A Denver judge recently “took” a property back from an investor that they bought at a 2021 foreclosure. What was the court case about? Why is this ruling so profound? Can lenders no longer loan on certain properties in Denver? What does this ruling mean for investors? How does this ruling impact real estate throughout the entire state of Colorado?
What was the Denver foreclosure case about?
An HOA went through a foreclosure process on a house in Green Valley ranch for unpaid dues. The house was a deed restricted property meaning that means that means the property has a deed restriction for affordability. This is very common throughout the front range and especially throughout the mountains.
In this particular case an investor bought the house at a foreclosure auction in 2021 and then attempted to evict the prior owner.
What did the judge rule in the foreclosure case?
Fast forward 4 years later and the property is still tied up in litigation. The judge ruled that the foreclosure sale was invalid as the investor wasn’t a qualified buyer meaning that the investor did not meet the income restrictions and residency restrictionsoutlined in the deed restriction. Essentially the court ruled that the foreclosure sale was invalid and the investor is now forced to relinquish the property. On a side note, nobody could meet the requirements as they can’t occupy the property as it is currently occupied by the prior owners.
Why is this case so groundbreaking?
I have never seen a case like this anywhere in the country. The objective of a foreclosure auction is to recover a debt not to find a qualified buyer for the property. The objective is to provide a venue to fairly sell a property via a court proceeding. There is currently no mechanism that I know requires or even allows a court to screen prospective buyers for their ability to purchase a particular property. Furthermore, how can a court even screen candidates to buy a primary residence when there is an existing person in the property that must be evicted for them to be an owner occupant. Finally does the court really believe that low income buyers of deed restricted properties are going to be paying cash for unit, if they could they would not qualify for the deed restriction as they have too many assets.
Long and short, there is no way that any buyers can or will ever meet these requirements!
Many mountain properties have similar deed restrictions with one change
Before getting into the can of worms this opens, the solution is super simple and typically done on mountain properties that I have seen. In many of the deed restrictions in mountain towns, the housing authority or other entity has the first right of refusal on a any property that is in default. For example, if a lender made a loan on a property in Telluride and the borrower defaulted, the lender has to give the housing authority the first right of refusal to buy the property which eliminates the issue above.
Can someone lend on deed restricted properties?
Based on the ruling above, it is not possible for a lender to loan on deed restricted properties as there is no mechanism for the lender to foreclose and for the court to sell to qualified buyers. For example what happens if a lender forecloses on a property and ends up the owner, obviously they can’t be a qualified buyer so under this ruling so what happens in this case, would they have to give the property back and the foreclosure sale would be invalid? How could a lender ever recoup their money? You will see many lenders stop issuing loans for deed restricted properties as the liability is too great based on this ruling.
Tax lien buyers have a similar liability
This ruling opens up a can of worms. Under this ruling, let’s say that a property owner in a deed restricted unit doesn’t pay their property taxes. Denver county sells the tax lien and an investor buys the tax lien. After three years if the taxes are not redeemed, under the current process, the investor could apply for a deed. Under this scenario, we have the same issue as highlighted above, there is no way for an investor can buy a tax lien. How does Denver or any other county now sell tax liens on deed restricted properties? How do these counties get their unpaid taxes collected? Now tax lien buyers also have liability if they bought a deed restricted property.
Huge issue of government taking
Regardless of your take on affordable housing, the main question is did the government “take” something of value from this investor without providing compensation. I would answer this question absolutely. This investor has been fighting for 4 years and now the court is reversing a sale that was completed 4 years ago and the investor is supposed to give the property back for what they paid. This is insane as the investor incurred substantial time, energy, money, etc… during those 4 years. Note based on this ruling basically every sale in Colorado dating back who knows how long is no longer valid.
Denver taking a property sets Terrible precedent
This court ruling is a terrible precedent for Colorado real estate as it opens a huge can of worms that will have far reaching implications. For example, how can anyone lend on a deed restricted property if no foreclosure sale can be done legitimately based on this ruling. Furthermore, no lender can own a deed restricted property even if it was acquired via foreclosure.
On a similar note, anyone who buys or sells a tax lien also has the same issues highlighted in this ruling which would lead to illegitimate sales. Ironically Denver county would have huge issues as they have no way to sell tax liens only to qualified tax lien buyers that live in the property as an owner occupant. This leads to the question as to how can Denver collect taxes on deed restricted properties.
Along with the items above, there is clearly government taking without compensation as a result of this ruling. The courts are ordering investors to “give back” properties they legitimately bought via a government auction process. Following this same logic the investor would have a claim against the county that conducted the foreclosure for selling a property that they weren’t able to sell as it is impossible to have a qualified owner occupied buyer.
I was floored at this ruling and had to read about it a handful of times before I even believed that there would be a ruling like this. The implications of this ruling for real estate are huge for the entire state. Under this ruling it is not possible for lenders to loan on deed restricted properties and also not possible for anyone to buy deed restricted properties at the foreclosure auction.
Furthermore, it creates a huge issue for tax lien buyers and buyers of any other debt. For example, let’s say that an owner of a deed restricted property bought a car and didn’t pay, they lender gets a judgement and ultimately moves to foreclose their judgment, now they also have a huge issue because of this ruling.
This ruling opens an enormous can of worms that will have far reaching implications for real estate throughout the state. Stay tuned as we are just in the first round as there will likely be appeals
Additional Reading/Resources
- https://coloradohardmoney.com/metro-denver-renters-pay-136-extra-each-month-when-landlords-use-rent-setting-software/
- https://www.denverpost.com/2025/04/23/hoa-foreclosure-auctions-colorado-denver-green-valley-ranch/
We are a Colorado Private/ Hard Money Lender funding in cash!
If you were forwarded this message, please subscribe to our newsletter
I need your help as my goal in writing these articles is to provide the best information/insight on Colorado Real Estate that you cannot get anywhere else! Please like and share my articles on linked in, twitter, facebook, and other social media and forward to your friends/associates I would greatly appreciate it.
Glen Weinberg personally writes these weekly real estate blogs based on his real estate experience as a lender and property owner. He is the owner of Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
Glen resides in Colorado, lends in Colorado, owns property in Colorado, and services loans in Colorado which provides a unique real estate prospective of what is actually happening on the ground both in Denver and throughout Colorado. My goal of this real estate blog is to provide an honest assessment of what I see happening in Colorado real estate and how it will impact real estate owners, buyers, realtors, mortgage professionals, etc…
Fairview is the recognized leader in Colorado Hard Money and Colorado private lending focusing on residential investment properties and commercial properties both in Denver and throughout the state. We are the Colorado experts having closed thousands of loans throughout the Front range, Western slope, resort communities, and everywhere in between. We also live, work, and play in the mountains throughout Colorado and understand the intricacies of each market.
When you call you will speak directly to the decision makers and get an honest answer quickly. We are recognized in the industry as the leader in Colorado hard money lending with no upfront fees or any other games. Learn more about Hard Money Lending through our free Hard Money Guide. To get started on a loan all we need is our simple one page application (no upfront fees or other games)
Tags: Denver hard money, Denver Colorado hard money lender, Colorado hard money, Colorado private lender, Denver private lender, Colorado ski lender, Colorado real estate trends, Colorado real estate prices, Private real estate loans, Hard money loans, Private real estate mortgage, Hard money mortgage lender, Hard money mortgage lender, residential hard money loans, commercial hard money loans, private mortgage lender, Hard Money Lender, Private lender, private real estate lender, residential hard money lender, commercial hard money lender, No doc real estate lender