Oregon Law Updates Impacting CRE Investors, Developers and Landlords

In this article legislative bills that were passed in the last (2019) session that impact Commercial Real Estate (CRE) investors, developers and landlords are summarized. It is the second of three articles that recap the very eventful 2019 Oregon legislature that resulted in numerous law changes. Be sure to look for the next article that will detail the tax law changes as well as the Paid Family and Medical Leave changes that is coming soon!

Missing Middle Housing (HB 2001)

Impact: This bill allows for more dense housing in cities around the state. California and Minnesota are among the other states considering this change in legislation.

Oregon is growing1 and the legislature is listening. Under the leadership of House Speaker Tina Kotek, and in response to the housing crisis, House Bill 2001 was passed. In an innovative move, the State of Oregon paved the way for duplexes, triplexes, four-plexes, townhouses and cottage clusters (defined as middle housing) to be built in areas formerly reserved for single-family homes.

The bill was passed with a Senate vote of 17-9, 43-16 in the House, signed into law by the Governor and using an emergency clause, became effective immediately. It legalizes the development of duplexes on single family lots in cities of 10,000 – 25.000 inhabitants. In cities that are larger than 25,000 inhabitants it permits the building of duplexes, triplexes, four-plexes, townhouses and cottage clusters. This law provides for the phased implementation of rules in June 2021 and 2022 to allow synchronization with the state’s land use regulations.

1 The three-county region expects to add 56%-74% more households by 2035. The City of Portland projects a household increase of 44%-57%. https://www.portlandonline.com/portlandplan/index.cfm?a=288097&c=52256.
The three counties surrounding Portland are forecasted to experience the greatest growth over the next 10 years. https://www.oregon.gov/das/OEA/Documents/appendixc.pdf

Regional Housing Inventory (HB 2003)

Impact: Requires localities to study housing needs and develop strategies to increase housing supply.

Effective January 1, 2020, in addition to appropriating funds to the Housing & Community Services Department, House Bill 2003 requires:

the Housing & Community Services Department to develop a methodology to conduct a regional housing needs analysis;
the City of Portland to estimate their housing stock every six years and cities outside of Portland, with populations greater than 10,000 inhabitants, to estimate their housing need and capacity every eight years;
local governments to:
- adopt a housing production strategy within one year;
- allow accessory dwelling units;
- allow affordable housing on land zoned for places of worship; and
the Land Conservation and Development Commission (LCDC) to:
- seek an enforcement order against cities not implementing a housing production strategy; and
- develop or rezoning of public property for affordable housing.

Housing Development & Guarantee Account (HB 2056)

Impact: House Bill 2056 updates and expands current loan guarantee programs for affordable housing.

Loan guarantee programs, administered by Oregon Housing and Community Services (OHCS), currently help finance up to 25 percent of a loan for low-income housing. This expansion allows eligible organizations to participate in this program to purchase land for affordable housing development.

Building Safety After Emergency Inspections (HB 2206)

Impact: Creates certified building evaluators to help decide if buildings can be occupied after a natural disaster.

This bill directs the state fire marshal to develop and administer a program to evaluate the condition of buildings after a natural disaster and create a registry of certified building evaluators and approved trainers.

If there is a major flood or earthquake, a building may not be occupied until it has been inspected by a certified evaluator. This seems to apply to all building without exception. It will behoove building owners to sign contracts with these evaluators, in advance, to ensure prompt inspections after a natural disaster.

Substantial Completion Statute of Limitations (SB 369)

Impact: Clarifies the definition of “date of acceptance” from a contractor to a property owner.

Senate Bill 369 modifies the statute of limitations for action against an architect, landscape architect or engineer arising out of construction, alteration or repair of improvement to real property. In order to do so, the bill modifies the definition of “substantial completion” to the earliest date of:

the date when the customer accepts, in writing, the project as having reached that state of completion when it may be used or occupied for its intended purpose or, if there is no such written acceptance, the date of acceptance of the completed construction, alteration or repair of such improvement by the customer;
the date when a public body issues a certificate of occupancy for the improvement; or
the date when the owner uses or occupies the improvement for its intended purpose.

Receiverships (HB 2285)

Impact: House Bill 2285 provides a new process for a locality to request a general judgement in lieu of receivership.

Upon request, the bill directs the court to enter a general judgment for the estimated cost of abatement in lieu of appointing a receiver. Such judgment is given the priority position of a lien. Additionally, House Bill 2285 allows a lien against the property, for outstanding amounts owed to a receiver. These liens have priority over all other liens, mortgages, and encumbrances.

Manufactured and Marina Community Updates (SB 586)

Impact: Significant clarifications and changes to laws that affect manufactured dwelling parks and marinas.

The law provides marina owners and occupants with some protections similar to those enjoyed by manufactured home parks including notification of a marina’s sale, provide financial due diligence information and a short tenant right-of-refusal period to purchase.

Senate Bill 586 also implements the following:

Increases the park registration fees;
Establishes the Dispute Resolution Committee;
Requires mediation for certain landlord-tenant and tenant-tenant disputes;
Institutes a 10-month cure period for home floatation issues;
Mandates reasonable notice before inspecting a hazardous tree;
Provides for a longer period before a landlord sells or disposes of a floating home;
Modifies the process for tenants to cure separate and distinct lease violations;
Requires landlord to provide at least one method by which a tenant may cure a violation; and
Amends the process for landlord to convert to a different utility billing method