At the December 6, 2016 Colorado Real Estate Commission Meeting, the Commissioners remarked on the number of presented complaint cases in which incomplete broker transaction files were identified.
The Division reminds real estate brokers that BOTH the individual licensee as well as their employing broker are EACH responsible for a complete file for every transaction in which the licensee participates.
Let's look at the Division's common practice advisory on real estate broker record retention requirements:
12-61-113(1)(i), C.R.S. requires all licensees to maintain possession of their transaction files for 4 years. Additionally, Commission Rule E-30, identifying employing broker responsibilities, includes the requirement to “Maintain all transaction records”. Even though a licensee’s brokerage may retain copies of each transaction file for their office records, this does not relieve the individual licensee of their responsibility to do the same.
Which documents to retain
Even when a licensee is aware of their requirement to maintain a transaction file, sometimes they are unfamiliar with the documents that should be retained. Commission Rule E-4 reads, in part,
“A real estate broker shall immediately deliver a duplicate of the original of any instrument… to all parties executing the same when such instrument has been prepared by the broker or the broker’s employed licensee or closing entity and relates to the employment or engagement of the broker or pertains to the consummation of the leasing, purchase, sale or exchange of real property in which the broker may participate as a broker.”
Requirements related to the closing settlement statement
Division investigations would also seem to indicate there is frequent confusion about a licensee’s requirements related to the closing settlement statement. Commission Rule E-5 reads, in part, “…the individual licensee who has established a brokerage relationship with the buyer or seller or who works with the buyer or seller as a customer…shall be responsible for the proper closing of the transaction and shall provide, SIGN, and be responsible for an accurate, complete closing statement as it applies to the party with whom the brokerage relationship has been established…”. The signed closing settlement statement should also be retained in the licensee’s transaction file for the required 4 year period.
Division created retention checklist
The Division has created and provided the brokerage community a list of common documents to retain in a licensee’s transaction file. This Transaction Files and the Retention of Records list is available on the Division of Real Estate website. It is important to note that this is a list of COMMON transaction documents.Not
every record identified in the list is used or required in every transaction. The rules identified above and additional Commission rules regarding specific forms determine which documents are mandatory in a transaction and need to be retained. Licensees should review their brokerage’s office policy manual and discuss the record retention requirements specific to their brokerage with their employing broker. Employing brokers who need clarification regarding compliance requirements related to record retention should consult with legal counsel.