Colorado House Bill 23-1120, also known as the “Mandatory Mediation Act,” brings important changes to the resolution of real estate disputes in the state. While mediation can offer benefits in terms of cost savings and amicable resolutions, it is important to consider the potential concerns and challenges that this legislative change presents for real estate investors. This article explores the aspects of HB23-1120 and sheds light on how it may impact different types of renters in the market.
HB23-1120, signed into law on June 7, 2023, establishes mandatory mediation for certain real estate disputes in Colorado. The bill requires a landlord and residential tenant to participate in mandatory mediation prior to commencing an eviction action if the residential tenant receives supplemental security income, federal social security disability insurance, or cash assistance through the Colorado Works program (collectively, “cash assistance”). The landlord and residential tenant do not have to participate in mediation if the residential tenant did not disclose or declined to disclose in writing to the landlord that the residential tenant receives cash assistance, the complainant is a 501(c)(3) nonprofit organization that offers opportunities for mediation to residential tenants, or the complainant is a landlord with five or fewer single-family rental homes and no more than five total rental units. Failure to comply with mandatory mediation is an affirmative defense.
The bill prohibits a law enforcement officer from executing a writ of restitution against a residential tenant for at least 30 days after the entry of judgment if the residential tenant receives cash assistance, except in the case in which a court has ordered a judgment for possession for a substantial violation or in the case of a landlord with five or fewer single-family rental homes and no more than five total rental units.
The bill requires a written demand for payment to include a statement that a residential tenant who receives cash assistance has a right to mediation before the landlord files an eviction complaint with the court. The bill requires a written rental agreement to include a statement that current law prohibits source of income discrimination and requires a non-exempt landlord to accept any lawful and verifiable source of money paid directly, indirectly, or on behalf of a person. The bill also prohibits a written rental agreement from including a waiver of mandatory mediation or a clause that allows a landlord to recoup any costs associated with mandatory mediation.
If mediation fails and a tenant covered under the bill is evicted, the bill requires that law enforcement wait 30 days before executing the eviction, up from 10 days under current law, except in cases of substantial violation or if the landlord has less than five single-family rental homes and less than five total rental units. Those landlords are also exempt from mandatory mediation.
Key Provisions and Implications Of HB23-1120
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Scope of Disputes:
The bill applies to a wide range of real estate disputes, including those related to residential or commercial real property, real estate contracts, lease agreements, homeowners’ associations, and construction defects. Parties involved in these types of disputes are required to participate in mediation before initiating litigation.
Implication for Investors: Real estate investors should be aware that a broad range of disputes within the real estate realm fall under the scope of mandatory mediation. This includes issues such as breach of contract, property damage claims, disputes with tenants or homeowners’ associations, and disagreements over construction defects. Familiarizing oneself with the specific types of disputes covered by the bill is crucial for investors.
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Mandatory Mediation Process:
HB23-1120 outlines the mediation process that parties must follow. The process typically involves the selection of a qualified and impartial mediator, scheduling mediation sessions, and exchanging relevant information between the parties.
Implication for Investors: Real estate investors should prepare themselves to actively engage in the mediation process. This involves selecting a mediator with expertise in real estate disputes, gathering relevant documentation and information, and being open to constructive dialogue. Understanding the mediation process and its potential benefits can empower investors to navigate disputes more effectively.
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Mediator Qualifications:
HB23-1120 emphasizes the importance of qualified mediators who possess the necessary skills and training to effectively facilitate real estate dispute resolutions. Mediators must meet specific qualifications established by the Colorado Judicial Department, including completing training programs approved by the court system.
Implication for Investors: When engaging in mandatory mediation, real estate investors should prioritize selecting a mediator who specializes in real estate disputes and meets the required qualifications. An experienced mediator with knowledge of real estate law and the industry can effectively guide the parties through the mediation process and help achieve a fair resolution.
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Exceptions to Mandatory Mediation:
The bill recognizes certain exceptions where mandatory mediation may not be required. These exceptions include emergencies, matters already subject to arbitration or mediation agreements, and disputes involving certain criminal activities.
Implication for Investors: Real estate investors should consult with legal professionals to determine if their specific dispute falls within the exceptions to mandatory mediation. Understanding these exceptions is vital for investors to assess whether mediation is required or if other avenues for resolution may be pursued.
If you would like to read the text of this bill, it can be found here: https://leg.colorado.gov/sites/default/files/2023a_1120_signed.pdf
Disclaimer: This article is for informational purposes only and should not be construed as legal advice. Real estate investors should consult with a qualified attorney or legal professional to understand the specific implications of Colorado House Bill 23-1120 on their individual investment situations.