Property Management in Colorado
Colorado lets arithmetic, not a judge, set the length of a minority owner's non-compete.
Two rules that decide how a Colorado sale gets papered changed in August 2025 and August 2026. A covenant signed by a minority owner whose stake came as compensation for services now has a maximum length that has to be calculated rather than argued, and raising the number of years means raising the money. An association management book that used to transfer with no state obligation attached now carries a 45-day turnover deadline with a daily penalty behind it. Neither changes what a book is worth. Both change what a buyer can hold you to after closing, and both are cheaper to settle while the documents are still yours to draft.
Denver-Aurora-Lakewood (Denver metro) / Colorado Springs / Fort Collins-Loveland (Northern Colorado) / Greeley / Weld County
Consideration divided by compensation, in years
Senate Bill 25-083 passed the legislature on 8 May 2025, was signed on 3 June 2025 as chapter 366, and took effect on 6 August 2025, applying to covenants entered into or renewed on or after that date. Anyone working from the pre-August text of C.R.S. section 8-2-113(3)(c) is reading superseded language, and so is any guidance on Colorado covenants published before that date.
The exception protects a covenant related to the purchase and sale of a business, a direct or indirect ownership share in a business, or all or substantially all of the assets of a business, and only where it restricts competition by an owner of an interest in the business. For an individual who holds a minority ownership share received as equity compensation or otherwise in connection with services rendered, the duration in years must not exceed the total consideration that individual received from the sale divided by their average annualized cash compensation from the business, including income received on account of the ownership interest, over the preceding two years or the shorter period of affiliation.
The denominator is where the surprises live, because it is not salary. It takes in distributions and anything else received on account of the ownership interest, so the better a minority owner has been paid out of the business, the fewer years the same closing check buys. Two people receiving identical consideration can be held for different lengths of time because one of them drew more. The quotient is a ceiling rather than a floor: it caps what a Colorado court may enforce and does nothing to make a covenant inside it reasonable.
The formula reaches the person a buyer most wants to hold, and misses the one most sellers assume it covers. It is written for the minority holder who was given points for service: the operations lead, the second-generation partner, the broker made an owner instead of paid a bonus. A founder holding a majority stake sits outside it. Where it does apply, more consideration is the only lawful route to more years, so the covenant and the price stop being two negotiations and become one.
What happens on a partial book is open. The exception names a business, an ownership share, or all or substantially all of the assets, and no Colorado court has construed whether a carve-out of one metro's portfolio is a business for this purpose since the language took effect. If the exception does not carry, the fallback is the general rule, under which a covenant restricting a worker is void, and a Colorado court has discretion to narrow an overbroad covenant but cannot be compelled to use it. A buyer taking a slice of doors rather than the company is drafting against a fallback with no repair in it.
A Colorado covenant fails on delivery before it fails on scope
Clearing the duration ceiling is not the end of it. C.R.S. section 8-2-113 carries notice and forum rules that SB 25-083 left untouched, and a covenant well inside the exception can still be void because of the way it reached the person signing it. Subsection (4)(a) makes a covenant otherwise permissible under subsection (2) or (3) void unless notice of the covenant and its terms is given to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of its effective date or the effective date of the consideration for it. Subsection (4)(b) requires that notice to be a separate document from any other covenants, in clear and conspicuous terms, and signed by the worker.
Whether subsection (4) reaches a pure sale-of-business covenant is unsettled, since every mechanic in it is keyed to a worker and an offer of employment, and a seller who takes the money and goes is neither. Sellers of Colorado management companies rarely go. They stay through a transition or an earn-out, which puts one person inside subsection (3) as an owner and inside subsection (4) as a worker on the same day. The safe assumption is that the standalone signed notice is required and that the fourteen days are counted backward from the earlier of the covenant's effective date and the consideration for it, which is a date that has to sit on the transaction calendar before closing week starts.
Two further mechanics run against the buyer's usual paper. A worker who at termination primarily resided or worked in Colorado cannot be required to litigate enforceability outside Colorado, and for a worker who at termination primarily resided and worked in Colorado, Colorado law governs enforceability notwithstanding any contrary contractual provision. The conjunctions differ on purpose, and the wider of the two is the forum rule. For the seller who stays through a transition, a Delaware or buyer's-home-state forum clause does not survive Colorado residence, even where the work happened somewhere else.
An employer that enters into, presents as a term of employment, or attempts to enforce a covenant void under the section owes actual damages plus a penalty of $5,000 per worker or prospective worker harmed. Subsection (8)(c) lets a court in its sound discretion award no penalty where the employer shows good faith and reasonable grounds for believing there was no violation, which is discretion to ask a Colorado court for rather than a defense the buyer holds. The penalty is counted per worker, so a buyer that papers the same void covenant across a management company's staff is exposed once for each person who signed it.
Handing back an association's records now runs on a 45-day clock
Colorado ran a licensing program for community association managers and then let it lapse. Governor Polis vetoed HB 19-1212 on 31 May 2019, the program expired on 30 June 2019, and the Division of Real Estate now states that there is no regulatory oversight of HOAs or community association managers in the state. Most Colorado associations must still register with the Division and renew each year under CCIOA, section 38-33.3-401.
So the two halves of a Colorado book sit under different rules. The association side carries no licensing gate, while the leasing side is brokerage under C.R.S. section 12-10-201(6)(a)(I), which means the buyer of a property management company needs its own licensed entity and a designated broker who has personally passed the Colorado examination and who is personally answerable under section 12-10-203(7) for the escrow and trust funds that entity handles.
What changed in August is that walking away from an association is no longer free. HB 26-1099 was signed on 13 April 2026 as chapter 42 and took effect on 12 August 2026, and it requires a departing management company to deliver all association property, records, money and accounts to the successor manager or to the association within 45 days, at no charge. Missing the deadline costs $250 per business day, plus interest and any late fees the association incurs, and a willful violation carries treble damages, attorney fees and court costs. The words at no charge close the customary escape, which was to bill the handover as a transition service and let the pace follow the invoice.
Two places this lands in a sale. A carve-out or partial-book sale of association contracts now runs against a statutory clock rather than against whatever the transition services schedule says, and an association that declines to follow the buyer stops being a lost account and becomes a turnover obligation with a daily meter behind it. Records hygiene has also become a dated deliverable: a company whose association files live across several systems and one long-serving employee's memory has 45 days to assemble them, at its own cost, for a book it no longer earns anything on.
Questions Colorado sellers ask
- How long a non-compete can a Colorado buyer ask me for?
- If you hold a minority share that came to you as equity compensation or otherwise for services, the ceiling is arithmetic: the total consideration you receive from the sale divided by your average annualized cash compensation from the business, including income on account of the ownership interest, over the preceding two years or your shorter period of affiliation. A founder with a majority stake is outside that formula. The quotient is a maximum rather than a safe harbor, so a covenant that clears it can still fail on its scope.
- Does my covenant need its own signed notice if I stay on after the sale?
- Assume it does. Subsection (4) of C.R.S. section 8-2-113 is keyed to a worker and an offer of employment, and whether it reaches a covenant given purely as a seller is unsettled. A Colorado seller who stays through a transition or an earn-out is an owner and a worker at the same time. What the subsection requires is a separate document, in clear and conspicuous terms, signed, and delivered at least fourteen days before the earlier of the covenant's effective date and the effective date of the consideration for it.
- I am selling only my association contracts. Does the 45-day turnover rule apply?
- HB 26-1099 is written about a departing management company rather than about a sale, so a carve-out that ends your engagement with an association starts the clock: all association property, records, money and accounts go to the successor manager or to the association within 45 days, at no charge, on penalty of $250 per business day, with treble damages, attorney fees and court costs available on a willful violation. The act is recent and no court has construed it, so put its application to a contemplated carve-out in front of Colorado counsel.
- Can an out-of-state buyer acquire my company without opening a Colorado office?
- Yes, in the sense that matters. The buyer needs a Colorado-licensed entity and a designated broker who has passed the Colorado examination, but under section 12-10-208(1) a nonresident broker is not required to maintain a Colorado place of business if it maintains a definite place of business in another state, subject to the consent to service conditions in that section. What it cannot do is manage residential property here for a single day without the licensed entity and the designated broker already in place.
- What happens to my broker license role if I leave at closing?
- The entity has to have a designated broker at all times, and the replacement must already be licensed and must qualify to act as an employing broker under section 12-10-203(5)(c)(II). Under section 12-10-203(6)(c) the Director may issue a named replacement a temporary license for up to ninety days, extendable once for good cause, which is a bridge for someone already identified rather than a window to recruit in. Whoever accepts the role is personally responsible under section 12-10-203(7) for the entity's escrow and trust funds.
- Will my buyer want the assets or the entity?
- Colorado adds one item to that decision. Because a property management company is generally not a retail business, the Colorado Department of Revenue routes a purchase of its assets to consumer use tax: the buyer owes tax at the 2.9 percent state rate plus applicable local rates on the price allocated to tangible personal property, reported on form DR 0252. That makes the allocation schedule a Colorado tax document. The amount is usually small on an asset-light management company, and it is the buyer's cost, so it belongs in the allocation negotiation. The withholding and clearance machinery buyers reach for in other states is written for a retailer selling out and generally will not be available here.
Where these facts come from
Everything above that is a rule rather than a judgment is listed here with its publisher and the date it was checked. Licensing, tax and non-compete rules change, sometimes without much notice. None of this is legal or tax advice, and it is not a substitute for your own counsel and CPA.
Senate Bill 25-083 passed the legislature and was sent to the Governor on 8 May 2025, was signed on 3 June 2025 as chapter 366, and took effect on 6 August 2025, applying to covenants entered into or renewed on or after that date. As amended, C.R.S. Section 8-2-113(3)(c) protects a covenant not to compete related to the purchase and sale of a business, a direct or indirect ownership share in a business, or all or substantially all of the assets of a business, that restricts competition by an owner of an interest in the business. For an individual who owns a minority ownership share received as equity compensation or otherwise in connection with services rendered, the duration in years must not exceed the total consideration received by the individual from the sale divided by the average annualized cash compensation received by the individual from the business, including income received on account of the ownership interest, during the preceding two years or the shorter period of affiliation.
Colorado General Assembly, SB 25-083. Checked 2026-09.
The formula caps duration and does not itself make a covenant reasonable in scope. Whether a partial book of management contracts is a business for the purposes of the exception has not been construed by a Colorado court.
C.R.S. Section 8-2-113(4)(a) makes a covenant otherwise permissible under subsection (2) or (3) void unless notice of the covenant and its terms is given to a prospective worker before the worker accepts the offer of employment, or to a current worker at least fourteen days before the earlier of its effective date or the effective date of the consideration for it, and Section 8-2-113(4)(b) requires that notice to be a separate document from any other covenants, in clear and conspicuous terms, and signed by the worker. Section 8-2-113(6) provides that a worker who at termination primarily resided or worked in Colorado may not be required to adjudicate enforceability outside Colorado, and that Colorado law governs enforceability, notwithstanding any contrary contractual provision, for a worker who at termination primarily resided and worked in Colorado. Section 8-2-113(8) makes an employer that enters into, presents as a term of employment, or attempts to enforce a covenant void under the section liable for actual damages plus a penalty of $5,000 per worker or prospective worker harmed, and Section 8-2-113(8)(c) permits a court in its sound discretion to award no penalty where the employer shows the act or omission was in good faith and that it had reasonable grounds for believing there was no violation.
Colorado General Assembly, Office of Legislative Legal Services, C.R.S. Title 8. Checked 2026-09.
Cited from the 2024 Colorado Revised Statutes. Whether subsection (4) applies to a sale-of-business covenant given by a seller who does not become a worker of the buyer is unsettled; the mechanics in that subsection are all keyed to a worker and an offer of employment.
In 23 LTD v. Herman, 2019 COA 113, an issue of first impression, the Colorado Court of Appeals held that parties to an agreement cannot contractually obligate a court to blue-pencil a covenant that violates Colorado public policy, and that the trial court did not abuse its discretion in declining to narrow an overbroad non-solicitation provision even though the agreement contained a severability clause expressly asking a court to supply reasonable time and geographic limits. The provision was left void and unreformed.
Trevor Crow, Crow Legal, published by the Colorado Bar Association Business Law Section. Checked 2020-01.
Secondary source, and the decision predates both the 2022 rewrite of C.R.S. section 8-2-113 and the 2025 amendment. No Colorado appellate decision has applied the reformation question to the current statute. Read the opinion itself with Colorado counsel before relying on it.
Section 12-10-201(6)(a)(I) of the Colorado Revised Statutes makes selling, exchanging, buying, renting or leasing real estate for others for compensation the act of a real estate broker, which is the provision that reaches third-party residential property management, and Colorado issues no separate property manager license. Under Section 12-10-203(6) a license issued to a partnership, limited liability company or corporation is issued to the entity, which must designate a qualified active broker who has personally passed the Colorado examination on the entity's behalf. Under Section 12-10-203(7) the designated broker is personally responsible for the handling of any and all earnest money deposits or escrow or trust funds received or disbursed by the entity, and a judgment for breach of that fiduciary duty may be enforced jointly or severally against the broker personally. Under Section 12-10-203(6)(c) the entity may designate another person to apply for a license, and the Director may issue a temporary license to prevent hardship for up to ninety days, extendable once by the Director for a further ninety days on a showing of good cause, with any further extension granted only by the Commission. Section 12-10-203(5)(c)(II) requires a broker to demonstrate experience and knowledge sufficient to employ and adequately supervise other brokers before acting as an employing broker. Section 12-10-203(2) requires a place of business within Colorado except as provided in Section 12-10-208, and Section 12-10-208(1) provides that a nonresident broker is not required to maintain a Colorado place of business if that broker maintains a definite place of business in another state, subject to the consent to service conditions in Section 12-10-208(2) and (3).
Colorado Division of Real Estate, Department of Regulatory Agencies, Colorado Real Estate Manual 2026, chapter 1. Checked 2026-09.
Article 10 of title 12 was amended in 2026 by the Division of Real Estate sunset act, so confirm the current text of any subsection with Colorado counsel before relying on it.
Community association manager licensing existed in the Community Association Manager Program housed in the Division of Real Estate. Governor Polis vetoed HB 19-1212 on 31 May 2019 and the program expired on 30 June 2019. The Division states that there is no regulatory oversight of HOAs or Community Association Managers in the State of Colorado. Most Colorado HOAs must register with the Division of Real Estate and renew on a yearly basis under CCIOA, Section 38-33.3-401.
Colorado Division of Real Estate, Department of Regulatory Agencies. Checked 2026-09.
House Bill 26-1099 was signed on 13 April 2026 as chapter 42 of the 2026 session laws and took effect on 12 August 2026. A departing community association management company must deliver all association property, records, money and accounts to the successor manager or to the association within 45 days at no charge, on penalty of $250 per business day plus interest and any late fees the association incurs, with treble damages, attorney fees and court costs available on a willful violation.
Colorado General Assembly, HB 26-1099. Checked 2026-09.
The act is recent and no court has construed it. Confirm its application to a specific management agreement, and to any contemplated carve-out of association contracts, with Colorado counsel.
The Department of Revenue's guidance on buying or selling a business states that anyone purchasing an existing retail business must withhold from amounts paid to the seller sufficient purchase money to cover outstanding taxes until the seller provides a Tax Status Letter, and that where the business purchased was not a retail business, the purchaser is liable for consumer use tax on the purchase price paid for tangible personal property acquired, reported on form DR 0252. The Colorado state sales and use tax rate is 2.9 percent, with applicable local rates in addition.
Colorado Department of Revenue, Division of Taxation. Checked 2026-09.
Titled motor vehicles are handled at registration rather than on form DR 0252. Local rates, and any additional filing for a business located inside a rural transportation authority, should be confirmed with a Colorado CPA.
Page last reviewed 2026-09-06.
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