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“Release” Yourself from Liability

People settle claims out of court all the time, and that is often the smart thing to do. But, most people forget the one simple step that is crucial to the process. This simple step, if omitted, can result in a future lawsuit against you, even if you allegedly settled the claim.

Consider the act of settling with a tenant who his behind on his rent: you accept the keys, waive his back rent and he moves out quietly. But, the tenant can always come back and sue you years later regarding damage to his property because of a leaky pipe. There is a simple way to avoid this lawsuit from happening.

Consider the times you may have accepted or given an earnest money deposit on a real estate contract. The closing never happened, and you either kept or forfeited the earnest money. Does this mean you can’t be sued in the future for breach of the contract? Don’t bet on it!

Consider the times you may have settled a claim with your neighbor regarding any controversy that may have allowed him to sue you. It may have been a situation where he fell on your property and was injured. You offered to pay his medical bills and he graciously accepted. However, two years later, what is to stop him from suing you for additional damages for pain and suffering? The answer: nothing!
OK, so now you are begging me to reveal the secret of how to avoid future liability on transactions such as these. The answer is simple: you need to get a written release of liability. A release, also known as a “general release,” is a simple document by which someone agrees to release you from all liability. A properly drafted release will prevent the signor of the document (the “releasor”) from bringing any claims against you in the future that he had as of the date of the release. Keep in mind that the release will not prevent the releasor from suing you for new claims related to events that arose after he signed the release.

So, whenever you have a dispute with any other party that is settled, make sure you have that party sign a general release form before you give any money or consideration. And, speaking of consideration, there must be consideration given for the release to make it legally binding. In other words, you can’t just get someone to sign a release with nothing in return. A promise to waive your own legal rights against the releasor is sufficient consideration (i.e., you may have to sign a release against the other party as well). If you can’t think of any consideration, consider any counterclaim you may have against the opposing party, and threaten legal action to create a “dispute.” For example, if someone threatens to sue you over monies owed for services, consider questioning any part of the services provided that may have been performed inadequately.

Of course, you may have to visit with a lawyer to determine what claims, if any, you may have against the party threatening you. In other words, don’t lie or make something up. Do what lawyers do: use your imagination, find a creative argument that might hold water, then bluff! Even if you have a very small chance of winning on your counterclaim in court, it is sufficient consideration to waive that claim in exchange for the opposing party waiving their own claim.

The Mortgage Elimination Scam

You’ve seen the claims:

“Eliminate your mortgage!!”

Can this really be true? Well, I’ve researched the law and here’s what I came up with.

The Claim

The claim they are making is that you can legally eliminate your mortgage based on a legal loophole that goes something like this…

“If the lender who funded your loan used borrowed money to fund your loan, then the loan is not valid. And, since the loan is not valid, the security instrument is not valid either. All you do is simply march into court and ask a judge to void your mortgage lien, and you don’t have to pay it back.”

Now, without going into the legal issues, a common sense approach would tell you that the entire premise of this argument is patently absurd. Think about it… most lenders use borrowed money to fund loans, that’s the nature of the business.

So, if these promoters are correct, then millions of mortgages would be void. The entire economy would collapse.

The Law

The “mortgage elimination” promoters cite various court cases in support of their position. At first blush, it would seem there are dozens of court cases in which the judge actually did what they claimed, that is, declare a mortgage void because the lender used borrowed funds for the loan. But, since most laymen are not trained in the law, they take this stuff, hook, line, and sinker.

I’ve read the decisions and they all have a common theme: they don’t support the mortgage elimination theory. In fact, most of the cases are only vaguely on point.

The “tax protestor” promoters did the same thing… take a quote from a judge’s decision out of context and cite the case as support for their position. In the end, the tax protestors all lost in court, paid large fines and went away with their tails between their legs. The government went after the promoters of the scam.

Similarly, the government is going after the promoters of the mortgage elimination scam. The Federal Reserve recently issued a warning, a copy of which can be found at the end of this article. The Office of the Comptroller of the Currency issued a similar warning last year.

The Cult of Stupidity

As I write this, undoubtedly a few “followers” of the theory will email me and argue that I don’t understand or that I’m part of the “establishment mentality” that keeps the little guy down. Of course, these are likely the same people who are collecting referral fees from the scammers that are charging thousands of dollars to consumers in exchange for a false promise to eliminate their mortgages.

How to Really Eliminate Your Mortgage

There are some legal ways to eliminate your mortgage:

  1. Pay it off in full
  2. File for chapter 7 bankruptcy (in which case you will not be liable for the mortgage note, but you will also lose the house)
  3. Find a REAL legal challenge that a judge is willing to accept as a valid reason to declare the debt void, such as usury, gross violation of lending laws, fraud, incompetence or the like

How to Pick a Good Colorado Real Estate Attorney

No real estate course or seminar is a substitute for a good Colorado real estate attorney. Finding a good Colorado real estate attorney may be difficult since most attorneys are not themselves investors or familiar with creative transactions. Most attorneys will give you just enough advice to keep them from getting sued, but not enough advice to show you how to make more money out of a deal.

A good Colorado real estate attorney is one who advises you of the risks, suggest alternative ways of doing a transaction and charges a reasonable fee for doing so. A bad real estate attorney either says nothing, points out problems without offering solutions or systematically kill deals. This is why attorneys are frequently referred to as “deal killers”.

Ask other investors in your area who they use as an attorney. Join a local real estate investors association and ask for referrals. Ask local real estate agents and title companies for referrals. Do not Google search for a Colorado real estate attorney and pick someone who simply CLAIMS to be a real estate expert, but is really a jack of all trades, one of which happens to be real estate.

When interviewing a potential real estate attorney, ask the following questions:

» Do you own rental property yourself?

» How many closings do you do per year?

» What kind of unusual transactions have you done recently?

» Have you done any evictions? Foreclosures? Zoning board appeals? Condo conversions?

» Can you explain to me the following concepts: lease/option, wrap, AITD, installment land contract?

» Do you have an assistant who can return my calls?

» Can I email you with questions?

Get a feel for the experience and personality of the attorney. A good Colorado real estate attorney on your side is worth his weight in gold, especially if he can do creative closings.

What to do if a Tenant Abandons Your Property

Have you ever had a tenant leave in the middle of the night or the middle of an eviction? Did you ever wonder what to do when the tenant abandons the property?

Basically, when a tenant abandons the property, you do not need to file an eviction or wait for the sheriff. You can change the locks.


If you are not certain whether the tenant has abandoned the property, you should not change the locks. If you have the keys and your lease allows it, you could enter the premises, but KNOCK FIRST. Whether or not the tenant has abandoned is often a judgment call, looking at a combination of factors, such as:

  • Did the neighbors see them move?
  • Are the utilities shut off?
  • Did the tenant put in a change of address at the post office?
  • Is there any significant furniture left?
  • If you have access, are there sheets on the beds?

Even if the tenant is not sleeping there, they are still “in possession” if they have their personal belongings in the unit and have not shown an intent to abandon these items.

If you do intend to claim abandonment, take pictures, gather evidence and cover all bases to prepare for a possible wrongful lockout claim.  Definitely, give the tenant notice in writing where you have stored their stuff (if you have anything) and give them adequate time to come get it. If you have ANY doubts, call your landlord–tenant attorney and do the proper legal eviction proceeding.

Or, here’s another possibility…


If the tenant has NOT abandoned your property, or you aren’t sure, or you messed up and they are coming back for their stuff, you should consider giving “Cash for Keys” to bribe the tenant to give up possession. While not deserving if they are behind on rent, it is smart BUSINESS because you avoid an eviction and possible damage to the property by the tenant.  If you do this, however, make CERTAIN you get the tenant to sign a general release of liability form.  This form, when signed by the tenant, will waive their rights to sue you (even if you messed up and they have a claim).

Make sure you contact an attorney to prepare a good general release of liability form.