| Legal Ideas and Information - November 2006 |
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Senate Bill 71
The Colorado Legislature passed Senate Bill 71 in 2006 to discourage predatory practices against persons in foreclosure. Violations of Senate Bill 71 can lead to criminal sanctions and, unlike the major changes to Colorado's foreclosure statutes, Senate Bill 71 has been in effect since the summer of 2006. Senate Bill 71 regulates "Foreclosure Consultants" and "Equity Purchasers." Foreclosure Consultants are persons who advise persons who are in foreclosure. Equity Purchasers would be more commonly referred to by real estate brokers as "foreclosure investors." In thinking through Senate Bill 71 issues, real estate brokers should distinguish between the regulation of Foreclosure Consultants and Equity Purchasers. Foreclosure Consultants A real estate broker who lists a property for an owner in foreclosure advises that owner. Real estate brokers would be considered foreclosure consultants under the Bill except that real estate brokers are explicitly exempted from the definition of a Foreclosure Consultant because real estate license law already imposes substantial duties on brokers. RESPA Exception: Affiliated Business Arrangements (ABA's)
I own a real estate brokerage firm. Mortgage companies and others profit from the business I refer to them. Does RESPA prohibit me from receiving referral fees from mortgage companies? Response:Yes, but there are at least two business models that allow you to capture some of the benefit from your referrals. General RESPA Prohibitions RESPA regulatory requirements apply to transactions that may involve a loan on residential real estate. RESPA generally prohibits payment of referral fees, unearned fees or kickbacks, as well as the splitting or sharing of fees or charges made or received for providing "real estate settlement services." The terms "federally related mortgage loan" and "settlement services" are both broadly defined. Virtually any institutional residential loan will be a federally related loan. "Settlement services" include: This publication is intended to provide accurate and authoritative information on the subject matter covered. It is distributed with the understanding that the publisher and distributor are not rendering legal, accounting or other professional service, and assume no liability in connection with its use. Copyright © 2006. This is an advertisement. |
IN THIS ISSUE
Is Your Non-Compete Enforceable?
It is not unusual for a business owner to require certain employees or the sellers of the business to enter into an agreement not to compete with the business for a period of time after they leave the business. Some people assume that if the non-competition agreement (or "non-compete") is written by an attorney, and if it has enough "bells and whistles," it must be valid and enforceable. Others assume the opposite, that non-competes are rarely, if ever, enforced. Neither assumption is correct. The stakes in enforcement of a non-compete are high indeed. If the former executives or owners of a business are allowed to compete without restriction, the business could easily lose its key customers and good will, depriving the business of profits and possibly the ability to survive. On the other hand, individuals who are restricted by a non-compete may be deprived for an extended time of the ability to work in the profession and marketplace to which they have devoted their careers, and in which they can be most productive for the economy. The Colorado legislature has attempted to balance these interests in a statute declaring that covenants not to compete shall be void, with certain significant exceptions. Some of the exceptions apply to contracts for the purchase and sale of a business or assets of a business; contracts for the protection of trade secrets; or covenants by "[e]xecutive and management personnel and officers and employees who constitute professional staff to executive and management personnel." If a particular case is found to fall within one of the statutory exceptions, and if the restrictions on competition are found reasonable under the circumstances, the courts will enforce an agreement not to compete. To be reasonable, a non-compete agreement must not be broader than necessary to protect the promisee's (e.g., the business's) legitimate interests, and it must not impose hardship on the promisor (e.g., the seller or employee). The Reed Mill Case. A recent decision by the Colorado Court of Appeals illustrates the issues involved, and the difficulty in predicting whether a non-compete will be enforced under varying circumstances. Meet The Attorneys
Jonathan H. Sargent Mr. Sargent received his Juris Doctor from the University of Colorado in 2006. His practice emphasizes Securities, Corporations, and Real Estate. |
