When Boulder County attached liens to nearly 10,900 properties as part of a plan to repave roads, it caused a lot of heartburn for the area’s real estate community.
That, according to several real estate professionals, is because there were no courtesy notices to title companies about when the lien-bearing assessments would officially be filed and take effect, as well as a gap of a week and a half or more before the information was available online.
That, in turn, created “significant liability for every county subdivision sale” whose closing paperwork didn’t note the Subdivision Paving Local Improvement District liens, said Lou Barnes, a mortgage banker with the Premier Mortgage Group in Boulder.
Barnes said the lack of online postings between early and mid-December potentially jeopardized any contracts being negotiated without the would-be buyers, sellers, lenders, title companies and real estate brokers being made aware of the liens during that period.
Boulder County Clerk and Recorder Hillary Hall said in a Thursday interview that documents filed with her office to be recorded, including the Subdivision Paving Local Improvement District assessment roll filed Dec. 2, aren’t normally immediately posted for computer searches.
Barnes and several others agreed there normally is a time lag between recording a lien-related document and its online posting, but they said it never before has involved such a large number of properties at the same time.
The properties, their legal descriptions and the assessment amounts on that LID list were entered into the county’s clerk’s computer system by a vendor under contract with her office, Hall said — a task, she said, that “still wouldn’t be done” if her staff had had to do it by hand.
A routine verification process followed and was completed Dec. 11, Hall said. She said the property-by-property assessment information has been available online since then, although she said her office is completing another round of quality-control checks that information has been properly indexed to enable specific computer searches.
Barnes, who was among those raising alarms about the situation, said in mid-December that as lenders began learning of the Dec. 2 recording of a 500-plus-page Local Improvement District assessment roll, they’ve been having to re-underwrite each affected loan. He said that as buyers learned of the new assessments, each transaction might have to be renegotiated because the seller and the seller’s agents may be vulnerable to claims by the buyers.
The paving district liens — typically tied to assessments of several thousand dollars per property — remain in place until they’re fully paid off, and it might become a matter of dispute between the prospective buyer and the seller of the property who should be responsible for that payment.
Ken Hotard, the Boulder Area Realtor Association’s senior vice president for public affairs, said although many in the real estate community knew LID was in the works, “It’s not clear that the county commissioners anticipated the complications this would create for property owners in the short term.”
“I don ‘t know how many transactions we’re talking about,” Hotard said, but he said he’d heard of several that could have been or were affected.
Hotard said that when the liens can’t be found and verified through a title company’s routine online title searches and then made known to all the parties involved before a closing, “you’re looking at undisclosed obligations” attached to the property, Hotard said.
“The sale of property is put in jeopardy when an undisclosed obligation is revealed after the property has been under contract,” Hotard said, and if a buyer learns of the lien after the closing on the sale, it “raises a specter of potential litigation” against the seller.
“It creates truly a tremendous can of worms to unravel,” Hotard said
Kelley Abernathy, president of the Longmont branch of Colorado Escrow and Title, said last-minute discoveries of the county’s subdivision paving district liens had nearly jeopardized two sales her office was involved in over the past two weeks.
Abernathy said the existence of the liens was “caught just in time,” hours before the closings on those transactions were to happen. In one case, the buyer and the seller agreed to divide the payment of the subdivision assessment, with each taking half that obligation, she said. In the other case, the seller agreed to cover the assessment obligation in order to remove the lien.
In general, lenders in real estate transactions insist that any liens be paid by the seller before closing and not be made an obligation of the new owner, Abernathy said.
Abernathy checked Thursday and reported she was able to get computer access to the necessary information, but she said she’ll also be especially careful to look for that information whenever researching pending transactions in rural Boulder County.
While the LID’s lien might amount to several thousand dollars on a property being sold for several hundred thousand dollars, “it’s going to be a deal breaker in some cases,” Abernathy predicted.
John Fryar can be reached at 303-684-5211 or jfryar@times-call.com.
