Obligations of Ownership
Not only are there restrictions on the use of virtually any property you buy, but by buying the property you will be assuming certain obligations. Real estate taxes are the most obvious of these. Home buyers are rarely surprised to learn that they are assuming an obligation to pay property taxes when they buy real estate. There are provisions (Section 8.4) within the standard Colorado purchase contract that allow the home buyer to review tax issues.
For those buying condominiums or townhomes, the responsibility of association fees is equally obvious, though buyers of single family homes in newer subdivisions must also be aware that association fees are quite common. Similar obligations arise for home buyers in rural or mountain areas where a number of property owners may have established contractual agreements to build and maintain a shared resource, most commonly an access road or a well. Buyers need to be aware that the nice graveled road leading to their home may not be maintained by county taxes but by $1000 yearly assessments to the homeowners on the road. The title company should alert the home buyer to any of these issues during the purchase process. The critical question is whether the buyers learns about their obligations while they still have time to back out of the contract.
Occasionally, buyers may encounter more substantial, hidden obligations associated with property they are purchasing. Several years ago, we found that a road easement passing through a mountain property carried an obligation to contribute to the construction of a road that extended several miles beyond the property boundary. This created a potential financial obligation ranging anywhere from $10,000 to $50,000. Nothing in the title search made this obvious. The language was buried on the 10th page of the description of an easement.
The other major source of financial obligations that a home buyer could inadvertently assume through a property purchase involves liens. If the previous homeowner has failed to pay taxes, association dues, assessments from the homeowners association or the city, or bills for work that contractors have done on the home, liens can be recorded against the property. Generally, existing liens will be discovered by the title company, which will require that they be paid before closing. But if the title company makes a mistake, or if a contractor files a lien after closing, you may be held financially responsible. This is one reason we strongly recommend certain types of title insurance to our clients (see the discussion of title insurance in our section Under Contract).