CP-46 Commission Position on Broker Disclosure of Adverse Material Facts
At the most recent Colorado Real Estate Commission meeting held on August 4, 2015, the Commission adopted Commission Position CP-46– regarding brokers disclosure of known adverse material facts.
The Commission believes it is in the public’s best interest for brokers to disclose all known adverse material facts to the parties to a real estate transaction because this disclosure increases each party’s awareness of those facts prior to completion of the transaction, it reduces the potential for creating a unfair transaction, and it otherwise protects the overall integrity of the transaction.
Quick Facts
► Brokers must disclose known adverse material facts. In all real estate transactions, brokers are obligated to disclose known adverse material facts to all of the parties involved in the transaction. Brokers should refrain from advising clients about clients’ disclosure duties, which may be different.
► Brokers need only disclose known adverse material facts. A broker need only disclose facts of which the broker has actual knowledge. Because a broker must actually know the adverse material fact, a broker does not violate Commission rules if he or she did not know the adverse material fact but only should have known the fact.
► Brokers must not disclose circumstances that may psychologically impact or stigmatize real property. Understanding a broker’s obligation to disclose known adverse material facts is as important as a broker’s duty not to disclose information that may psychologically impact or stigmatize real property. Without the informed consent of the client, brokers must not disclose facts or suspicions regarding circumstances which may psychologically impact or stigmatize real property.
► Brokers must disclose all known adverse material facts, unless it is one of the circumstances set forth in section 38-35.5-101(1). The Commission believes it is in the public’s best interest for brokers to disclose all known adverse material facts to the parties to a real estate transaction because this disclosure increases each party’s awareness of those facts prior to completion of the transaction, it reduces the potential for creating an unfair transaction, and it otherwise protects the overall integrity of the transaction. A broker’s obligation to avoid disclosure of circumstances which may psychologically impact or stigmatize real property should not impede a party’s right to be informed about all known adverse material facts.
