You’ve no doubt heard about Governor Brown signing Senate Bill 608 which makes some pretty significant changes to landlord-tenant law. It is being called the first statewide rent control law in the country. And it is, but it isn’t the rent control that has landlords concerned as much as the restriction on no-cause eviction. Proponents of the bill say rent control is ineffective if landlords can just evict their tenant so to increase the rent. Below are several bullet points to summarize the law changes already in effect. You’ll notice the section highlighted particularly important for realtors.
- In any 12-month period, landlords cannot increase rent more than 7% plus inflation.
- Inflation is defined by the Consumer Price Index. The Oregon Department of Administration Services will publish calculated rent maximums September 30th of each year. (Rent cap for 2019 has been set at 10.3%)
- The rent cap does not apply to properties less than 15 years old or if the landlord is providing reduced rent as part of a federal, state or local program or subsidy.
- No cause evictions are still allowed for tenants in their first year of occupancy.
- Tenants on a month-to-month require 30 days notice for a no-cause eviction in the first year.
- Tenants who have signed a fix term lease for 1 year or less do not have to be renewed or roll over month-to-month, but 30 days notice of non-renewal is required.
- If doing a no cause eviction or not renewing a fixed term lease within the first year of a tenant’s occupancy, the landlord may not reset the rent for the next tenant at an amount greater than 7% plus inflation.
- After the first year of occupancy, when a fixed term lease expires, it must roll over to a month-to-month, unless both parties agree to another fixed term lease.
- No-cause evictions are allowed after the first year of occupancy for only the following reasons:
- If the landlord intends to demolish the dwelling unit or convert it to a non-residential use.
- If the landlord intends to undertake repairs and those repairs make the premises unfit or unsafe.
- The landlord intends to occupy the dwelling, or have an immediate family member occupy the dwelling as a primary residence.
- If the tenant has committed three or more violations of the rental agreement within a 12-month period (proper notice for each violation required).
- The landlord has accepted an offer to purchase and the buyer intends to reside in the dwelling as a primary residence.
- Notice and written evidence of offer must be given within 120 days of accepting the offer
- If the buyer intends on renting the property, the tenant cannot be given a no-cause eviction if that tenant has occupied the unit longer than 1 year. In other words, the new owner must adopt the existing tenant, even if that tenant is on a month-to-month.
- When exercising one of the qualified reasons for a no-cause eviction after 1 year of occupancy, the landlord must:
- Give 90 days notice.
- State the reason for eviction and provide any supporting facts.
- Pay tenant 1 month’s rent when giving notice (exception for landlords who have “ownership interest” in four or fewer dwelling units).
How these law changes will affect the market is yet to be seen. Some investors have said they want to take their real estate investments to another state. Depending on how many follow this trend could increase inventory in the sales market in the next year. When landlords cannot do a no-cause eviction, they will likely try to price their tenants out by raising the maximum limit on tenants. That factor and decreased rental inventory could make rent prices trend upward. This could create opportunity for investors, especially new builds who are exempt from rent caps for 15 years. The rent caps will require investors to budget for capital expenses and property managers to stay on top of rent increases. If they don’t, they will find their investment expenses costing more than what they can raise rent to cover.
The information in the post is meant to be for information purposes only and does not constitute legal advice. You are encouraged consult with a legal professional to answer specific questions about your situation.