Understanding Oregon State's Senate Bill 608

KAREN: Hi, welcome to House Talk. As you know, this is Karen Malanga, Principal Broker at RE/MAX Key Properties and NestBend.com. I’m so excited to have Lindsay here from Velocity Property Management because – she’s not an attorney, and she’ll tell you that right up front, but she is going to help us go through more details on Senate Bill 608, how it affects you as a tenant, how it affects you as a property owner.

She’s coming from a more knowledgeable side than I am being a realtor because she’s a property manager, so she has to deal with this day in and day out. Lindsay, welcome to the program. So glad you could come, and take it away.

LINDSAY: Thanks, Karen. Yeah, the hot topic is Senate Bill 608 and all the challenges that are coming with it.

KAREN: There’s always challenges with change.

LINDSAY: Yes.

KAREN: I think the questions I get are on the landlord side, how does this affect me if I do have a tenant that I feel I do need to evict? How does it affect me if my property costs have gone up? How does it affect me being able to raise the rent to help cover some of those costs? And as a tenant, how does it affect me? Is it protecting me a little bit more, or are there some windows in there where I’m protected less? I don’t know where you should begin.

LINDSAY: That’s really good.

KAREN: Take one side. I don’t know which one you want. [laughs]

LINDSAY: Again, I’m not an attorney, so this is just giving my professional opinion. One of the things that I think – one to start off with that I found interesting when I was seeking legal advice around all of these new laws is that if your lease took effect before February 28^th –

KAREN: Of what year?

LINDSAY: Of this year, when the bill took effect, you are not constrained by the new law. So let’s say I have a lease that started last summer and it’s coming to an end. It’s been a year lease. You can still terminate as you would prior to this law. You’re looking at these laws affecting any new contracts.

KAREN: So once you renew, then the new law comes into play.

LINDSAY: Exactly. That helps, I think, lay out how you’re going to look at this. As a landlord, it’s really interesting. The rent increase has been the big one that everyone’s talking about now. We have rent control. We’re the first state to have that.

One of the things – well, there’s lots of things, but one of them is if you’re 14 years or newer, you can rent increase as much as you’d like. This is based on when you got your county – what is that called, Karen? Occupancy. When you get the occupancy from the county.

KAREN: Yeah, the certificate of occupancy.

LINDSAY: That’s the date that you need to look at. If it’s 14 years or newer, you’re not constrained by the rent increase, so you can go ahead and raise rent however much you’d like.

KAREN: So why did they do that? Why would they base that on older homes? It’s interesting to me, coming from the real estate side. To me, some of the homes built prior to 14 years ago need the property owner to put a lot of money into them at this point. Obviously you’ve painted it a couple of times, and after 14 years there’s a lot of things that become obsolete. Your furnace, all that stuff.

So it seems like owners of those properties are putting more money into those and would probably need a rent raise more, almost. Am I making sense?

LINDSAY: Yeah, you’d think, right? I know, this bill is very confusing. But yes, you’re making sense. None of this makes total sense, or makes common sense, I should say. I don’t know why they did that. It’s silly. But anyway, that does help people with newer homes.

Anything before that, you can only increase it 7% plus the consumer price index that’s stated. There’s a couple percent in there that you can go. Right now I’m encouraging owners to not go more than about 9% on an increase.

KAREN: Okay. If I read the fine print on it – and again, I’m certainly not an attorney – the state is going to say what that consumer price raise can be.

LINDSAY: Yeah.

KAREN: The other thing I don’t get, Lindsay – and tell me if I’m crazy – they did a blanket percentage for the whole state.

LINDSAY: Yes, they did.

KAREN: That kind of makes no sense.

LINDSAY: I think it comes out once a year.

KAREN: A lot of people that are in some of those older homes are also ones that are probably less inclined to be able to afford to have a raise in their rent, too.

LINDSAY: I know, I know.

KAREN: So it’s affecting – I don’t know if this is the right thing. But we can’t do anything about it. We just have to understand it.

LINDSAY: We can’t. But what’s happening is we’re seeing rent increases happening now all the time rather than when you needed to raise them, because you’re now forced to keep your market rate up by this. Sometimes you’d keep good tenants on the same rate for several years and you wouldn’t raise it. Now you need to raise it because you’re capped.

KAREN: Especially if you’re 13 years old, because you’ll be 14 years old next year.

LINDSAY: Exactly. That’s a good point.

KAREN: Those poor tenants are going to realize probably a higher raise in rent than what is appropriate.

LINDSAY: That’s exactly what we’re seeing. I know.

KAREN: So the bill’s kind of having a reverse effect.

LINDSAY: I think it is. I have a lot of owners that are selling because they’re just not interested in this right now.

KAREN: I have a lot of clients that are selling as well. In fact, two of the homes that we sold didn’t go to investors; they went to first-time homebuyers. So that took two rental homes off the market.

LINDSAY: Yes. I think the market is getting tighter now that we’re seeing this. Now, the other thing is you have to give a 90-day notice for a rent increase or change of terms.

KAREN: That’s on those properties that are 14 years –

LINDSAY: That’s on anything.

KAREN: Okay, wait.

[laughs]

Let’s take a break, because this is probably going to – we’ll be right back with House Talk.

Hi, welcome back to House Talk. Again, this is Karen Malanga, Principal Broker at RE/MAX Key Properties and NestBend.com. Happy to be visiting with Lindsay from Velocity Property Management.

Before the break we were discussing Senate Bill 608. I got a little confused, so I thought I’d start us off on this second segment with – okay, if your home is older than 14 years, you aren’t affected by this 7% cap on rent raise?

LINDSAY: Correct.

KAREN: No, wait. If your home is newer than 14 years.

LINDSAY: Newer, yes.

KAREN: But you are affected by other parts of the bill.

LINDSAY: Everything else applies. It’s just the amount you can raise rent.

KAREN: Okay, can we go over everything else that you can pull out of the top of your head?

LINDSAY: [laughs] Oh boy.

KAREN: You’re good at this, come on.

LINDSAY: I know, I know, right? So one of them is you do need to give a 90-day notice for any change of terms to the contract.

KAREN: Is that different than before?

LINDSAY: That was currently how it was in the City of Bend, but outside of that – Redmond, Prineville – wasn’t that way. Now it all is that way. Everywhere you are, no matter where you have a home in Oregon.

KAREN: In the whole state.

LINDSAY: The whole state, it’s 90-day notice.

The second thing that’s playing into it is how you can terminate. You used to be able to terminate a lease with no cause. Let’s say a tenant had been living there for a year and you just weren’t jiving. Things weren’t working out. They weren’t horrible, they were paying their rent, but it just wasn’t the right fit. You used to be able to say, “Here’s your notice, and we’re not going to renew your contract.”

Now you don’t have that ability after the first year. The first year starts when a tenant receives keys, not when a new contract is signed.

KAREN: Okay, explain this to me. Just pretend that I don’t know what anything – and I actually don’t. [laughs] It’s a learning experience for me. Just so I look at the timetable and it makes clear sense to me, does that mean that you would want to – one the year is up, you don’t have that right. So do you find people, then, giving notice at 11 months or 10 months?

LINDSAY: Exactly. It’s when you give keys. Let’s say June of last year we gave keys to a tenant and they moved in. Then you can give them a 90-day notice of nonrenewal during the first year of when they receive keys.

KAREN: So it’d have to be at 9 months.

LINDSAY: Exactly. You’re going to want to just get real familiar and see how happy you are with your residents at that time. Once the year is up and you’ve moved into either a month-to-month agreement or signed a new contract, you’re really locked in to that tenant. You’ve really committed, because now we can’t just give them a no cause.

Now, if a tenant violates rules, you can still ask them to leave based on violations. But you can’t just say “we’re choosing not to renew” after that 1 year.

KAREN: So that first year is really critical both for the tenant and for the landlord.

LINDSAY: It’s really critical, yeah.

KAREN: To figure out if they do get along. Because I know sometimes things just don’t mesh.

LINDSAY: They just don’t mesh. The house isn’t the right fit, or there’s other things. As an owner, you want to keep in mind that timeframe, because you’re going to want to deal with it that first year.

KAREN: Have there been changes in the circumstances that fall under just cause determinate? Are those the same?

LINDSAY: Yes, those are still the same.

KAREN: What would be some samples of those?

LINDSAY: Non-payment of rent, obviously. Unauthorized pets. For cause, so something a tenant has done that’s violating the contract, you can still terminate.

KAREN: Is the timeframe the same?

LINDSAY: It’s all the same. Well, they’re all different – sorry, yeah. In terms of for cause notices, they’re all different. So consult an attorney for that.

KAREN: Oh my goodness. This is one reason to really get a property manager. [laughs]

LINDSAY: Yeah, I highly recommend getting an attorney and a property manager, because it’s just getting a lot more constrictive. You really need to know what you’re doing now.

KAREN: Also the tenants have a lot more knowledge, too, and they’re watching their dates too. I can see both sides of each equation. We want more people to own rentals so that there’s more property available to rent.

LINDSAY: Yes.

KAREN: As we make it more restrictive on investors, we end up with less inventory to rent.

LINDSAY: Exactly.

KAREN: That’s exactly what’s happening in what I see in Bend. I don’t know about statewide.

LINDSAY: I think it’s causing more of a housing crisis, because I think people are selling. There’s still that option just to sell your property, and then we have less and less inventory. I think you get less and less owners that are willing to just be nice owners, because you have so many rules you have to play by that you just don’t have that ability like you did.

KAREN: Owning property becomes more of a job.

LINDSAY: Exactly, and a profession rather than just this –

KAREN: Having a rental house.

LINDSAY: Having a rental house, yeah. For renters, I think there’s some benefits for sure on the rent increases, but limiting that so you’re not just going to get into a home and get settled with your family and then have these rents just skyrocket on you in the next year. There’s some security there for renters, but I think that what they’re going to see is more frequent rent increases than before.

KAREN: Sure. I do think as a renter it might behoove them to really look at the age of the home they’re renting too, because if it’s newer than 14 years old, then they’re going to have a little bit more flexibility or a little bit more security.

LINDSAY: That’s a great point. Yes, that’s a really good point.

KAREN: Yeah, so if they want one of those older homes on an acre where they can have the boat and the car, they might want to look at the age of that. If it’s a 1970s, that rent can be raised substantially.

LINDSAY: Yes. There’s also some fees that have gone in now. You’re supposed to pay a tenant a relocation fee, which has been happening in Portland for a while, but now that’s the new thing. There’s a few things that you can do to ask a tenant to leave after that first year.

You can still move into your property. You can still have an immediate family member move into it. Give your tenant the 90-day notice and move in or have a family member move in.

You can still list it for sale. There’s some extra things around how that would look, but there’s a 1 month relocation fee that an owner that has four or less units gets waived, but if you have more than four units, you have to pay 1 month relocation fee to that tenant if it falls under a few of the criteria.

KAREN: I think I want to correct something I just said previously because I think I got it goofed up again. [laughs] Oh, Karen. I haven’t had my coffee. But it would behoove a tenant to look at a property that’s older than 14 years.

LINDSAY: Yes, sorry. Did we say newer earlier?

KAREN: Yeah, we agreed that it would be newer. But older.

LINDSAY: Older, because older is limited on the rent to 7%.

KAREN: Yeah, older is limited. If they look at a newer one – okay, we’ll be back. We’re going to take a break. I’m going to get a cup of coffee. We’ll be right back with House Talk.

Hi, welcome back to House Talk. Again, it’s Karen Malanga, Principal Broker at RE/MAX Key Properties, and I’m sitting here with Lindsay from Velocity Property Management. We’ve had our coffee. We’re a little bit more clear on Senate Bill 608.

I just want to say, I think if you’re an investor – now that I have this perfectly clear – it would behoove you to be looking at newer properties. I don’t want to get political here, but the reason that could be part of this bill is to incentivize bigger builders to come in and build new units, because they’re going to be able to have more substantial rent increases.

I don’t know how that’s going to affect our tenant population. I’m not real comfortable with all that. But again, there’s so many deep dives on this bill, and we need time, and we need time to be behind us to see how it’s really going to affect our housing situation here in central Oregon. Obviously we can’t speak for the whole state, but what we experience every day is really important, whether we’re helping a renter find a home or whether we’re helping an investor buy a property.

Lindsay, a little more detail? [laughs]

LINDSAY: Yeah, it’s so important. I do think get a real estate attorney or call a property manager if you’re a single family owner and you just have a couple rentals. Just get some advice. It’s wise.

KAREN: When you start working with someone, how do you start the whole dialogue? When I have an investor and I send them your way, how does it begin? Because a lot of my investors are from out-of-state, so they’ve got different rules on properties they own elsewhere.

LINDSAY: It’s wise to educate them on what you’re getting into when you buy an investment in central Oregon. But I think if you want to get started, I’d contact us at VelocityPropertyManagement.com. You can give us a call or email us. We’ll be happy to get you on the right track and give you some guidance on your long-term plans.

I think you do really want to look now at what your long-term plan is. Are you going to be a long-term investor or a short-term? Because you’ll really want to play this depending on what your plan is.

If you are looking to sell right now – because we have people that are looking to sell their rental investments – really get a good realtor, like Karen Malanga, who’s excellent, and really have your realtor guide you. This is getting a little more tricky.

KAREN: It is getting tricky.

LINDSAY: For you too, not just for me.

KAREN: Yeah. I do know that when we have an investor, we want to make sure that we’re really helping them find the best property for the long-term.

LINDSAY: Yeah, and maybe you want to sell your older rental right now and buy something newer.

KAREN: That would make a whole bunch of sense.

LINDSAY: So call Karen and get her to help you out.

KAREN: [laughs] Oh, Lindsay.

LINDSAY: No, it’s true. It’s true.

KAREN: Do we have any more words of advice to our listeners, like a website to go to? Do you have information on this Senate bill on your website?

LINDSAY: I don’t, but if you just google “Senate Bill 608 in Oregon,” it should pull it up for you. There’s going to be a lot of information. If you’re looking for an attorney, too, I have some great contacts. If you call us and you’re just wanting some guidance on who to call for more detail, I’m happy to direct you that way.

KAREN: Okay. Also, we have the summary for Senate Bill 608 on our website at NestBend.com, so if you wanted to read just a summary, it does provide a lot of information. Obviously it’s not legal information. We always want to say that. But I think that in the end, like I said, time will tell and we’ll see just how this plays out. Right?

LINDSAY: Yes. Maybe in a year we’ll revisit this and talk about how it’s looking now. [laughs]

KAREN: Anyway, Lindsay, a little bit about you. How many homes and properties do you guys manage at Velocity?

LINDSAY: We have about 250.

KAREN: Oh my goodness.

LINDSAY: Yeah, in central Oregon. We do all over, but particularly Bend.

KAREN: How do you do that?

LINDSAY: It’s a lot, but it’s good. We have a lot of help. We have a great team. We’re limited – we really want to take on properties and really manage them well, so we don’t just take everything. We don’t just take on an unlimited amount, so we really can customize to our owners and be a good source for them.

KAREN: Do you offer different levels of service?

LINDSAY: We do, yes. That’s all on our website.

KAREN: Okay, tell us what your basic service would be.

LINDSAY: Our basic service, we do just tenant placement. We can do all the screening, the marketing, the showings, the full lease agreement, and then you can take it over and manage it from there. It’s a really nice service if you’re just wanting to make sure you get good tenants in.

Then from there we can do monthly management, you can hire us a la carte to do inspections. We do all kinds of fun things. Just call us. We’ll get you plugged in. [laughs]

KAREN: Just call you. And you do winter servicing as well, or winter maintenance?

LINDSAY: We do.

KAREN: I think that’s important, especially for out-of-state investors.

LINDSAY: We do.

KAREN: Any time that you can’t drive by or check on your property, it becomes much more difficult and things can happen.

LINDSAY: Yeah, and tenants know when their owners aren’t around. So make sure you have somebody that’s keeping a good eye on it for you.

KAREN: As we’re winding down our program, Lindsay, why don’t you give our audience your phone number?

LINDSAY: It’s (541) 388-1382.

KAREN: Perfect. If you do, after listening to this, have an older property that you would like to sell, I’d love to help you. You can reach me at (541) 390-3326. Thanks so much, Lindsay, for being on the program.

LINDSAY: Thanks, Karen.