Attorney Bradley Kraus says Oregon’s HB 4401 creates a confusing mix of timelines related to important time periods—the “emergency period” and the “grace period” – and continues the implicit punishment of landlords for a problem they did not create
By Bradley S. Kraus,
Attorney at Law, Warren Allen, LLP
When 2020 came to a close, many landlords waited to see what new laws would be handed down to them from the December special session. As these laws regulate their businesses—and often their livelihoods—landlords hoped for clarity, assistance, and understanding from our elected officials. What they received, instead, was House Bill 4401.
HB 4401 continues to complicate the dynamics of the landlord/tenant relationship and, with seeming intent, places further pitfalls for landlords.
Most landlords have been hoping for a simple answer to the question of when they can expect to see rental payments again, either from their tenants directly or from the state. On that point, HB 4401 fails the test, creating a confusing mix of timelines related to important time periods—the “emergency period” and the “grace period.”
The emergency period was defined previously in House Bill 4213, the legislature’s eviction moratorium law passed last summer. The emergency period was effectively the period of time wherein landlords could not demand payment from their tenants. HB 4213 also provided a grace period for tenants in the form of a six-month window—ending on March 31, 2021—in which tenants would need to pay back the balances that arose during the emergency period. Those time frames are now fluctuating, depending on whether certain events defined in HB 4401 have occurred.
Whether these events have occurred is important, due to the structure of HB 4401.
For starters, HB 4401 provided an avenue for landlords to serve non-payment notices again, at least for January rent only. As good as that sounds, a closer look reveals an empty offering. HB 4401 requires landlords to serve statutory declarations of hardship and a statutory notice of tenants’ rights along with every non-payment notice, every balance- due notice of any kind, and every summons for evictions of any kind. If the landlord fails to do so, the emergency period and grace period are automatically extended until June 30, 2021. The tenant is also provided a defense to any eviction based on non-payment, while the landlord could face exposure under HB 4401’s damages provision.
The automatic extensions of the emergency period and grace period are the unfortunate reality that landlords face, thanks to HB 4401.
The declaration of hardship form mentioned above can be returned to the landlord from the tenant at almost any time and is unchallengeable. If your tenant returns the form to you, the emergency period and grace period are automatically extended until June 30, 2021, meaning landlords cannot demand rent until at least July. Landlords cannot demand further documentation from their tenants, question the declaration, or require multiple declarations. Doing so violates HB 4401, and triggers the damages provision.
HB 4401 and financial assistance for landlords
Landlords expecting HB 4401 to lend financial assistance to them are also likely to be disappointed.
While HB 4401 did set up a landlord-compensation fund of sorts, as of this writing, no process to apply for said funding exists.
Additionally, and most important, landlords are required to forgive 20 percent of the tenants’ unpaid balance in exchange for funding from the state, along with other restrictions which exist during the “pendency of” their “distribution application.”
Forgiving 20 percent of unpaid rent likely wipes away the profit margin for any landlord, which is typically not large to begin with. Finally, the fund will likely benefit small mom-and-pops first, which, while immensely helpful to them, will likely leave landlords with medium to large portfolios out to dry through no fault of their own, other than the fact that they own more rental units.
While COVID-19 cannot be minimized in the problems it has caused, HB 4401 continues the failure to distinguish between tenants who actually need help (i.e., those who can prove that COVID-19 has caused financial hardship for them) and those who are simply gaming the system (i.e., not paying rent simply because they do not have to).
While I am confident our elected officials think that the latter does not exist, I encourage them to give me a call to discuss that very issue.
In short, HB 4401 continues the implicit punishment of landlords for a problem they did not create. Given the complexity of this new law, and the potential exposure it creates, landlords are encouraged to fully understand this law before taking actions that could trigger it.
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 kraus@warrenallen.com or 503-255-8795.
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