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. (Wow! I quoted myself!)
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):
- His [the RE agent] office must be connected with the transaction as broker.
- There must be no charge for preparing the documents other than the normal commission.
- 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:
- 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.
- He should not prepare any documents which cannot be properly prepared on the standard and approved printed form.
- 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.
- 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:
a. Always recommend to the purchaser that the title be examined.
b. Inform the parties that each has a right to have the papers prepared by an attorney of their own choosing.
c. Advise the parties that each has a right to be represented at the closing by an attorney if they desire.
d. 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, Colorado commission approved 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.
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