Colorado § 38-38-506 - Omitted parties - definitions.

§ 38-38-506. Omitted parties - definitions.

(1) As used in this section, "omitted party" means any person who:

(a) Prior to the recording of the notice of election and demand or lis pendens, has either acquired a record interest in the property or has obtained a valid possessory interest and is in actual possession of the property, which interest is junior to the deed of trust or other lien being foreclosed and would otherwise be extinguished by the foreclosure; and

(b) Is not included as a party defendant in a judicial foreclosure action or, if included, is not served with process, or is not served with notice of levy or seizure pursuant to section 13-55-102, C.R.S., or is not notified pursuant to section 38-38-103 of a sale, or is not notified in connection with the legal proceedings contemplated by section 38-38-105.

(2) (a) The interest of an omitted party in the property that is the subject of a sale may be terminated if the omitted party, or anyone claiming by, through, or under an omitted party, in a civil action commenced at any time by any interested person as defined in subsection (2)(c) of this section, by an omitted party, or by anyone claiming by, through, or under an omitted party, is afforded redemption rights if the omitted party would have been entitled to redeem pursuant to section 38-38-302, upon such terms as the court may deem equitable under the circumstances, which terms shall not, however, be more favorable than the person's statutory rights. The court shall give full consideration to whether the omitted party or anyone claiming by, through, or under an omitted party was given or had actual notice or knowledge of the foreclosure and was given an opportunity to exercise statutory rights to cure or redeem.

(b) For purposes of this section, the lien that is the subject of the sale shall not be extinguished by merger with the title to the property acquired pursuant to section 38-38-501 until the interest of any omitted party has been affirmed pursuant to subsection (3) of this section or has been terminated as provided in paragraph (a) of this subsection (2), or by operation of law. The omitted party, or anyone claiming by, through, or under an omitted party, cannot extinguish the lien that is subject to the sale by enforcement of the lien of the omitted party.

(c) As used in this section, "interested person" means the holder of the evidence of debt being foreclosed, a holder of a certificate of purchase or certificate of redemption issued pursuant to section 38-38-401 or 38-38-402, or an owner of the property pursuant to section 38-38-501 or a person claiming by, through, or under such holder or owner.

(d) An omitted party, or anyone claiming by, through, or under an omitted party, shall not have a remedy to cure or redeem, except as set forth in this subsection (2). An interested party shall not be able to extinguish an omitted party's interest except as set forth in this subsection (2) or by written waiver or agreement signed by the omitted party or anyone claiming by, through, or under an omitted party.

(3) If an interested person files with the officer at any time a document affirming an omitted party's interest in the property, subject to the terms, conditions, and provisions of the recorded instrument from which such omitted party's interest is derived, or in the case of an omitted party that is a lessee, subject to the terms and conditions of the lease, whether written or oral, the interest of such omitted party in the property shall not be affected by the foreclosure, and such omitted party shall have no right to cure or redeem.

(4) (Deleted by amendment, L. 2006, p. 1476, § 31; L. 2007, p. 1849, § 27, effective January 1, 2008.)

Source: L. 90: Entire article R&RE, p. 1672, § 2, effective October 1. L. 2006: Entire section amended, p. 1476, § 31, effective January 1, 2008. L. 2009: (2)(a) and (2)(b) amended and (2)(d) added, (HB 09-1207), ch. 164, p. 720, § 18, effective January 1, 2010. L. 2026: (2)(a) amended, (HB 26-1098), ch. 90, p. 366, § 14, effective July 1.

Editor's note: The effective date for amendments made to this section by chapter 305, Session Laws of Colorado 2006, was changed from July 1, 2007, to January 1, 2008, by section 27 of chapter 404, Session Laws of Colorado 2007. (See L. 2007, p. 1849.)

ANNOTATION

Law reviews. For article, "Strategic Options for Overly Encumbered Real Property (Friendly Foreclosures)", see 46 Colo. Law. 31 (July 2017).

26 U.S.C. § 7425(b)(1), a provision of the Internal Revenue Code, preempts this section. Russell v. United States, 551 F.3d 1174 (10th Cir. 2008).

Lease not saved from extinguishment by omitted party status where neither the foreclosing lienor nor the certificate of purchase holders filed a document with the public trustee affirming the lessees' interest in the crop harvested after the redemption period expired. Elrick v. Merrill, 10 P.3d 689 (Colo. App. 2000).

Because municipality did not receive notice of foreclosure, it is an "omitted party" under subsection (1). Because municipality did not receive notice of foreclosure, partnership took title to ranch subject to municipality's judgment lien. This conclusion is supported by the former version of § 38-38-501. Bd. of Cty. Comm'rs v. Sportsmen's Ranch, 271 P.3d 562 (Colo. App. 2011).

Because party received actual notice and had knowledge of the foreclosure, it was not an omitted party even though there was a failure to notify the party's nominee listed in the deed of trust. Bank of N.Y. Mellon v. Mulei, 885 F. Supp. 2d 1075 (D. Colo. 2012).

PART 6

RECEIVERS