Best Practices in Leasing under Oregon Rent Control Laws
Recent law changes in Oregon have given tenants certain rights they did not previously have. The disruption to landlord practices is not the rent cap laws, but the restrictions to no-cause evictions. These laws have necessitated that landlords conform their practices to position themselves in the best possible position in dealing with tenants in a legal way.
1. First Year Trial Period
Landlords have their preferred practice of either initially signing new tenants on a fixed term lease or a month-to-month tenancy. In the first year of tenancy, landlords can still begin the tenancy the way they prefer. Landlords might consider the wisdom of always having fix term leases mature during the summer months when people are moving. However a rental agreement is structured, one thing is for sure–landlords should never initially sign a new tenant for a lease longer than a one year term. The new laws state that landlords cannot perform a no-cause eviction once the tenant resides in a unit longer than one year (with some exceptions). By signing an initial lease with a term longer than one year, a landlord loses their rights for a no-cause eviction right off the bat. It is a good idea to view the first year of tenancy as a trial period to decide whether the landlord wants to commit to keeping the tenant for the long term.
Instead, if the landlord initially signs a one year lease for example, at the end of that year the landlord can decide if they want to keep that tenant before losing their no-cause eviction rights. If in the first year the landlord doesn’t think the tenant is going to work out in the long term the landlord can give them 30-day notice and the landlord does not have to continue renting to them. However, be advised that if a tenant does not stay more than one year, state law forbids landlords from raising the rent for the next tenant at an amount higher than the rent cap (7% plus inflation).
2. Incentivizing Fixed Term Leases
If a landlord chooses to keep a tenant after the first year of occupancy, he or she can require them to sign a lease after the first year. If the tenant doesn’t want to sign a lease, the landlord still reserves the right to end tenancy at the conclusion of the first year with 30-day notice. If the tenant agrees to sign the lease, the landlord at least has the assurance of getting an early termination fee if the tenant breaks lease. This is preferred over a tenant on a month-to-month who can leave anytime with 30-day notice while the landlord cannot perform a no-cause eviction.
However, if a lease is maturing on a tenant that has occupied the unit longer than one year, state law says the tenant must be allowed to go month-to-month at the end of the lease unless both parties agree to a new lease. If possible, it is still in the landlord’s best interest to have a fixed term lease with the tenant for the benefit of having an early termination fee, whereas the landlord has no protections if the tenant is on a month-to-month after the first year. Therefore, the best practice for the landlord is to incentivize signing a fixed term lease rather than going month-to-month. The landlord may offer rent at a higher amount if going month-to-month but a lower amount if signing a fixed-term lease, as long as the higher amount does not exceed the rent cap.
3. Send Notice of Violations
One of the few exceptions in the new landlord-tenant laws which allows landlords to give tenants a no-cause eviction after the first year of occupancy is if the tenant has received three lease violation notices in a 12-month period. This puts a lot of strain on landlord-tenant relations whereas landlords might otherwise simply give verbal notice for minor violations. With the new laws, it is important for landlords to serve these notices in case a no-cause eviction becomes necessary in the future. It might help preserve good relationships with tenant by explaining state law requires landlords to send a notice for even minor violations, but if they fix the violation, the matter isn’t a big deal. This way, the landlord has record of giving notice without looking heavy handed by the tenant.