Bulletin: CO000001

Dear Associates:

There have been several developments in Colorado law within the last few years concerning foreclosure of farmland.

Most recently, Sections 13-40-104, 13-40-124 and 13-40-125 have created new rights in favor of a qualified farm owner-tenants after foreclosure. A qualified farm owner-tenant is a person who is a farmer or rancher on the property at the time of the commencement of the proceeding to foreclose. Such person has the right to retain possession of the property by agreement to lease the property for the calendar year during which the right of redemption expires and further has the right to enter the property after expiration of such lease for the purpose of cultivating or removing crops, if any, planted or sown by him prior to the termination of the lease. These rights apply if the lender entitled to possession of the property derived its rights from the owner or predecessor by mortgage held as of January 1, 1986 or as a result of a refinance of such prior mortgage and if the lender has the right to evict the qualified farmer owner-tenant on or before January 1, 1989. In addition, the qualified farm owner-tenant has the right of first refusal to acquire the property on the terms and conditions of the bona fide offer to purchase received by the owner during the redemption period or within ninety days thereafter. The qualified owner-tenant may also have the right to renew the lease. Although the qualified farmer owner-tenant may waive such rights, the waiver must strictly comply with Section 13-40-125 and the waiver may be revoked within three business days after execution. These provisions terminate effective January 31, 1989.

Because of these rights you should, where issuing in connection with a farmland or ranchland which has been foreclosed, make the following exception:

"Rights of any qualified farmer owner-tenant to lease, occupy, use or acquire subject property or a portion thereof pursuant to Sections 13-40-101 through 13-40-125 of the Colorado Revised Statutes, as same may be amended."

This exception may be deleted provided that you secure an affidavit from the lender which has foreclosed stating (1) that it received no offer or contract from a third party to purchase or lease such property within ninety days after the redemption period; (2) that the former owner of subject property has no right to purchase such property pursuant to such Sections 13-40-101 through 13-40-125; (3) that there are no lease rights by the foreclosed farmer or rancher; (4) that the former owner and/or tenant of subject property is not in possession of the property at this time; (5) that there are no crops which were planted or sown by the former owner or tenant that remain on the land; and (6) that the lender indemnifies both you and Stewart Title Guaranty Company in connection with any claim pursuant to Sections 13-40-101 through 13-40-125.

Colorado also has modified the redemption period for agricultural real estate (until January 31, 1990) extending same from seventy-five days after sale to six months after sale. The sale of the agricultural residence (not more than five acres) may be bifurcated and separately redeemed. The owner has an additional five day period to redeem the agricultural residence after the termination of redemption period for encumbrances or lienors (this right expires January 31, 1989). In connection with the foreclosure of agricultural real estate, no officer, director or employee of the lender or spouse or child of such person may purchase the property at foreclosure sale or from the lender after foreclosure.

You should note that certain rights and options in connection with foreclosures of farmland are also created under the Agricultural Credit Act of 1987 as described in another Bulletin.