time of sale but to which the purchaser has no guaranteed right of recurring use or enjoyment during the purchaser's full term of interest in the Subdivision.

2.7. Invalid Payment

If the Fees accompanying any Application made to the Commission are paid for by check and the check is not immediately paid upon presentment to the bank upon which the check was drawn, or if payment is submitted in any other manner and payment is denied, rescinded or returned as invalid, the application will be deemed incomplete and canceled. The application may be reinstated only at the discretion of the Commission and upon full payment of any Fees together with payment of the fee required by state fiscal rules for the clerical services necessary for reinstatement.

2.8. Review of Application for Completeness

If the Commission requires additional information, the Commission will give written notice of the information so required and will allow an additional sixty (60) Days to present such material before denial of the application, which period may be extended only upon a showing of good cause.

2.9. Issuance of a Developer Certificate or the Addition of a Subdivision

The Commission will issue or deny registration of a Developer Certificate or approve or deny the addition of a Subdivision within sixty (60) Days from the date of receipt of the Deemed Complete application by the Commission.

2.10. Offering Reservations during the Pendency of the Application

A. Pursuant to section 12-10-502(2), C.R.S., where a Developer receives cash or receivables from a purchaser for an uncompleted Subdivision, the Commission will register such Developer only after:

1. The Developer deposits in an escrow account, with an independent escrow agent, all funds and receivables received from purchasers, or

2. The Developer obtains a letter of credit or bond payable to an independent escrow agent, payment or performance bond, or establishes any other financial arrangement acceptable to the Commission, the purpose of which is to ensure completion of Subdivision accommodations and facilities and to protect the purchaser's interest in the Subdivision accommodations and facilities.

B. All approvals for the use of Reservation Agreements issued as set forth in this rule will expire on December 31 following the date of issuance.

4 CCR 725-6, ch. 2

38 CR 01, January 10, 2015, effective 1/30/2015

44 CR 21, November 10, 2021, effective 11/30/2021