The Division of Real Estate (“Division”) would like to remind all Colorado licensed real estate brokers of their disclosure requirements when party to an affiliated business arrangement pursuant to section 12-61-113.2, C.R.S., and Colorado Real Estate Commission (“Commission”) Rule E-46. A licensed broker who is referring business to a settlement service provider in connection with a real estate settlement transaction must make certain disclosures if:
- The broker has either an affiliate relationship with or a direct beneficial ownership interest of more than one percent in the settlement service provider; and
- The broker directly or indirectly refers business to a settlement service provider or affirmatively influences the selection of the settlement service provider.
The licensee or the employing broker of a licensee who is party to an affiliated business arrangement must disclose the existence of the arrangement. The disclosure must be written and provided to the party they are referring at the time the referral is made. Additionally, written disclosure must be made at the time the contract to buy and sell is executed by all parties to the transaction. The disclosure must comply with the federal “Real Estate Settlement Procedures Act of 1974”, as amended. A copy of the Affiliated Business Arrangement Disclosure Statement Format Notice may be found in Appendix D to 12 CFR Part 1024 (Regulation X). A broker must not require the use of an affiliated business arrangement or a particular provider of settlement services as a condition of obtaining services from that broker for any settlement services.
A broker is also required to report all affiliated business arrangements to the Commission through the Division of Real Estate. A broker must make written disclosure of the names of all affiliated business arrangements to which the broker is a party at the time a broker enters into or changes an affiliated business arrangement. Employing brokers must disclose the names of all affiliated business arrangements to which the employing broker is a party on an annual basis.
The written disclosure requirements may be made through the Colorado Affiliated Business Online Services database, which is accessible on the Division’s website.