2021 Colorado Code
Title 38 - Property - Real and Personal
Article 30 - Titles and Interests
§ 38-30-165. Unreasonable Restraints on the Alienation of Property - Prohibited Practices

1. Subject to the limitations and exceptions as provided in this section, any person with a security interest in real estate shall not, directly or indirectly:
   1. Accelerate or mature the indebtedness secured by such real estate on account of the sale or transfer of such real estate or on account of the assumption of such indebtedness; except that this paragraph (a) shall not apply if the person to whom the real estate would be sold or transferred is reasonably determined by the person holding the security interest to be financially incapable of retiring the indebtedness according to its terms, based upon standards normally used by persons in the business of making loans on real estate in the same or similar circumstances; or
   2. Increase the interest rate more than one percent per annum above the existing interest rate of the indebtedness or otherwise modify, for the benefit of the holder of the security interest, the terms and conditions of the indebtedness secured by such real estate, on account of the sale or transfer of such real estate or on account of the assumption of such indebtedness; or
   3. Charge, collect, or attempt to collect any fee in excess of one-half of one percent of the principal amount of the indebtedness outstanding, on account of the sale or transfer of such real estate or on account of the assumption of such indebtedness, not including title insurance, abstracting, credit report, survey, or other charges appertaining to the sale; or
   4. Enforce or attempt to enforce the provisions of any mortgage, deed of trust, or other real estate security instrument executed on or after July 1, 1975, which provisions are contrary to this section; but this section shall not be applicable to instruments executed prior to July 1, 1975, nor to the rights, duties, or interests flowing therefrom.

2. The maximum increase allowed in paragraph (b) of subsection (1) of this section and the maximum fee allowed in paragraph (c) of subsection (1) of this section shall not be deemed required, minimum, or ordinary, but said interest increase and fee may, in any case, be less than the amount allowed.
3. This section shall be applicable only to a security interest in real property utilized as residential dwelling units other than motels, hotels, and nursing homes.
4. This section shall not be applicable in those cases in which the secretary of the department of housing and urban development, or his successor, matures the indebtedness on multiple-family housing projects pursuant to the current law and regulations of the federal housing administration.
5. This section shall not be applicable to a person with a security interest in real estate who is not regularly engaged in the business of making real estate loans.
6. In the event that the party assuming the indebtedness declines to agree to an increase in the interest rate as provided in paragraph (b) of subsection (1) of this section, said indebtedness may be prepaid without penalty or increased interest at any time within sixty days after said assumption; but if he does not make such prepayment within the sixty-day period he shall be liable for the increased interest rate from the date of the assumption, and any prepayment penalty provided for in the security instrument shall thereafter be in effect.
7. The provisions of subsection (1) of this section shall not apply in cases of mortgage loans made on or after January 1, 1981, with proceeds of bonds issued pursuant to article 3 of title 29, C.R.S.
8. The provisions of subsection (1) of this section shall not apply to indebtedness made or acquired by the Colorado housing and finance authority on or after April 1, 1981, secured by real estate, when said authority accelerates or matures, or requires or permits the acceleration or maturing of, indebtedness secured by real estate or when said authority increases, or requires or permits the increase of, the interest rate more than one percent per annum above the existing rate of the indebtedness in accordance with regulations of the Colorado housing and finance authority.

History. Source: L. 75: Entire section added, p. 1428, § 1, effective July 1. L. 76: (1)(c) amended, p. 315, § 70, effective May 20. L. 81: (8) added, p. 1827, § 1, effective April 2; (7) added, p. 1826, § 1, effective April 30. L. 87: (8) amended, p. 1197, § 20, effective May 20.

For powers of the Colorado housing finance authority, see the “Colorado Housing and Finance Authority Act”, part 7 of article 4 of title 29.

Law reviews. For article, “Due-On-Sale Law as Preempted by the Garn-St. Germain Act”, see 12 Colo. Law. 591 (1983). For article, “The Influence of the U.S. Constitution on Colorado Real Property Law”, see 16 Colo. Law. 1603 (1987).

Lender to receive notice of impending sale. Subsection (1)(a) contemplates that the lender receive notice of an impending sale or transfer prior to closing so that, in the event acceleration of the indebtedness is warranted, the lender's position is not impaired. Kemp v. Empire Sav., Bldg. & Loan Ass'n, 635 P.2d 234 (Colo. App. 1981), aff'd, 660 P.2d 899 (Colo. 1983).

Violation may be ground for acceleration. Violation of the agreement to seek prior approval of transfers may be a ground for acceleration. Kemp v. Empire Sav., Bldg. & Loan Ass'n, 660 P.2d 899 (Colo. 1983).

Limitation inapplicable to federal savings and loan associations. The one percent limitation on the increase of interest rates set forth in subsection (1)(b) does not apply to federal savings and loan associations. Dantus v. First Fed. Sav. & Loan Ass'n, 502 F. Supp. 658 (D. Colo. 1980 ).

The doctrine of federal preemption precludes the application of subsection (1)(b) to federal savings and loan associations. Haugen v. Western Fed. Sav. & Loan Ass'n, 633 P.2d 497 (Colo. App. 1981).

A regulation of the federal home loan bank board permitting federal savings and loan associations to use due-on-sale clauses in their mortgage contracts preempts any restrictions imposed by state law on the exercise of these clauses. Haugen v. Western Fed. Sav. & Loan Ass'n, 649 P.2d 323 (Colo. 1982).

Due-on-sale clauses are per se reasonable restraints on alienation. Income Realty & Mtg., Inc. v. Columbia Sav. & Loan Ass'n, 661 P.2d 257 (Colo. 1983) (instrument executed prior to July 1, 1975).

The due-on-sale clause is a per se reasonable restraint on alienation and a case-by-case analysis of the justifiable interests of the parties is not warranted. Krause v. Columbia Sav. & Loan Ass'n, 661 P.2d 265 (Colo. 1983) (instrument executed prior to July 1, 1975).

A due-on-sale clause does not constitute an unreasonable restraint on alienation as applied to installment land contracts. Income Realty & Mtg., Inc. v. Columbia Sav. & Loan Ass'n, 661 P.2d 257 (Colo. 1983)(instrument executed prior to July 1, 1975). See Rustic Hills Shopping Plaza, Inc. v. Columbia Sav. & Loan Ass'n, 661 P.2d 254 (Colo. 1983) (instrument executed prior to July 1, 1975).

Due-on-sale clause may be challenged only on ground of unconscionable conduct. Due-on-sale clauses may be challenged only on the ground that the lender, in the exercise or enforcement of the clause, has engaged in unconscionable conduct. Income Realty & Mtg., Inc. v. Columbia Sav. & Loan Ass'n, 661 P.2d 257 (Colo. 1983)(instrument executed prior to July 1, 1975).

Applied in Von Ehrenkrook v. Midland Fed. Sav. & Loan Ass'n, 196 Colo. 179 , 585 P.2d 589 (1979); Krause v. Columbia Sav. & Loan Ass'n, 631 P.2d 1158 (Colo. App. 1981).