In 2024, Republican Rep. Lisa Frizell and a small bipartisan coalition brought forward a bill to limit legal actions against real estate appraisers. While the bill cleared the Colorado House of Representatives, it ultimately died in the Senate Judiciary Committee.
After working with a group of stakeholders, Frizell brought the bill back as Senate Bill 25-035, along with a new prime sponsor, Democratic Sen. Dafna Michaelson Jenet. “Last year I voted no on this bill, and it was one of the hardest votes I had to take, because I was really conflicted,” Michaelson Jenet said.
Frizell said that the measure was brought to her by the Colorado Coalition of Appraisers, a group comprising several national and local real estate appraisal organizations. She told lawmakers in the bill’s first committee hearing that they were trying to fix a situation where appraisers were being sued, often frivolously and after the expiration of their five-year mandatory record keeping requirement.
The measure, if enacted, would require a legal action to be brought against an appraiser within that same time period, creating a five-year statute of limitations in line with the record keeping requirement. Currently, the statute of limitations doesn’t begin until discovery.
“What this looks like is an appraiser conducts an appraisal on a property and sometime later, maybe 10 years, they no longer have their working documents and yet a lawsuit is filed,” Frizell said. “Many of these, in fact the vast majority of these lawsuits have been frivolous in nature. Knowing that the appraiser no longer has their work papers and it’s very, very difficult for them to defend themselves. This leads to very lengthy and costly legal battles.”
Brett Wilkerson, a general appraiser and a director at CCA, said that over the past 15 years, appraisers have seen a trend of predatory litigation targeting appraisers. He cited a specific company in his testimony that he said sued more than 580 appraisers after the 2008 recession, after it bought the right to sue on distressed and underwater loans. He said the company often sued 10 to 15 years after an appraisal was completed. He noted that under current law, appraisers in Colorado could face lawsuits decades after their appraisal.
“This predatory practice not only destabilizes the real estate market, but also has devastating consequences for individual appraisers,” Wilkerson said.
Michaelson Jenet noted that she met with the coalition since the 2024 session and learned more about why it was bringing the bill. “The bill makes sense and is an important protection for these vital small businesses in the real estate process,” Michaelson Jenet said.
The stakeholder process was an important component of the bill moving forward this year, as was an amendment brought at its first committee hearing. The process and amendment led to the Colorado Mortgage Lenders Association and Colorado Trial Lawyers Association removing their opposition to the bill.
The amendment was brought to ensure that fraudulent activity wasn’t condoned under the new bill, according to Frizell. She said the amendment continues protection for consumers and home buyers and carved out the original lender from the bill to protect small business mortgage lenders.
Thomas Neville, testifying on behalf of CTLA, said that the organization occasionally has a difficult role in the General Assembly, and that this bill was a prime example of that.
“Last year we testified against an earlier version of the bill, and people looked at me really funny when I came up, because it seemed out of our lane,” Neville said. “But it was important for us to be heard, because the bill created a new statute of repose, and statutes of repose are bad policy because they can lock courthouse doors before a party even knows they’ve been injured.”
He noted that the bill was intended to fix a limited problem, and one that had only appeared a single time in the state of Colorado. “The problem is real estate speculators buying up bad debt and trying to sue appraisers for errors that the speculators know were made and trying to bring claims way out of time,” Neville said.
But he told lawmakers that through work with the appraisers, CTLA was able to find a path to yes. “One where we could achieve the appraisers’ goal, not by fostering bad policy, but by narrowing the scope of the bill to preserve the rights of the parties to the original appraisal report and also the rights of consumers whose mortgages are based on those reports,” Neville said.
The sponsors noted that while the majority of the bill would bring Colorado in line with the policy of 15 other states, that there was one component that broke new ground.
“Colorado would be the first state to pass the policy specifically calling out discriminatory housing practices, and I think that’s something to be really proud of, and I’m happy that that’s part of this bill,” Frizell said.