What the Code of Ethics (Article 13) Means to the Colorado Realtor®

In a recent post about the Understanding the Realtor® Code of Ethics: Article 13, I explained that Realtors® are not attorneys. Why? Because they aren’t.

Article 13:
REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.

In my post I stated, “This Article protects the public AND the Realtor® from adverse legal repercussions. Realtors® have NO BUSINESS practicing law. None. Realtors® are all versed in contract law, but are not licensed to practice it. Realtors® are allowed to “fill in the blanks” – that is it. Anything beyond that would be practicing law, and Realtors® are not allowed to do that. No. No. No.” This is absolutely true.

However, Colorado has always been on the cutting edge of real estate law and practices, which includes a court decision (Conway Bogue Realty Inv Co vs. Denver Bar Association) that lays out the specific guidelines for Colorado Realtors® when they are dealing with contracts and contract law. Unlike most states, Colorado Realtors® are allowed to legally prepare real estate documents and work with clients from contract to close without the assistance of an attorney – but, under strict guidelines.

See, in 1957, there were many counties in Colorado that either did not have an attorney, or only had maybe one or two. Having an attorney present for every real estate transaction was a distinct disadvantage to parties wanting to buy and sell real estate. Since contracts, by definition, are an arm of the law, how could real estate transactions take place when there were no attorneys around to facilitate it?

The court decided that in a severe limited respect, a licensed real estate agent in Colorado could work with contracts without an attorney. Real Estate agents are able to do this under the following circumstances (taken from the Conway-Bogue Decision):

  1. His [the RE agent] office must be connected with the transaction as broker.
  2. There must be no charge for preparing the documents other than the normal commission.
  3. The documents must be prepared on commonly used printed, standard and approved forms.

It is clear from the decision that the broker should not, under any circumstances:

  1. Prepare any legal documents as a business, courtesy or favor, for any transaction with which he is not connected as a broker, either with or without pay.
  2. He should not prepare any documents which cannot be properly prepared on the standard and approved printed form.
  3. He clearly should not draw wills, contracts, agreements and so forth, except the initial binder contract or other customary agreements of the type used to bind the transaction or sale.
  4. In addition, it would appear in the best interests of the public and also in conformity with the Court’s opinion for the broker to:
    1. Always recommend to the purchaser that the title be examined.
    2. Inform the parties that each has a right to have the papers prepared by an attorney of their own choosing.
    3. Advise the parties that each has a right to be represented at the closing by an attorney if they desire.
    4. In spite of the permission to prepare such documents, there will inevitably arise situations in which the legal complications are beyond the knowledge of the broker. In such instances an attorney’s assistance should always be sought.

This ended with the Supreme Court allowing Colorado real estate brokers to “prepare these legal documents on standard and approved printed forms by filling in the blanks therein, with information obtained from the usual sources, in transactions with which they are connected as brokers, when they receive no compensation for these acts other than ordinary commission.”

To ensure that this was not abused, Rule F was approved by the Attorney General. Rule F states that the Colorado Real Estate Commission will use its authority to standardize and approve forms to be used in real estate transactions. These Real Estate Commission Approved Contracts and Forms have a statement on the top of each document that reads:

“The printed portions of this form, except differentiated additions, have been approved by the Colorado Real Estate Commission.”

The commission approved forms include:

  • Listing Contracts
  • Sales Contracts
  • Exchange Contracts
  • Disclosure Forms
  • Settlement Sheets
  • Extension Agreements
  • Counterproposals

(Any form that becomes a part of a transaction that IS NOT commission approved, must state clearly that it is NOT a commission approved form.)

Every year, our contracts and other commission approved forms are updated to supply the public with the greatest amount of security and protection when entering into a real estate transaction. Colorado Realtors® are mandated to take annual commission update courses to keep up to date on all of these changes.

Posted by: Mariana Wagner – Colorado Springs Real Estate

Advertisements

About Mariana

I am a Mom, Wife, Real Estate Agent Trainer and Mortgage Lender. Find me at http://www.marianawagner.com
This entry was posted in Colorado Info., Real Estate Consumer Info., Realtor® Code of Ethics. Bookmark the permalink.

8 Responses to What the Code of Ethics (Article 13) Means to the Colorado Realtor®

  1. Jim Hansen says:

    Hi Mariana,

    Thanks for discussing this important topic!

    You have caused me to think of several questions: 1)Does this apply to all real estate, or just to specific categories of real estate, eg. residential, but not commercial or agricultural? 2) Can the client add articles of their own construction to the usual pre-approved forms? 3)Must we, as Realtors, obtain acknowledgements from our clients that we have complied with the stipulations of this statute?

  2. RealtyScoop says:

    Hey Jim! Thank you for your comment. From my understanding, let me address your questions:
    1. “Does this apply to all real estate…” Yes. Anyone who is a licensed Realtor(r) is held to this. The state approved forms cover all areas of real estate.
    2. “Can the client add articles of their own construction to the usual pre-approved forms?” They can add sub sections through the additional provisions, but those additions are not state approved – only the pre-printed portions of the contract are approved.
    3. “Must we, as Realtors, obtain acknowledgements from our clients that we have complied with the stipulations of this statute?” In the act of calling yourself a Realtor(r) you are telling your clients that you are compiant with this.
    I hope that this clears it up a bit.

  3. Deb Hemmann says:

    Thank you for the informative article. How are administative fees considered?
    Thank you for caring about how we are doing real estate and helping us do a better job.

    Regards, Deb

  4. RealtyScoop says:

    Hi Deb! From what I gather, admin. fees are outside the scope of this decision. How I read it (and you may want to get a 2nd opinion…) we are not allowed to represent someone and then charge them extra to write up a contract, and then charge them again to write up a counter proposal… The commission that we agree upon in the buyer and seller agreements cover the “costs” of writing up contracts and such. Thank you for stopping by!

  5. saralipnitz says:

    I thank you for talking about this important topic. I would love to put something out there about this on my site. Our ethics code is something many of us take seriously. Obviously you do or you would not have posted about it.

  6. RealtyScoop says:

    Hi Sarah! Nice to see you here. I have been methodically going through each of the articles of the code and writing about them – Hopefully educating the public about the high standards that we are held to. It is so important.

  7. RealtyScoop says:

    (taken from email)
    Mariana, GREAT article. Sometimes we as Realtors forget we’re not to practice law. Hmm, wonder how many of us do unknowingly? Very thought-provoking. Thanks for sharing!

    – Juanita

  8. RealtyScoop says:

    (taken from email, regarding this post)
    Also, I printed out your article about Conway Bogue, etc. I will be happy to read it and send you my comments. Just up front, without reading it, I want to say that I consider you one of Keller Williams greatest treasures. You are an awesome person, so willing to share and help others. You have the gift of teaching with the confidence of someone who comprehends well what they are teaching. You are truly a treasure to all of us.
    Thanks and God bless you – Therese

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s