The Landlord Compensation Fund is now accepting applications in Oregon to assist landlords with the massive amounts of unpaid rent that currently exist.
By Bradley S. Kraus,
Attorney at Law, Warren Allen, LLP
Regular readers of this series likely noted last month’s mention of the Landlord Compensation Fund, a key piece of the recent House Bill 4401. As that article was drafted, the Landlord Compensation fund had not yet materialized. Shortly after it was published, the wheels began to turn. As of this article’s drafting, the Landlord Compensation Fund is now accepting applications to assist landlords with the massive amounts of unpaid rent that currently exist.
It is important to note that landlords are not automatically eligible for the fund. Landlords must submit completed Declarations of Financial Hardship forms, procured directly from the tenants, who owe rent for any or all months since April 2020. This presents challenges related to getting the forms from some tenants who either (a) refuse to communicate, (b) do not believe they owe rent, or (c) do not believe they should have to assist the landlord in getting the rent they owe. In these instances, landlords now have options.
First, HB 4401 allows for a balance-due notice, with which the landlord must include both the declaration form and the notice of tenants’ rights form, in order to comply with the statutory requirements. While a balance-due notice is not a requirement for unpaid rent to remain due and owing, it creates a viable method for landlords to get the declaration form in front of tenants and perhaps jump-start the conversation.
While many landlords use this approach, it is important to note that landlords should be cautious in their communications with their tenants. There is no statutory definition or form for what constitutes a balance-due notice. That ambiguity provides an opportunity for tenants to argue that certain written communications to the tenant may qualify as a de facto balance-due notice. If a landlord does not include the declaration form and notice of tenants’ rights with that innocuous communication—because they may not believe it to be required—potential issues could result.
Landlord compensation fund and tenants who refuse
The other option provided for in HB 4401 for tenants who simply refuse to provide the declaration form is the service of 10-day non-payment-of-rent notices. While landlords should consult legal counsel to assist in the crafting of these notices, it is imperative to note that these notices, when served, must also include the declaration form and notice of tenants’ rights. Once the tenant is served with the notice, they can return the declaration form, at which time (a) the landlord must cease their eviction process, and (b) the tenant’s grace period and emergency period are extended through June 30, 2021. In other words, if the form is returned, they will have until June 30, 2021 to repay the landlord and cannot be evicted through that date, but the landlord now has their declaration form, with which they can apply to the fund.
If the tenant still refuses to return the form, a landlord could file an eviction action with their non-payment notice. The summons of any eviction filed must include the declaration form and notice of tenants’ rights, as per HB 4401. The failure to do so renders the landlord’s eviction action defective, extends the grace period and emergency period by law, and presents exposure. However, the required inclusion of this form provides the tenant another opportunity to return it to the landlord to access the fund and avoid eviction and payment.
Oregon landlord compensation fund downsides
It is also important to keep in mind the downsides to the Landlord Compensation Fund in Oregon.
Oregon has unveiled a scoring system to determine how funding is distributed, prioritizing smaller landlords with the largest amount of unpaid rent. Landlords also cannot evict tenants without cause or for non-payment through the pendency of the distribution application, a time frame which is currently unknown. This could interfere with a landlord’s plans to potentially sell the property or have a family member move in. Oregon landlords must also provide the state with any documents they request related to the application. Finally, 20 percent of the tenant’s unpaid balance must be forgiven.
Landlords are not required to engage in the compensation fund. Once the moratoriums lift, landlords could technically sue their tenants for the unpaid amounts. However, if your tenant has been affected by COVID-19, the fund may be a landlord’s one opportunity to recover some of those amounts, provided the funding meets the need. Given the scope of the need, that is unlikely to be the case.
Brad Kraus is a partner at Warren Allen LLP. His primary practice area is landlord/tenant law, but he also assists clients with various litigation matters, probate matters, real estate disputes, and family-law matters. A native of New Ulm, Minnesota, he continues to root for Minnesota sports teams in his free time. You can reach him via email firstname.lastname@example.org or 503-255-8795.