Real Estate Law Alert: House Bill 3186 - Restrictions on Condominium Conversions

3/22/2007

House Bill 3186 has been introduced to the Oregon House of Representatives at the request of the Community Alliance of Tenants. This bill, if passed, would pose significant restrictions on residential condominium conversions. A copy of the bill is available here. The following is a summary of the essential features of the bill:

1. Rent Controls and Restrictions on Terminations.

   a. Once the 120-day notice of conversion has been provided to tenants, an owner may not give a 30-day termination notice to a tenant without cause that would result in the tenancy terminating before the expiration of the 120-day period. "Cause" is not defined in the bill.

   b. During the same 120-day period, the owner may not increase rents in excess of any scheduled increase specified in the lease or the percentage increase listed in the Consumer Price Index ("CPI").

   c. The bill creates a rebuttable presumption that any landlord’s 30-day termination notice given without cause and any increase in rent beyond the CPI occurring within 180 days before delivery of the notice of conversion was given to avoid, or to assist a declarant of a conversion condominium to avoid, the requirements under the act.

   d. Violation of any of the above may result in damage payments to the tenants in an amount that is the greater of six times the monthly rent or two times the actual damages to the tenants.

   e. The result of these provisions is to lock in rental rates and tenancies for a total of 10 months.

2. Payments to Tenants. The converter must pay to each tenant an amount equal to three times the Section 8 fair market rental, adjusted for unit type and size, established periodically by HUD, and deliver the payments to the tenants no later than 30 days after delivering the 120-day notice of conversion. The bill provides that if the tenant elects before the payment date to purchase the unit, the declarant may reduce the purchase price in the amount of the payment instead of making the payment to the tenant. However, the act currently prohibits making any offer to the tenant during this 30-day period.

3. Notifications to Local Authorities. The bill requires the developer to send a copy of the 120-day notice of conversion to the mayor or county commission and to the local regional housing council, or if there is no regional housing council, to the Housing and Community Services Department. The notice must be accompanied by information on the number of units, occupancy, rents, and most recent rent increases, plus a certification that there have been no evictions or rent increases in violation of the act. The 120-day period will not commence to run until this notice has been given to those agencies.

4. Rehabilitation. Improvements to the general common elements may be conducted only between the hours of 9 a.m. and 7 p.m., and must allow tenants reasonable access to the common elements.

5. Local Governments May Impose Additional Requirements and Restrictions on Conversions. The bill permits local governments to impose additional restrictions on conversions.

This bill would make condominium conversions difficult, if not practicably impossible. A developer would not be able to obtain possession of the units in order to make renovations or to have inventory to sell to buyers, and would be required to make substantial financial payments to all tenants, whether or not they purchase a unit.

If you are concerned about this bill, you are encouraged to contact legislators and industry groups such as the Metro Multifamily Housing Association, Oregon Association of Realtors, Home Builders Association of Metropolitan Portland, etc. In addition, we have been informed that some developers are interested in hiring a lobbyist to oppose this bill, and some wish to present a group letter to the House Committee on Consumer Affairs to which this bill has been referred. If you wish to participate in either effort, please let us know and we will pass on your interest to the appropriate persons.

Howard M. Feuerstein, (503) 294-9215, hmfeuerstein@stoel.com
Christian H. Scott, (503) 294-9834, chscott@stoel.com