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Commentary and Analysis Regarding Colorado Law

A Tale of Two Towns…and their Fire Protection Districts

Submitted by Blair M. Dickhoner

Authorities can be formed in accordance with Section 18, Article XIV of the Colorado Constitution and Sections 29-1-201, et seq. CRS. These cooperative entities provide a variety of functions and are one way to pool resources and maximize governmental services. Many types of special districts and local governments across the state have entered into partnerships to form a broad range of authorities, including water authorities, wastewater authorities, power authorities, 911 authorities, transportation authorities and many others.

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Are you Putting Yourself at Risk By “Saving” on your Car Insurance? (Part 2)


Submitted by Bradley A. Hall

Last quarter, I wrote about how you are able to protect yourself and your family members from injuries caused by uninsured and underinsured negligent drivers. But what if the shoe is on the other foot? What if you are now the defendant who ran the stop sign, looked down at the wrong time, or committed some other act which injured another driver, pedestrian, or even one of your own passengers? Do you have enough liability insurance to cover the injured parties’ damages? If not, your personal assets, including your ongoing income, may be at risk.

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Fracking Ban May Lead to Takings Claims


Submitted by Cameron A. Grant

Recently the Denver Post reported that Boulder County could be liable for $1 billion in petro “takings” if local governments adopt and enforce bans on the drilling practice called fracking.  On June 24th, voters in the City of Loveland rejected a measure that would have extended a moratorium on drilling in the city limits.  Clearly, the issues surrounding oil and gas development in Colorado are heating up.  Sensational claims continue to be made during this energetic election season.  The potential threat of petro takings is one such claim.

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Your Wills and Trusts May Need a Checkup


Submitted by Anton V. Dworak

After more than 10 years of tax chaos, the American Tax Relief Act (ATRA) of 2012 ended the uncertainty that swirled around estate and gift taxes. ATRA made permanent the $5,000,000 estate tax exclusion, generation skipping tax exemption and gift tax exclusion with all indexed for inflation ($5,340,000 in 2014). While this change should be heralded as excluding the vast majority of Americans from worrying about Federal estate and gift taxes, this change could make many wills and trusts executed before ATRA more difficult to administer or in some cases have a result that that decedent did not desire for their beneficiaries.

The problem is that when the estate tax exemptions were as low as $600,000, it was standard practice to create wills with formula clauses. These clauses employed a mathematical formula to determine marital and family bequests. Here’s an example: John and Jane are married, but John has 2 children from a prior marriage and Jane has none. John’s estate is $1,200,000 and Jane’s is smaller. John has a will done in 1990 that has a formula that says put the estate tax exclusion in effect in year of his death into a trust for the benefit of his children and put the rest into a marital trust for Jane for income only and some principal distributions, with the remainder passing to John’s children upon her death. In 1990 when the estate tax exclusion was $600,000, if John died this might have worked perfectly. $600,000 would go into a trust for John’s kids with the remaining $600,000 for Jane for her use during her life. If using those same numbers in 2014, the entire estate of $1,200,000 would go to the children in their trust and none to Jane because only assets over the $5,340,000 exclusion would go into Jane’s trust. Jane would get nothing from John’s estate and she would have to rely on her own estate to provide for herself or use some complicated legal proceedings to see if she could get more from John’s estate depending on how long they were married.

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Colorado Open Records Act

Submitted by Blair M. Dickhoner

On May 2, 2014, Governor Hickenlooper signed HB 14-1193 into law.  This legislation was passed in response to recent court decisions holding that “reasonable” fees could be charged for research and retrieval time spent in response to an open records request.  While the courts stated that such fees are permissible, they did not define the amount of a “reasonable” fee.  This new law, which becomes effective July 1, 2014, requires that if a special district is going to charge a fee for research and retrieval time it must have an open records policy in place that has been posted to the records custodian’s website or otherwise published prior to receiving the request.  This policy must contain the procedures for requesting and obtaining open records and it must specify the amount of the research and retrieval fee which the legislature determined should not be greater than $30.00 per hour.  Additionally, special districts may not charge at all for the first hour devoted to research and retrieval of records.

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DO YOU GET COMPENSATION FOR LOSING YOUR LAND IN AN ADVERSE POSSESSION CASE?


Submitted by Eve I. Canfield

After the famous case in Boulder District Court, McLean v DK Trust, Colorado‘s legislature revised the statute on adverse possession. (C.R.S. § 38-41-101). In addition to making it a little more difficult to prove all of the elements of adverse possession for the party claiming ownership against the record owner, the revised statue allowed for some compensation to the losing party at the discretion of the judge. Compensation for the property itself is based upon the actual value by the county assessor for the most recent property tax valuation. Compensation may also be in the way of an equitable apportionment of the actual tax value of the property being lost if that parcel was not already taxed separately from the losing party’s property. A losing party can also be reimbursed for all or part of the property taxes and other assessments that were paid by the losing party for the last eighteen years before the entry of a final order giving title to the adverse possessor. This revision provides some relief to property owners losing title to a portion of land that has been proven to be adversely possessed by another. The only problem that remains, is that this revision allowing for compensation is only applicable in actions in which title vests with the adverse possessor on or after July 1, 2008, meaning the full 18 year requirement for adverse possession has been fulfilled before July 1, 2008. If title is shown to vest in the adverse party before July 1, 2008, this compensation provision is not available to you if your land if taken through an adverse possession action.

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Ins and Outs of Liquor Licensing


Submitted by Adele L. Reester

Have a liquor license or thinking about getting one for your business: knowing the ins and outs can make all the difference.Liquor licensing of restaurants, taverns, stores, and other establishments is governed by a variety of state laws and regulations, legal decisions, and local rules established by individual Local Licensing Authority (“LLA”). Each municipality or county establishes its own LLA, which may be its judge, a hearing officer, the city council, the county commissioners, or even an appointed citizen board like the one used by the City of Boulder. In Longmont, the City utilizes its municipal judge, while outside city limits Boulder County’s Board of County Commissioners has appointed a hearing officer.

Starting the liquor license process, the applicant will need to complete the state application forms and also comply with any locally established rules. While there are uniform requirements that apply across the board to all applicants throughout the state, having knowledge of the local rules is essential for a smooth application route from start to finish. Longmont is a prime example where local rules create additional burdens on an applicant; some of the City’s local rules include: completion of a City application and other financial release forms; submission of three letters of reference that address the applicant’s (and perhaps registered manager’s) moral character and financial abilities; and deadlines for submitting neighborhood survey results and other evidence prior to the public hearing. Applicants need to assure that applications are complete or they will be rejected.

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Proposed Rule Redefining “Waters of the United States” Under the Clean Water Act and New Interpretive Rule for Agricultural Exemption for 404 Permits


Submitted by Matthew Machado

The EPA has proposed a rule that will expand the need for federal permits under the federal Clean Water Act (CWA) for discharges or other impacts to waters of the U.S. The activities requiring such permits include discharges of “dredged or fill material” (Section 404 Permits) and permits for point source discharges of pollutants the Colorado Department of Health and Environment (CDPS Permit). Typical examples of activities requiring a 404 permit include replacement of a ditch headgate for a municipally owned ditch or digging in a wetland. Examples of activities requiring a CDPS permit include municipal stormwater discharges, CAFOs, and industrial discharges. Depending on the activity involved, obtaining a permit could take hours or take years and millions of dollars.

I. Proposed Rule Redefining Waters of the U.S.The EPA and the Army Corp of Engineer are currently considering adoption of a Proposed Rule intended to expand and/or clarify (depending on who you talk to) the types of streams and wetlands that are considered to be “waters of the U.S.,” and therefore subject to the CWA. Comments on the proposed rule may be submitted to the EPA and Corps until October 20, 2014.The proposed rule will expand the definition of waters of the U.S. to lands that have more marginal water attributes, and result in more projects requiring CWA permits. Under the current rule, the term “wetlands” generally includes those areas normally inundated sufficient to support wetlands vegetations, including swamps, marshes, bogs, and similar areas. Under the proposed rule, the focus would be less on the degree of inundation and more on the connection to a larger water body that is clearly a water of the U.S. For the most part, unless exempt (see below), tributaries and wetlands in the watershed of a stream or river will definitely be deemed waters of the U.S. Furthermore, land with more marginal water attributes in the watershed not currently considered water of the U.S. (e.g. dry gulches and drainage ditches common in Colorado) could be deemed on a case by case basis water of the U.S based on the connection and other factors (“significant nexus” test).

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Are You Putting Yourself At Risk By “Saving” On Your Car Insurance?


According to statistics compiled by the Center for Disease Control, the number one cause of death due to unintentional injury is motor vehicle accidents.  Likewise, motor vehicle accidents are the fourth leading for emergency room visits resulting from unintentional accidents.

Across the United States, 1 in 7 drivers are uninsured.  Colorado falls in line with that statistic.  In addition, Colorado requires only that a driver purchase $25,000 in liability coverage.  The odds are good in Colorado that, if you are involved in an auto accident, the at-fault driver is going to be uninsured or have the minimum limits of coverage.  Even a moderately serious accident can result in well in excess of $25,000 in damages.  An ambulance ride to the emergency room, follow-up care with your physician, lost wages and other expenses can add up quickly.

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Family Farm Audits


Submitted by John Wade Gaddis

Varying commodity prices, uncertain water supplies, and unseasonable weather make it imperative for a family farm to stay on top of its business. How? Here are ten items to consider:

  1. Hold Regular Meetings. Meet regularly with your lender. Meet regularly with your ditch boss. Meet regularly with the owners of the farm and keep everyone in the loop. Schedule regular meetings.
  2. Keep Entity Up to Date. Keep annual meeting minutes. File reports with the Secretary of State annually.
  3. Plan Oil and Gas Development. Do you want to sever the minerals from the farm? Should you form an entity to take ownership of the minerals?  If you are leasing or entering into a production agreement, preserve as much of your property for future development as possible.
  4. Review All Insurance Policies. Does the farm’s insurance policy provide sufficient coverage for a catastrophic loss? Should you investigate obtaining a liability umbrella to provide more coverage? What crop loss insurance should be purchased?
  5. What is Your Plan for Retirement? Everyone talks about estate planning but have you put together a written retirement plan? Will the farm ownership continue in the family?  If so, have you defined a structure that helps your heirs make decisions in a way that avoids conflict or a forced breakup of the farm?
  6. Keep Up With Special Districts. Participate in discussions with any special districts that may affect your farm. Participating in sanitation districts, water districts and metropolitan districts can add value to the farm.
  7. Participate in Governmental Long Range Planning. Many farms lie within urban planning areas. Be sure to attend any public hearings about land use planning, zoning and future annexations. Be Proactive. Contact surrounding communities to review their long range plans.
  8. Document Everything. Update farm leases. Update farm house rental agreements. Document all farm assets, including water rights and storage rights. Obtain and inventory copies of all deeds, water rights, oil and gas rights and water storage rights.
  9. Know Your Disaster Plan. Recent events have taught that monsoon rains occur, fires can quickly destroy thousands of acres and unthinkable tragedies happen. Think about the worst that can happen and have a written plan of action in place.
  10. Assemble a Team of Trusted Advisors. Assembling a team of agricultural advisors, appraisers, bankers, accountants and attorneys – that know you and know your goals, hopes and methods of operation will help meet every challenge and make the most of every opportunity.

It is important to pay attention to larger issues that affect your farm. Sometimes you can manage to review all of these issues on your own. If you need help doing this, Lyons Gaddis Kahn Hall Jeffers Dworak and Grant PC performs farm audits and we can schedule one for you.  Please contact an attorney in our Transactional Group for help.

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Do Not Overlook the Real Estate When Buying a Business, Part 1

Cameron Grant 01

Four Reasons that a Survey is Important When Buying a Business with Valuable Real Estate


This is the first of a two-part article addressing the real estate component of a business purchase.  Almost invariably, my clients looking to purchase a new business focus on gross revenues, strategies for decreasing costs, expanding customer base, manufacturing processes and other forward-looking elements of the deal.  Rarely do they focus on one of the most basic and often significant factors – the company real estate.  Whether it is a leased retail location, shared manufacturing facility or a long owned office building, a buyer should not overlook the bricks and mortar.  In Part 1 of this article, I will discuss the importance of a survey when evaluating a business purchase involving valuable real estate.  In Part 2, I will discuss issues involving leases, their evaluation, assignment and assumption.

My clients often ask whether a survey is needed as part of a new business purchase.  If the business does not own real estate or if the real estate is neither valuable nor critical to the business operation, then no, a survey may not be important.  If, however, the company owns valuable real estate or real estate critical to the business operation, then a survey is absolutely an important part of a due diligence process.  In these cases, we strongly suggest that our clients obtain a new survey or update the seller’s existing survey.  This exercise will give you a picture of the property you are about to purchase.  That picture will be an important tool as you determine whether you will control the business real estate.  The following list identifies four pieces of crucial information provided by a survey:

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Lyons Gaddis Opening Louisville Office

The firm is excited about our new branch office in Louisville. Scheduled for opening in mid-April, we are remodeling the space to include a conference room and offices for four attorneys. Located at 363 Centennial Parkway, Suite 110 (immediately west of Lowes, on the north side of the Highway 36 and McCaslin Boulevard interchange), our new branch office in Louisville will provide greater flexibility to meet with current and new clients from Louisville, Superior, Erie, Lafayette, Broomfield and surrounding communities near the Highway 36 corridor, as well as those from the Boulder and Denver metropolitan areas.

The branch office will also allow our three attorneys who live in Louisville, Shareholder Steve Jeffers, and Associates Matt Machado and Madoline Wallace-Gross, to work on a regular basis in the Louisville office and be more active in their hometown community. Steve has lived in Boulder County since 1977 and called Louisville home for the past 28 years. Long-time Associates Matt and Madoline have also lived in Louisville for a number of years. All three attorneys look forward to the new opportunities for community involvement.

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Special District Election Bill Signed by the Governor

Submitted by Blair M. Dickhoner

On February 18th, Governor Hickenlooper signed into law the much anticipated Local Government Election Code, legislatively known as HB-1164.  HB-1164 was crafted to resolve several inconsistencies between special district election requirements and the new election provisions created by the passage of HB-1303 last year.  HB-1164, codified at Section 1-13.5-101 et seq., C.R.S., applies to any district, business improvement district, Title 32 special district, authority or political subdivision of Colorado that is authorized by law to conduct an election.  It does not, however, apply to counties, school districts, RTD or municipalities.

Special districts that are unable to cancel their election will be permitted to follow one of the following election options: (1) hold a coordinated election with the county (primarily for November elections); (2) conduct a polling place election; or (3) carry out an independent mail ballot election.  In circumstances where a special district opts to proceed with a non-coordinated polling place or independent mail ballot election, the new Local Government Election Code will govern the operation of that election.

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Colorado Water Law Legislation Update


Submitted by Jeffrey J. Kahn

Proposed Water Legislation and Ballot Initiative

Legislation:  The 2014 Colorado Legislative Session convened on January 8th and several pending bills appear headed for enactment, including:

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LEGISLATURE CONTINUES PATTERN OF STRONGER REGULATION OF HOAs


Submitted by Eve I. Canfield

The Colorado Common Interest Ownership Act (“CCIOA”), C.R.S. § 38-33.3-101, et seq, was amended in 2013.  Two statutory amendments were made by HB 1276 and HB 1277. 

 HB 1276 has been referred to as the “HOA Debt Collection Bill”.  The legislature has continued to define and control collection procedures of HOAs to address what the public sees as unfair and abusive collection procedures by HOAs.  While the prior SB 100 required HOAs to adopt collection policies and procedures, HB 1276 goes further in stating specific requirements for an HOA’s collection policy.  HOA collection policies will have to be 1276-compliant, or the HOA will be prohibited from using a collection agency or an attorney to collect past due assessments.  There are 7 specific requirements to be included in the policy:

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A Holiday Gift to Your Family


Submitted by Wallace H. Grant

Is your will up to date?  Do you have powers of attorney delegating financial and medical authority to a trusted family member or advisor?  Do you have a living will?  If not, spending some time updating your will and other estate planning documents would be a good holiday gift to your family, or a New Year’s Resolution that you can accomplish early in the New Year.

A Will is your opportunity to decide what happens to your estate upon your death.  In your will, you can designate who you chose to administer your estate; you can select guardians for your minor children; you can establish trusts for young children or family members who have special needs; you can determine who is to receive your personal items, such as collections, special tools, antiques, etc.; and you can decide how the rest of your estate is to be divided and distributed.  If you don’t have a will, those decisions are made by Colorado statutes, rather than by you!

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Starting a New Business


Submitted by Chad A Kupper

A limited liability company is flexible, and offers distinct advantages over a sole proprietorship, namely, the ability to reduce the personal liability of its members. But, did you know that an LLC also offer pass-through taxation in certain circumstances? If there is only one member in the company, the LLC is treated as a “disregarded entity” for tax purposes, and the individual owner would report the LLC’s income or loss on Schedule C of his or her individual tax return. Thus, income from the LLC is taxed at the individual tax rates. Make sure you know which corporate tax election is best for your LLC. Ask us how we can help you set up the right business for your needs.

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Public Benefit Corporations


Have You Heard?

Public Benefit Corporations
Submitted by Suzan D. Fritchel
Beginning in April, 2014, Colorado will have a new business entity: the Public Benefit Corporation.

The Colorado State Legislature recently passed a bill authorizing a new form of business entity called the Public Benefit Corporation. This new entity will be “for profit,” but the board of directors must balance the best interests of the corporation and shareholders (maximization of profits) with the “public benefits” as stated in its articles of incorporation. Examples of possible public benefits identified by an entity would include charitable, cultural, educational, environmental or religious goals. Contact us for guidance in this new area of business operation.

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Powerful Powers of Attorney


Three Ways to Empowerment

Submitted by Anton V. Dworak

When clients make appointments for “estate planning”,  they tend to be focused on how they leave their property when they pass away.    While this is, of course very important,  we always stress that an estate plan is incomplete without properly drafted “powers of attorney.”

 A power of attorney is a legal document where you grant powers to make decisions for you under circumstances you dictate.  These powers include making financial decisions,  paying bills,  executing deeds or making medical decisions.     These powers can be effective immediately or upon disability.    What powers and when they can be used depends on your individual personal circumstances.

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Mutual Indemnification in Leases


Why Can’t I Have What the Landlord Gets?
Submitted by Cameron A. Grant

I recently spoke to a group of commercial real estate brokers about the legal aspects of the leasing business. One question that garnered significant attention related to indemnification provisions in lease agreements. These brokers represent both landlords and tenants in lease deals and routinely run into a negotiating hurdle about indemnification. Landlords often demand that the tenant indemnify them against a host of potential problems but are reluctant to give tenants a similar level of protection. The brokers reported difficulty in bringing the two sides together over this issue. One broker said that a major lease negotiation broke down over this issue alone. This is an avoidable problem. If the parties understand the differing degrees of control and exposure perhaps indemnification will not pose such a challenge to these negotiations.

What is “indemnification“? – a party’s agreement to pay the liability, and in some cases, the defense costs and damages, of the other party if a claim is asserted by a third party.

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