By Cliff Hockley
Bluestone & Hockley Property Management
As I am sure you have heard, the national unemployment numbers are dismal; the Bureau of Labor Statistics showed that the unemployment rate rose by 10.3 percentage points between March and mid-April to 14.7 percent; and since then, millions of Americans have continued to file each week, with the current total at more than 40 million as of late May.
This may even be lower than the real number, due to the challenges many newly unemployed have had filing and the processing backlog faced by local unemployment offices.
Below is a chart of the number of claims, by month, in Oregon, through April 18.
The unemployment rates below are estimates based on initial claims filed and closely track national numbers.
| February | 3.2% |
| March | 9.42% |
| April – 18 | 13.73% |
March and April rent collections
Bluestone and Hockley is a large residential and commercial property-management company, and it may be of interest to others how a Portland landlord is faring right now.
Our March rent collections were normal, even as the pandemic rolled into Oregon. We transitioned our operations from the Barbur Boulevard office to working out of home offices in the third week of March.
Thankfully, we’ve spent the last two years investing in the infrastructure to be able to operate from the cloud. Rents are being collected, bills are being paid, and maintenance operations have continued. Many of our clients receive communications weekly, or as the situation on the ground with their property changes.
April collections have been lower, with about 85+ percent of client revenues received, across all property types, as compared to an average of 95 percent in a normal month.
May and June residential rental collections will be affected by the number of unemployed tenants and the eviction moratoriums put in place by the cities of Hillsboro, Beaverton, and Portland; Multnomah County; and the State of Oregon.
Residential Collections:
Residential Eviction Moratoriums
Multnomah County allows tenants up to six months after the county’s emergency declaration is lifted to repay missed rent. (This grace period required tenants to demonstrate a COVID-related impact BEFORE missed rent was due.)
In April, Bluestone and Hockley negotiated payment plans with tenants, based on the then-current language. These rules and regulations have become more restrictive. Based on the current language of the Multnomah County ordinances, payment-plan agreements are still a valid strategy to use, by keeping a current record of understanding, and legally nudging tenants to pay the most they are able (a partial payment for example).
The reason that payment agreements currently have limited practical utility in Multnomah County is twofold:
- The language of the moratorium creates a repayment obligation that doesn’t begin until the emergency status is lifted, and we don’t know when that will be (i.e., we don’t yet have a “start date” for the 6-month repayment period)
- Even more significantly for a landlord, the language does not require any interim rent payments and merely states that tenants have 6 months to repay the covered debt once the emergency is lifted. Accordingly, once the emergency is lifted, the tenant can pay $0 of the owed amount until day 180 and we can’t terminate them for it until day 181.
Currently, the rest of the state is covered by either local regulations (i.e. Beaverton, Hillsboro, etc.) or by the Governor’s Executive Order 20-13.
Summary: Oregon Governor’s Executive Order 20-13:
- Residential Tenancies
During this moratorium, a landlord of residential properties in Oregon shall not, for reason of nonpayment as defined in paragraph l(b) of this Executive Order, terminate any tenant’s rental agreement; take any action, judicial or otherwise, relating to residential evictions pursuant to or arising under ORS 105.105 through 105.168, including, without limitation, filing, serving, delivering or acting on any notice, order or writ of termination or the equivalent; or otherwise interfere in any way with such tenant’s right to possession of the tenant’s dwelling unit.
Nothing in paragraph 1 of this Executive Order relieves a residential tenant’s obligation to pay rent, utility charges, or any other service charges or fees, except for late charges or other penalties arising from nonpayment which are specifically waived by and during this moratorium. Additionally, paragraph 1 of this Executive Order does not apply to the termination of residential rental agreements for causes other than nonpayment.
During this moratorium, any residential or non-residential tenant who is or will be unable to pay the full rent when due under a rental agreement or lease, shall notify the landlord as soon as reasonably possible; and shall make partial rent payments to the extent the tenant is financially able to do so.
Commercial Eviction Moratorium
Another thing that’s clear is that businesses not open as a direct result of COVID -19 cannot be forced to pay rent and cannot be evicted. The governor’s order explains that commercial tenants need to pay rent as they are able. This implies that use of the PPP (Payroll Protection Program) or other funds to pay rent is expected. Those companies that cannot pay have until six months after the end of the officially declared emergency to pay for those months that were missed.
As you review our commercial-rent collection charts below, you will see that our property managers worked very closely with our clients and tenants to collect 87 percent of April’s commercial rent.
Non-Residential Tenancies (i.e. Commercial Tenancies).
a. During this moratorium, a landlord of non-residential properties in Oregon shall not, for reason of nonpayment as defined in paragraph 2(b) of this Executive Order, terminate any tenant’s lease; take any action, judicial or otherwise, relating to non-residential evictions pursuant to or arising under ORS 105.105 through 105.168, including, without limitation, filing, serving, delivering or acting on any notice, order or writ of termination or the equivalent; or otherwise interfere with such tenant’s right to possession of the leased premises.
c. Paragraph 2 of this Executive Order shall apply if a tenant provides the landlord, within 30 calendar days of unpaid rent being due, with documentation or other evidence that nonpayment is caused by, in whole or in part, directly or indirectly, the COVID-19 pandemic. Acceptable documentation or other evidence includes, without limitation, proof of loss of income due to any governmental restrictions imposed to mitigate the spread of COVID-19.
d. Nothing in paragraph 2 of this Executive Order relieves a nonresidential tenant’s obligation to pay rent, utility charges, or any other service charges or fees, except for late charges or other penalties arising from nonpayment which are specifically waived by and during this moratorium. During this moratorium, a non-residential tenant who is or will be unable to pay the full rent when due under a rental agreement or lease, shall notify the landlord as soon as reasonably possible; and shall make partial rent payments to the extent the tenant is financially able to do so.
Forbearance
Most of our property owners have had enough reserves to get through the month of April. Those in trouble have started negotiating with their banks to buy some breathing room.
- Some financial institutions are agreeing to put off payments for a couple of months, others are putting off principal payments and asking for interest-only. There are no consistent lender policies at this point. Freddie Mac will offer forbearance up to 90 days (three consecutive monthly payments). If a borrower accepts this arrangement, Freddie Mac will also waive any associated late charges and default interest.
This is different than foreclosure, where a financial institution will take a property back from a property owner, through strict foreclosure or deed in lieu of foreclosure.
Association Collections
As of the 13th of April, approximately 86 percent of our association homeowners had paid their assessments, compared to approximately 93 percent in a normal month. We expect that the month of May will result in a lower collection percentage as some owners were laid off.
| Percent of accounts paid: | 85.94%
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| Percent of accounts delinquent: | 14.06 (of that 5.3% are in collections)
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| April Late Fee Waivers: | 4
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Summary Being a Portland Landlord During the Pandemic
Yes, COVID-19 does exist. We have tenants that are infected with COVID who live and work in buildings we manage. We also have tenants who are taking care of sick family members, and many tenants who have been laid off or who lost their jobs permanently as a direct result of this pandemic. Businesses have either closed or severely reduced the scope of their operations to comply with the governor’s executive orders. The impact of this disease and the efforts to flatten the curve will be felt for many months.
There is a glimmer of hope on the horizon with the May 1 openings of hospitals and dental offices for minor procedures. (Of course, this is dependent on the ability to obtain personal protective equipment (PPE). The governor’s order requires a two-week supply before work can begin.) If this is successful, we should see the opening of the state as soon as the governor thinks it is safe.
We are on the edge of a new frontier and need to adjust our expectations. Investors are resourceful and will find a way to cope with all these changes. The only way property owners will obtain all their rent payments will be full employment. We will all have to work as a community to open the state in a safe manner and get everyone back to work, with the appropriate social distancing and PPE. There is still danger in the promised land.
About the author:
Cliff Hockley is President, Bluestone and Hockley Real Estate Services and Executive Director, SVN | Bluestone and Hockley
Rent Growth Shows Significant 1-Month Decline
