This is the first of many legislative updates for 2019.
There is an old saying coined by the Salem 'Statesman Journal' that during the Oregon Legislative Session no man's or women's horse or home is safe." This certainly applies to the 2019 Legislative Session.
As many of you know the November 2018 General Election was not kind to landlords
Attached is a copy legislation impacting manufactured home communities. Many of these legislative concepts we have seen before in past sessions. Of specific interest is SB 586 which is the coalition bill. This bill will be completely revised in February. The other priority bill is the rent control bill - SB 608. MHCO will be monitoring all the bills listed in the legislative report and additional legislative proposals that will be trickling out between now and the end of February.
By: Dale Strom
Dale Strom is a second generation Manufactured Home Community landlord. He is a Board Member, past President and current Treasurer of MHCO and owns two manufactured home communities in Oregon.
This is the fifth of a multiple part series on a private owner of a Manufactured Home Community willingly attempting to sell that Community to an Association of tenants within that Community. Riverbend MHP is a 39 space community located within the city limits of Clatskanie, OR.
The fourth part of this series covered a period of time immediately after the tenants met with representatives from CASA to early October where both parties were anticipating to sign a purchase agreement on November 1. This period of time of will encompass almost 5 months.
The author is called by both CASA's Executive Director and the Development Manager. Obviously, there is something that isn't going according to schedule. Obviously, November 1 will come and go without the completion of the sale.
Before we get back to the phone call from CASA, a few details that occurred after September 1 were not mentioned in thefourth part of this series.
THE PAPERWORK PROCESS - The Cooperative requested an appraisal on Riverbend for the purpose of financing. An application for Capital Needs Assessment was required to fund the appraisal. Although this process was a few days late, this shouldn't delay the sale, if any, at all. The request for the appraisal was made on or around September 17. The completed appraisal was submitted to the State on October 16.
The appraisal, once completed, is the last and remaining document for the application process. The application then activates the underwriting process. When the State grants its approval of the underwritten application, it is then forwarded to the Oregon Housing Stability Council (HSC) for the final approval. So, who then gives the financing approval?
Grant agreements are then drafted and agreed to by CASA, the Cooperative and the Department of Justice for comments and approval of the funds needed to finance this purchase agreement. Once the agreement has gone through the many approvals and those signatures have been secured, the sale then gets the go ahead. The closing is all that remains.
PARK OPERATIONS - Always in the back of my mind in the 4thquarter of each year is budgeting and my assessment for a need to increase the rent. Scheduled rent increases that I have asked of the tenants usually takes place on January 1. If the sale does not go through as expected, I will need to start in late September on implementing the increase.
All Oregon MHP landlords know that when they feel that they must increase their rents, that landlord will immediately turn to their Oregon Revised Statutes and go directly go to ORS 90.600. Those landlords will then be reminded that all tenants will need to be given a 90 day notification upon a landlords need for such an increase. In this case, I needed to get my notifications in the mail by September 26 to insure that the tenants did get their notices by September 30 in time for the January 1 implementation. (In Oregon, a tenant needs to be properly served via first class mail so that the notices are in their possession for the full 90 days before the rent is due).
My tenants were now aware that if I was still the owner of the community on January, their rents were now to be increased from $370 to $380 per month for the New Year. (Yes, that is the going rate of MHP rents in the small city). The request for the rent increase at the beginning of the year would become prophetic in more than one way.
Now we have an appraisal, capital needs assessment, an application, a submittal to the State for underwriting, approval by HSC for final approval, financing and finally approval by the Department of Justice, CASA and the Cooperative. And then we are ready for a closing on November 1. What could possibly go wrong???
Receiving the phone call from the Executive Director and Development Manager of CASA, they informed me that the events of their due diligence, application and approval process leading to a final sale was running behind their timeline. Their request was that we agree to and move back the closing date to March 1.
If you remember from the first part of this series, I wanted to sell this community for several reasons. I thought that the possible sale to the tenants would work for me because I was not going to exercise my 1031 option and I wanted to sell but didn't need to sell. The exemption of the State Capital Gains was another huge benefit that does not go ignored. I could wait when the purchasing party was ready.
I also mentioned in the first part of the series that my terms on selling would increase the Ernest Money by $10,000 per month for 2 months for any delay by the buyer for this sale.
CASA did want to delay the sale of the park back to March 1 because of delays of the process that the buyer needs to achieve in this process. It appears that the delay could possibly be with the Department of Justice. It has been suggested to me that the DOJ accomplishes its work on its timeline and doesn't have any kind of fast track program for this type of case. Whatever the delays were, the Ernest Money was increased by $20,000.
Then there is the case of my onsite manager. She has been there the entire 12 _ years that I have owned the community. She has spoken to me over the past 2 or more years about retirement and spending more time for herself and family. She does not want the responsibility of park management anymore. My agreement with my manager when I signed the Purchase Agreement was that she would work for me until November 1. This was extended another month, when the extension by CASA was requested. My manager still resides in the park and will continue to live there as a tenant.
During this time, I have also been in frequent contact with the Coop board President and the Treasurer about the status of the park. This can lead to problems of a conflict of interest here although the best interest of the Community is most important to both parties. I continue to speak with the onsite manager regarding the status of the park. When it is necessary to speak with the 2 board members, usually the conversation will swerve into the current status of the park and how some issues need immediate attention. With all that has occurred since the formation of the board for the Cooperative, I can honestly say that I have had a great working relationship with both the President and the Treasurer. Also adding that they, in no way, have acted in my behalf to take care of any issues that I have a need to accomplish. I have seen this as phasing out my current manager and bring in the new ownership.
I do look forward to closing this deal in that we have been working on this sale for almost 5 months. Now I look at this delay from another standpoint. We are getting late in 2018. Pushing this sale back into 2019 will make tax planning much easier in that I have more time to do that planning. In addition, the rent increase will be implemented on schedule on January 1. It became prophetic in that the $380 rent is the amount that the Cooperative will start asking its members upon closing.
It remains to be seen if this rent in the long run can be sustained by the Cooperative or if an adjustment of the rent will need to be made.
Now that we are targeting the close sometime in the first quarter of 2019, I can now anticipate enjoying the Thanksgiving and Christmas holidays. But I also need to find the proper way to sell" the 2 park owned homes to the "occupants" (not a complete legal description of the habitants) of those homes.
Recently
Attached is Phil Querin's detailed analysis of SB 608 (Rent Control). SB 608 will be up for a public hearing on Monday, February 4th at 3 pm. Information on written and public testimony will be forth coming early next week.
We are now wrapping up week 3 of the 2019 Oregon Legislative Session. A lot of new legislative proposals have been submitted making this one of the most active legislative sessions in recent memory. The Senate this week passed the most sweeping changes to Oregon Landlord-Tenant law in three decades with the passage of SB 608. The next step for rent control is a public hearing in the Oregon House on Monday, Feb 18th at 1 pm. There are many other legislative proposals swirling around the Oregon Capital. See the attached summary for all the legislation MHCO is currently tracking.
On February 28, 2019 SB 608 (rent control) was signed into law. MHCO has received numerous questions regarding the new statute. We asked MHCO Legal Counsel to review 10 of the most frequent questions and provide answers. This is the first of many Q&As regarding Oregon's new law. Click the file (10 Questions and Answers Regarding Oregon's New Rent Control Law) above for the complete question and answer. MHCO will continue to provide detailed information on the new law through Q&As as well an in-depth seminars at MHCO's Annual Conference in Eugene on October 28 & 29th.
We crossed a significant threshold this week in the Oregon Legislature with a number of bills going to the legislative graveyard. MHCO is tracking and working to defeat/pass a number of bills this session. Rent Control (SB 608) was not the only bill that concerned MHCO this legislative session. For the latest status on proposed legislation - the good, the bad and the truly horrific - click the the attachment above. We are pleased that a significant number of legislative proposals have been defeated. We are still hoping for an adjournment in late June 2019.