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Colorado Realtors® and the Code of Ethics: Article 13 (Conway-Bogue Decision)

By
Real Estate Agent with The Artisan Group- Keller Williams Premier Realty

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):

  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:
    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.

Posted by

       Posted By: Derek and Mariana Wagner - Springs Top Agents

Keller Williams Premier
(719) 434-7525    SpringsTopAgents.com

Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®
Interesting - I just Googled "Conway Bogue Decision" and THIS post pops up as #3 on the first page.
Feb 25, 2007 12:20 PM
Dena Stevens
Rocky Mountain Realty - Canon City, CO
Putting The Real Into Realtor Since 2004
This is a great reminder of how important our jobs are, and how seriously we should take our responsibility.
Feb 25, 2007 01:23 PM
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®
I completely agree, Dena. And in the case of us particularly (CO brokers) we have a lot of responsibility...
Feb 25, 2007 01:28 PM
Sabine Pyrchalla
Colorado Springs, CO

Mariana,

Great Post (In addition to all the previous one's!). And what a great reminder to stay focused and not "stray" from that fine line of preparing a contract and practicing law. (By the way - I think this series would be a great print out for one of our Tuesday Morning Meetings!)

Feb 26, 2007 03:18 AM
Marcial Maier
Global trade - Hallsville, NY
GREAT DAY, I WOULD LIKE TO WORK MY PROJECTS WITH A LAWYER IN MY TEAM, VERIFICATION OF CLIENTS FUNDS OR DEPOSITS, CONTRACTS, NECESSARY DOCUMENTATION FOR A SUCCESFUL TRANSACTION. WOULD YOU ASSIST ME OR RECOMMEND A LAWYER, THANK YOU
Aug 26, 2007 06:00 PM
Anonymous
K Reed
Do any of you get sellers asking you.."What would you charge to just do the paper work?"  They want to market and negotiate for themselves.
Apr 14, 2008 03:48 PM
#6
Bill Schwent
Casa Tierra Realty - Santa Fe, NM
Santa Fe Broker

Mariana,

Unfortunatrely, not all terms of a deal can be completed by checking the box without the purchase agreement being 100 pages long.  For example, in a transaction this week, I added the following statement to a counter offer in response to the seller's instructions:  "upon the completion of the inspection, title examination and financing contingencies, the earnest money shall become non-refundable to the buyer."  Can you see any possibility for this seller requirement to be covered by checking a box?  There are dozens of situations in most deals that require the broker to write something to express in writing the needs of one or the other party.  Indeed, our code of ethics envisions this in Article 9:

REALTORS®, for the protection of all parties, shall assure whenever possible that all
agreements related to real estate transactions including, but not limited to, listing and
representation agreements, purchase contracts, and leases are in writing in clear and
understandable language expressing the specific terms, conditions, obligations and
commitments of the parties
. A copy of each agreement shall be furnished to each party
to such agreements upon their signing or initialing. (Amended 1/04)

As a qualifying broker, I can only wish that all the terms of every purchase agreement and other documents could be fully completed by "checking a box" but that is probably not possible considering the complexities of each transaction.  Check Oliver Frascona's books and CDs for excellent phaseology of such terms.

Apr 18, 2008 08:36 AM
Mobile Austin Notary
Apostille/Authentication/Embassy Legalization, Notary Public, Loan Signing Agent & Process Server Services - Austin, TX
www.mobileaustinnotary.com

Thanks for the great information.Butterfly

Dec 08, 2008 12:43 PM
Anonymous
Kristen Campagna

Agents have the most important position in the real estate industry, making sure the customer's getting what they deserve (homeownership is their greatest asset)! Unlike attorney's Agents are more intouch with the customer's needs, wants and hopes! But like attorney's have to deal with all the legal terms and documents that are pertinent to each and every type of transaction. Let me know if I can help you with managing a closer watch through the closing process.

Dec 09, 2008 04:24 AM
#9
Derek and Mariana Wagner
The Artisan Group- Keller Williams Premier Realty - Colorado Springs, CO
The Artisan Group - Colorado Springs REALTORS®

Kristen - Thank you for your comment. In Colorado, we do not use attorneys for closing. RE attorneys are retained more for RE disputes than for any kind of contract or closing processes.

Dec 09, 2008 04:44 AM
Mary Douglas
United Country Ponderosa Realty, Red Feather Lakes, Colorado - Red Feather Lakes, CO
REALTOR, Red Feather Lakes, Colorado

Hi Mariana, Good information for everyone.  I used to work for a Title Company - the reason why the Title Company's can prepare legal documents is because they are working under the direction of the Broker- in a scrivener capacity.  Sometimes we were asked to prepare a Quit Claim Deed or other document for property that we were not insuring. People got angry or frustrated when we had to tell them that we couldn't help them --  because we weren't attorney's either!   I think it's always good practice not to forget to advise them to seek legal counsel, if they choose.

Dec 09, 2008 12:49 PM
Sharon Harris
Keller Williams Keystone Realty - Hanover, PA
Realtor

Thanks for reminding us. Sometimes it is easy to go the extra mile to try and help. But you are clear here in this post that we should stick to wrtting contracts and selling homes.

Dec 09, 2008 10:28 PM