Senate Bill 608
The ramifications for landlords
If you have been paying attention to the current legislative session that has been happening in Salem you have most likely heard about the passing of SB 608, the 24 page document that is changing the face of land-lording in the state of Oregon. Having read through the bill, I as a landlord, personally do not find it to be as devastating as many in my industry have made it out to be and here is why.
First, let’s start with a handful of things that were originally proposed by advocacy groups:
- Rent control, limiting the amount rent could be raised by 2% per year
- The elimination of “No Cause Notices”
- Vacancy Control, limiting the amount rent could be raised to 2% even if a tenant moves out
- Relocation costs up to $5,000 paid by the landlord to the tenant prior to move out
- Elimination of leases allowing tenants to leave whenever they so choose, but if a landlord asks the tenant to leave they would be responsible for relocation costs
Thankfully, none of these came to fruition, though there are a some changes to the landscape that I will be going over, and hopefully allow you to prepare for the change in the investment landscape.
For Cause Evictions
For causes evictions thankfully have not been touched, allowing landlords to deal with problem tenants just as they have before but there have been some additional changes to comply with some of the new regulations that have been put in place. Landlords can still evict for tenant based causes such as non-payment of rent, violation of the rental agreement and outrageous conduct as well as other issues that may arise over the course of a tenancy.
There is a new provision that is being added that is a “landlord based” for cause eviction, the four reasons are
- the home is either being sold and will be owner occupied,
- the landlord needs to repair or renovate the home
- the home is being demolished and will no longer be habitable
- it is being removed from residential use.
If the landlord is exercising any of these four options they will have to give a minimum 90 day notice and will have to pay a relocation fee equal to one month’s rent.
Exceptions to this law are landlords with 4 our fewer units not having to pay relocation costs and owners that live on site with two units or fewer can still use no cause notices to remove a tenant.
Month to Month Tenancies
Month to month tenancies have not changed very much, landlords can still use a No Cause eviction to remove a tenant as long as it is accompanied by a minimum 30 day notice. After the first 12 months of occupancy the landlord may only terminate for cause stating a tenant based reason or, one of the four landlord based reasons.
Fixed Term Tenancies
Fixed term tenancies have a few more wrinkles that are being thrown in, the biggest being an automatic renewal of lease on a month to month basis after the first 12 months have passed. In regards to termination of the lease a landlord can still issue a no cause notice for termination in the first 12 months of the lease as long as it is accompanied by a minimum 90 day notice. After the first 12 months the fixed term lease will automatically turn to a month to month and termination will only be able to be completed through a for cause eviction.
The exception to the automatic renewal is if the tenant has violated the terms of the lease three separate times during a 12 month period, but it must be accompanied by written warnings given with each violation.
This is the part of the bill that was called the rent control aspect but frankly isn’t too detrimental as a landlord if you keep on top of your rents. Under this bill landlords can raise their rents up to 7% PLUS Consumer Price Index West (CPI-W) in a given 12 month period. The current CPI-W is sitting at 3.2% allowing a 10.2% rate increase annually, nothing to be alarmed about. Rent increases will only be allowed after the first 12 months of occupancy and must be accompanied by a minimum 90 day notice of increase as per the current laws.
The exceptions to this are buildings that have been built within the last 15 years and new tenancies, in these cases the rent may be raised over the 7% plus CPI-W, unless the previous tenant received a no cause eviction or the lease was not allowed to roll over, then the landlord could only raise rent 7% plus CPI-W
My take on this new bill is that it is setting the unprofessional property manager up for failure. If you are a manager who has quality paperwork, documenting, and screening processes as well as scheduled rent increases you should be fine. Also, as this is most likely going to be pushed through in the next couple months and signed into law through emergency action now is the time to remove any tenants that are not quality as it will become much more difficult as well as costly. Personally, I find that this is the time to get a good property manager if you have fallen behind on rent and are dealing with difficult tenants because as time goes on it will be much more difficult to correct bad behavior without having to resort to detrimental means for tenants.