Application of payments and 72 Hour Notices in Manufactured Home Communities

Want access to MHCO content?

For complete access to forms, conference presentations, community updates and MHCO columns, log in to your account or register.

By: Bradley Kraus - Attorney at Law - Warren Allen LLP

 

Bradley Kraus is an attorney at Warren Allen LLP, where he is a member of the firm’s landlords’ rights team. A graduate of the University of Minnesota, Mr. Kraus also graduated cum laude from Lewis and Clark Law School. He currently represents many of the Pacific Northwest’s premier management companies and ownership entities and assists clients in various litigation matters, including business, property and contract disputes.

 

A landlord recently approached me after I watched his eviction trial. He was pro se, and lost to a well-known tenants’ attorney due to, among other things, a failure to follow the statutes and requirements set out in the statutes which govern eviction actions in Oregon. Among his questions about what just happened, he exclaimed, “[t]his is so straightforward; they owe me rent! That should be all that matters! Doesn’t the judge care?!” 

 

While I couldn’t tell if the mean ol’ judge cared about the landlord’s plight, I did my best to soften the blow of what he perceived as an unjust result. But unfortunately for this landlord (and many others), this area of law, and the associated rules, are highly technical. Some of the law and rules you know, but others may not be so apparent. As it relates to manufactured homes, one such rule/technicality—debtor application of payments—is absent in the ORLTA. 

 

In a multi-family home setting, ORS 90.220(9) directs any payments received from tenants to be applied in a certain sequence. That same statute then states that these rules do not apply to manufactured homes. So what’s the application of payments rule for manufactured home parks? The answer may be located in your Rental Agreements, as the statutory exemption means the rule defaults to whatever the parties contractually agreed to as the appropriate application of payments. If there’s nothing in your Rental Agreements that directs the application of payments, you may have to pay closer attention to the notations your tenants insert in the checks/money orders/cashier’s checks they tender. 

 

If there’s no agreement between the parties (and no statute applies), then case law dictates that the debtor—in this case, the tenant—may direct how their payments will apply to their outstanding debts to the Landlord. So why does this matter? If you are a manufactured home park manager, look at how many payments by your tenants contain a notation like “rent.” The following example illuminates the issue, and shows how this issue can complicate your termination rights and strategies. 

 

Imagine, for example, a manufactured home tenant fails to pay any July rent ($700) and approximately $100 in utilities. August rent and utilities come due, and thereafter, the tenant tenders a check (containing the notation “rent”) in the amount of $750. Many landlords would believe that because the tenant’s total debt in July was $800, the landlord could apply the $750 fully to July rent and some of the utilities, and not have a partial payment problem under ORS 90.417. Since (in the landlord’s mind) there’s no partial payment issue, the landlord believes she can still serve a Non-Payment of Rent notice for August rent. Such a belief is misguided under Oregon case law. 

 

Under Oregon law, “[a} debtor has power to determine the application of any money payment that he tenders to his creditor.” Remember that little “rent” notation above? The tenant has technically paid all of July’s rent, and $50 dollars of August rent. If the above landlord fails to timely return the $50 overage, a partial payment problem has occurred. If the landlord were to serve a Non-Payment of Rent notice for August, the Non-Payment notice is defective, as $50 of the $750 payment tendered by the tenant/debtor rolled into August rent, creating the partial payment issue. 

 

So how do you avoid these issues? First, if you stay on top of delinquencies and/or your tenant maintains a zero balance, the above issue likely never troubles you. However, if you have tenants that are delinquent on multiple months of rent, closely review their next check/money order/cashier’s check tendered to you. If it contains a notation of some kind, it may affect your ability to serve a Non-Payment of Rent notice. If you have such an issue, it may be time to have an experienced attorney review potential strategies for your delinquencies, present or future.

Contact Information for Brad Kraus Attorney at Law:

Warren Allen LLP, 850 NE 122nd Avenue, Portland, OR 97230      Phone: (503) 255-8795     E-mail: kraus@warrenallen.com

Community Update Topics: 
Location Tags: