Phil Querin Q&A: Resident Vacates Owing Several Months Rent (Corrected 6-7-2021)

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Phil Querin

 

Question: We have several tenants that have vacated owing us money. They did not have a declaration on file with us. Can we start to collect on this money owed? What are our next steps?


 

 

[Corrected Update: The third paragraph below the Question has been revised to clarify that SB 282 extended the Grace Period for tenants to cover the entireMoratorium period, April 1, 2020 to June 30, 2021. Thanks to John VanLandingham for bringing this to our attention.]

 

Question: We have several tenants that have vacated owing us money. They did not have a declaration on file with us. Can we start to collect on this money owed? What are our next steps?

 

Answer: The Oregon Eviction Moratorium laws have been largely silent on the fate of the non-payment balance of former tenants. Here’s what we do know:

 

There is a short window, between March 31, 2021 and June 30, 2021 where a landlord may file an action to recover a Nonpayment Balance (all outstanding rents, charges and fees accrued between April 1, 2020 to December 31, 2020), but only from a tenant who has notfiled a Declaration of Financial Hardship. 

 

This window is closed on July 1, 2021, when relevant portions of a new bill, SB 282, come into effect. SB 282 extended the Grace Period to cover the entireMoratorium period, April 1, 2020 to June 30, 2021. Accordingly, commencing on July 1, 2021, a landlord must wait until after February 28, 2022 to recover any outstanding Nonpayment Balance accruing during the Moratorium, regardless of whether the tenant has submitted a Declaration of Financial Hardship.

 

While filing to collect a Nonpayment Balance is technically possible in the short window between March 31 and June 30, 2021 under the current moratorium rules, there is no way of knowing how the courts will interpret this right, or if it is being allowed at this time. Problem: The Moratorium bills do not specify whether these protections apply only to current tenants or to current andformer tenants. Without delving into the legislative history, or getting a legal opinion from your own counsel, the safest approach might be to interpret this prohibition as applying to both current and former tenants.

 

The most recent bill, SB 282, signed in mid-May 2021, prohibits landlords from reporting outstanding rents, charges, and fees accruing between April 1, 2020 to June 30, 2021 to any consumer credit agency.

 

All of the Eviction Moratorium bills, dating back to early 2020 (HB 4213, HB 4401, and SB 282) are largely silent on the application of these new regulations to tenants who have moved out during the pandemic. The only portion of the law directly addressing former tenants says that if a tenancy terminates before the end of the new Grace Period (i.e., before February 28, 2022), a landlord “may claim from the security deposit or last month’s rent deposit to repay the unpaid rent balance that accrued [between April 1, 2020 and June 30, 2021].” 

 

Though there is no indication whether the laws implicate the relationship between landlords and former tenants, prior guidance issued by the Oregon Law Center in a January 2021 webinar addressing HB 4401 indicates that the laws likely do impact former tenants. Much of the relevant language between HB 4401 and SB 282 remains the same, so it’s reasonable to assume that the interpretation of one will suffice for the other unless and until further guidance is issued. 

 

Oregon Law Center HB 4401 Eviction Moratorium FAQ

 

“Q: Does the prohibition on reporting "non-payment balance to any consumer credit agency" include stopping landlords from sending past residents to collections?

“A: If the debt is for rent owed during the moratorium period [now April 1, 2020 through June 30, 2021], and is either debt from before December, or the tenant has submitted a Hardship Declaration, then the landlord may not make a report to the credit bureau and may not pursue collections while the tenant is covered by the moratorium. After the tenant has moved out, the law is less clear. There is an argument that these protections continue until the end of the moratorium period, regardless of whether the tenant has moved out.”[emphasis added]

 

“Q: What if a client has vacated a unit with a remaining balance of rent still due, can they submit the declaration of hardship to prevent those charges from being submitted to collections?[. . .]

“A: If a tenant vacates a unit with a remaining balance of rent still due, the landlord can use the deposit to pay for past-due rent. If there is still remaining past due rent owed, and the tenant had submitted a declaration form to the landlord before moving out, it is unclear whether the landlord can pursue collections and make a credit bureau report right away,(SB 282 has made reporting nonpayment debt to a credit bureau unlawful) or has to wait until the end of the moratorium period(June 30, 2021).”[1][emphasis added.]

 

 

What’s Next:

 

Landlords will be able to begin collecting the current month’s rents, charges, and fees, on time and with appropriate remedies (imposition of late fees or termination) on and after July 1, 2021. For any outstanding Nonpayment Balance for current or former tenants, landlords may:

 

 1) Apply to the Landlord Compensation Fund for partial compensation for their losses   (Note: Must have a signed Declaration of Financial Hardship from tenant, current or        former);

 

2) Contact the tenant and try to work out a voluntary repayment plan for nonpayment     debt; 

 

3) Wait until after February 28, 2022 to pursue legal action to collect the debt. 

 

Since Oregon has been operating under some form of Covid-related eviction and collections moratoria since the Spring of 2020, there has been no official guidance on how to collect a Nonpayment Balance from anyone. It simply hasn’t been an option for the last year. Tenants will be required to pay current rents beginning in July of 2021, and collections for debts incurred after that date will be as normal. How the process of collecting outstandingNonpayment Balances will proceed is unclear at this time.

 

It is worth noting that the eviction moratoria laws permit landlords to accept partial payments from tenants, or on behalf of tenants, without waiving their rights to later seek the balance of the debt or pursuing any other available options once the latest moratorium expires. 

 

Also, the Landlord Compensation Fund will have a third round of funding and, unlike the prior two rounds, landlords may apply for compensation for former tenants provided they (a) have a signed Hardship Declaration and (b) a current address on file. If a tenant has passed away with an outstanding debt, the landlord should contact the Landlord Compensation Fund for further guidance.

 

 

 

 

 

 

 

 

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