Special Legislative Session update regarding residential and commercial tenancies and property-related loans affected by COVID – 19 Pandemic
In a record-shattering short summer special session that opened on Wednesday the 24th of June and closed on Friday the 26th of June 2020 the house and the senate voted to pass two bills that affect both commercial and residential real estate investors law.
The first, House Bill 4213: Extends the state’s moratorium on residential and commercial evictions, which was set to expire on June 30. Instead, evictions will now be banned in most cases until Sept. 30. Renters will have until March 31, 2021, to pay back unpaid rent, but will be expected to pay current rents accrued beginning Oct. 1, 2020.
The second, House Bill 4204: A companion to the eviction ban, prohibits lenders from pursuing foreclosures against homeowners and Real estate investors through Sept. 30. 2020. Gov. Kate Brown has the authority to extend the moratorium past that date. Missed payments will be due at the end of a borrower’s loan term if some other arrangement is not made with the lender.
These bills are of remarkable importance to both Residential and Commercial Landlords. In a session that was mostly conducted online, rules were set to protect tenants that are unable to pay their rent and Landlords that could not pay their mortgages.
Salient Items defined in the bill:
- “Emergency period” is now defined as the period beginning on April 1, 2020 and ending on September 30, 2020. (even though the Governor can change the emergency timeframes if she so deems it necessary, we have a tentative beginning and an end defined to the emergency).
- During and after the emergency period and notwithstanding this chapter or ORS 105.105 to 105.168, a landlord may not, and may not threaten to: (a) Deliver a notice of termination of a rental agreement based on a tenant’s nonpayment balance; (b) Initiate or continue an action under ORS 105.110 to take possession of a dwelling unit based on a notice of termination for nonpayment delivered on or after April 1, 2020; (c) Take any action that would interfere with a tenant’s possession or use of a dwelling unit based on a tenant’s nonpayment balance; (d) Assess a late fee or any other penalty on a tenant’s nonpayment; or (e) Report a tenant’s nonpayment balance as delinquent to any consumer credit reporting
- Rents may include: (a) Rent for the current rental period; (b) Utility or service charges; (c) Late rent payment charges; and (d) Fees or charges owed by the tenant under ORS 90.302 or other fees or charges related to damage claims or other claims against the tenant. Repayment of these charges needs to be applied by the landlord in this order as well.
- Following the emergency period, a tenant with an outstanding nonpayment balance has a six-month grace period that ends on March 31, 2021, to pay the outstanding nonpayment balance, this applies for both residential and commercial tenancies.
- Rents and other charges or fees that come due after the emergency period must be paid as usual or the landlord may terminate the tenancy under ORS 90.392, 90.394 or 90.630.
- If a landlord violates the bill, a tenant may obtain injunctive relief to recover possession or address any other violation of this section and may recover from the landlord an amount up to three months’ periodic rent plus any actual damages.
- Notwithstanding ORS 12.125, the period of limitation is tolled until March 31, 2021, for claims by a landlord based on a tenant’s nonpayment or nonpayment balance,
The language in this bill is groundbreaking because during this pandemic ( defined as 8 March 2020 – 30 September 2020 ) it obligates a lender to negotiate with a borrower of real property and enables the borrower to pay missed loan payments at the end of the loan period.
- During the emergency period, a lender may not treat as a default a borrower’s failure to make a periodic installment payment or to pay any other amount that is due to the lender on or in connection with an obligation that is subject to a financing agreement if at any time during the emergency period. Lenders are limited in their actions regarding taking a borrower to court to foreclose on a real estate loan.
- A borrower does not need to provide a notification to a lender under paragraph more than once.
- If the subject property is a residence with four or fewer dwelling units, the notification must attest that the borrower’s failure to pay is a result of a loss of income related to the COVID-19 pandemic.
- If the subject property is a commercial property or residential property with more than four dwelling units, the notification must include financial statements or other evidence that demonstrates a loss of income related to the COVID-19 pandemic and must disclose any funds the borrower received from the United States Small Business Administration under the Paycheck Protection Program, as implemented under the Paycheck Protection Program Flexibility Act of 2020 (P.L. 116-142) or other state or federal relief programs.
- Establishes temporary limitations on lenders being able to enforce default remedies on obligations secured by mortgages, trust deeds, land sale contracts, or other instruments.
- Provides for certain exemptions. Requires lenders to defer payments if lender and borrower do not otherwise agree on loan mitigation, deferral, or other foreclosure avoidance measure and permits borrower to pay deferred amounts at end of loan term.
- Provides that lender may adjust escrow impound payment and take into account deficiencies or shortages that result from deferring borrower’s payments.
- Requires borrower to provide notice to lenders if the borrower cannot make periodic installment payment.
- Prohibits lenders from collecting various fees, penalties, and charges during the emergency period and from undertaking specified practices.
- Requires courts to dismiss foreclosure proceedings brought during the emergency period without prejudice.
- Permits borrower that suffers ascertainable loss of money or property because lender took prohibited action to bring action for actual damages.
Both bills were declared emergencies and will become Law as soon as the Governor signs them. It remains to be seen what will happen as the Covid -19 virus continues to linger in Oregon and the United States. Currently, unemployment in Oregon is running at 14.2% up from 3.5 % in February.
The governor’s emergency orders regarding COVID -19 on hotels, restaurants, and fitness centers, in particular, have had a major impact on the employment of Oregon residents in the larger metro areas and their ability to stay in business and pay rent. These bills are just a stop-gap on the way to finding a permanent solution to our new COVID – 19 reality.