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Answer:  In a word – No.  Or, to be more precise, as discussed below, if you do not renew the lease, it will automatically become a month-to-month tenancy on the same terms as the lease.  In other words, your non-renewal will not result in forcing the tenant to vacate the space.

When this law was first being discussed, this issue was addressed.  Prior to enactment, there was an open question whether fixed term tenancies [i.e. leases - those with definite start and ending dates] were even legal.  From the tenants’ perspective, under the manufactured housing landlord-tenant laws, since a landlord cannot terminate a tenancy “without cause,” a lease that expires without renewal is the same thing i.e. termination without cause.  Accordingly, ORS 90.545was enacted, which provided protections to tenants against the possibility of unilateral nonrenewal.

Is this unfair to a landlord, such as yourself, when an applicant is approved, ostensibly based upon a satisfactory application, who then becomes the “Tenant From Hell?”  Some would say that the landlord’s best protection is at the front end of the business relationship, since he/she is given a full and complete opportunity to set out all screening criteria and performing a thorough vetting of the applicant’s financial, rental, and criminal background. But once the landlord approves the applicant – presumably because he/she passed the vetting process - they have the right to remain at the space, so long as they don’t commit certain material violations, such as nonpayment of rent, breach the rules, rental agreement, state law, or commit certain actions outrageous in the extreme.   

Here is how the fixed term tenancy law, found at ORS 90.545 and 90.550, works:

• At least 60 days prior to the ending date of the lease term the landlord must provide to the tenant a proposed new lease, together with a written statement that summarizes any new or revised terms, conditions, rules or regulations.
  •  The new rental agreement may include new or revised terms, conditions, rules or regulations, if:
    • They fairly implement a statute or ordinance adopted after the creation of the pre-existing lease; or
    • They are the same as those offered to new or prospective tenants at the time the new proposed lease is submitted to the tenant and for the preceding six-months prior to submission period;
    • If there have been no new or prospective tenants during the six-month period, the new lease terms must be same as are customary for the rental market; and
    • They are consistent with the rights and remedies provided to tenants under ORS Chapter 90; and
    • Do not relate to the age, size, style, construction material or year of construction of the manufactured dwelling [or floating home] contrary to ORS 90.632 (2);[1] and
    • Do not require an alteration of the manufactured dwelling [or floating home] or alteration or new construction of an accessory building or structure.
• The tenant may accept or reject a landlord’s proposed new rental agreement at least 30 days prior to the ending of the term by giving written notice to the landlord.
• Note that if a landlord fails to submit a proposed new rental agreement as allowed, the tenancy renews as a month-to-month tenancy under the same terms as the prior lease, except that the landlord has the right to increase the rent unilaterally, pursuant to ORS 90.600.
• If the tenant fails to accept or unreasonably rejects a landlord’s proposed new rental agreement, the fixed term tenancy terminates on the ending date without further notice and the landlord may take possession through the eviction process, assuming the tenant does not vacate the space and remove the home.
  • However, if the tenant surrenders possession of the space prior to the filing an eviction, he/she has the right to enter into a written storage agreement with the landlord, and then has the same rights and responsibilities of a lienholder during an abandonment, i.e. pay storage fees, maintain the space, and sell the home within six months [rather than 12 for lienholders].  See, ORS 90.675 (19).

Conclusion.  My suggestion is that if your tenant is continually causing problems, paper your file thoroughly, showing the efforts you’ve made to work with that person. If there are complaints from other residents, document them. Eventually, the tenant will slip up – doing something that gives you the basis for an eviction.  If he is a chronic late payer, consider using the three strikes law, found in ORS 90.630(8). Then find a good landlord attorney and discuss the best method to evict the tenant.  You will then be armed with good evidence for the judge or jury to show that you walked the extra mile with this person, but they simply refused to cooperate.  And remember that although there are restrictions on the contents of the new lease you offer, it may contain provisions that will give you a better foundation for the eviction.  Good luck!

[1] This specific protection was important to the tenant lobby, since until it was enacted, there was an open question as to whether landlords could impose as a condition upon accepting an applicant who was purchasing an older home, that it must be removed upon subsequent resale. In addition, ORS 90.632 was enacted which permits landlords to expressly require that homes be repaired due to damage or deterioration.

Answer. Your questions are all good ones, but generally are dealt with in the utility pass-through laws.[1] Here is a summary:

1. Right to Pass Through Utilities. If a written rental agreement so provides, the landlord may require tenants to pay a utility or service charge that has been billed by a utility or service provider to the utility or service provided directly to the tenant's space as measured by a submeter

1. Permitted Charges. The utility or service charge to be assessed to the tenants may consist of:
   1. The cost of the utility or service provided to the tenant's space and under the tenant's control, as measured by the submeter;
   2. The cost of any sewer service for stormwater or wastewater as a percentage of the tenant's water charge as measured by a submeter, if the utility or service provider charges the landlord for sewer service as a percentage of water provided; and
   3. A pro rata portion of any base or service charge billed by the utility or service provider, including but not limited to any tax passed through by the provider.

1. Prohibited Charges. The utility or service charge may not include:
   1. Any additional charges (including any costs of the landlord), for the installation, maintenance or operation of the utility or service system or any profit for the landlord; or
   2. Any costs to provide a utility or service to common areas of the facility.[2]

1. Unilateral Amendment. Landlords may unilaterally amend a rental agreement to convert a tenant's existing utility or service billing method to a submeter billing method. The language in the amendment must fairly describe the submetering provisions.

1. 180-day Notice. Landlords must give the tenants not less than 180 days' written notice before converting to a submeter billing method. (PCQ Comment - I believe landlords can send out the unilateral amendment anytime - It does not have to correspond to when they send the 180-day notice out. The "unilateral amendment" language means that the landlord does not need tenant "consent.")

1. Access to Install or Maintain Meters. Landlords must give notice before entering a tenant's space to install or maintain a utility or service line or a submeter that measures the amount of a provided utility or service.
   1. PCQ Comment - The statute does not treat submeter installation as something that must wait until the 180-day notice is mailed. Installation may commence at any time following unilateral amendment of the rental agreement.
   2. The landlord must give tenants at least 24 hours' actual notice of intent to enter and the landlord or landlord's agent may enter only at reasonable times.
      1. PCQ Comment - Although the statute only says "actual notice" (e.g. phone call or phone message left on recorder) I would make sure it is in writing. If it's mailed the landlord would have to add three additional days before gaining entry. If delivered, and the clock time of delivery was put on the notice, the landlord wouldn't have to add any additional time beyond the 24 hours. The 24-hours applies to the minimum amount of advance notice - not to the actual date of intended entry - so long as the entry is not within the 24-hour period.
   3. Landlords may not enter if the tenant, after receiving the notice, denies consent to enter. The tenant must assert this denial of consent by giving actual notice of the denial to the landlord prior to, or at the time of, the attempted entry.
      1. If the tenant refuses to allow lawful access, landlords may obtain injunctive relief to compel access or may terminate the rental agreement with 30-day notice under ORS 90.630 (1). In addition, landlords may recover actual damages. I've never seen this happen, although I have seen situations where some tenants refuse to allow the installation, but they usually come around, since the benefits are well known.
      2. PCQ Comment - Once the amendment is in effect the landlord can start the submeter installation anytime thereafter.

1. Reduction of Base Rent. If the cost of the tenant's utility or service was included in the rent before the conversion to submeters, landlords must reduce the tenant's rent upon their first billing of the tenant using the submeter method.
   1. Although the statute does not set forth a "formula" for calculation, the rent reduction may not be less than an amount "reasonably comparable to the amount of the rent previously allocated to the utility or service cost averaged over at least the preceding six months."
   2. Before landlords first bill the tenant using the submeter method, they must provide the tenants with written documentation from the utility or service provider showing their cost for the utility or service provided to the facility during at least the six preceding months.
2. Prohibition on Subsequent Rent Raises. During the six months following a conversion to submeters, landlords may not raise the rent to recover the costs of installing, maintaining or operating the utility or service system or of new lines or submeters.
   1. Except as part of the rent, landlords may not charge the tenant for the cost of installation or for any capital expenses related to the conversion to submeters or for the cost of maintenance or operation of the utility or service system. (The term "operation" includes, but is not limited to, reading the submeter.)
   2. PCQ Comment: What this means to me is that the landlord can raise rent in the ordinary course after the six month period and apply it toward recoupment of the capital costs. However, I would not "advertise" it and the rent raise statute (ORS 90.600) does not require landlords to do so.

1. Entry to Read Submeter. Landlords or their authorized agent may enter a tenant's space without tenant consent for the purpose of reading a submeter. The following restrictions apply:
   1. Landlords may not remain on the space for a purpose other than reading the submeter.
   2. Landlords may not enter the space more than once per month.
   3. Landlords may enter the space only at reasonable times between 8 a.m. and 6 p.m.

[1] See, ORS 90.531 - 90.539.

[2] Note: Common area utility charges may be passed through, but that right must be included in the rental agreement and the amount passed through per tenant must be calculated on a proportionate basis, e.g. the number of spaces in the park being the denominator.

By:  Phillip C. Querin, MHCO Legal Counsel

The difference between a well-run manufactured housing community and one with problems frequently lies with the rules and regulations each facility has adopted.  Here are some tips for developing a set of rules and regulations that may be helpful in the successful operation of your community:

1. Avoid Ambiguity.  When writing a rule, make sure that it is understandable.  If a court or jury were called upon to enforce it, would they be able to understand it?  Is it fair?  Is the rule capable of different interpretations?  Is it too vague so as to give little or no guidance to the tenant?  Avoid using general terms which are so subjective that reasonable people could differ about what constitutes a violation.  If necessary, use an example.  If the rule must necessarily be open-ended (e.g. prohibiting loud and disturbing noise or offensive behavior), tie the violation to whether the conduct results in complaints from other tenants.  That way the issue does not become whether the manager is arbitrarily exercising his or her own discretion.
2. Updating the Rules.  Oregon landlord-tenant statutes can change every yerar when the Legislature meets.  Circumstances and needs can change more frequently than that.  At least once a year, take a look at your rules to see if they are legally sufficient and whether they meet the community's present needs.  It is much easier to make smaller changes to the rules one or two at a time rather than trying to get the tenants to agree to a wholesale change of all the rules at once.  If your tenants are on leases, you have the right to submit new park documents (i.e. rules and rental agreement) not less than 60 days prior to the expiration of the lease term.  A tenant shall accept or reject the landlord's proposed new rental agreement at least 30 days prior to the ending of the term by giving written notice to the landlord.  If accepted, the rules and rental agreement will define your new rental relationship with the tenants.  It is one good way to update your rules, without having to go through a formal rules change.
3. Legally Adopting Your Rules.  If the tenants are on month-to-month tenancies, Oregon law requires that the landlord must give at least 30 days' advance written notice to make a change in the rules.  If 51% or more of the tenants affected by the rule change object within the 30 days of service of the notice, the change(s) will not go into effect.  However, if less than 51% object, the new rule(s) will become effective in 60 days from the date the notice was served on the tenants.  The law regarding the contents and timing of the notice of rule change must be strictly followed.  ORS 90.610 describes the process.  Read it carefully!  And use MHCO Form 60: "Sixty Day Notice of Rule Change".  Simply sending a letter to the tenants informing them of a change in the rules is insufficient.  If the rules are not properly adopted they will not be enforceable.  Frequently, the landlord or manager will first learn that their rules were improperly adopted when they try to enforce them.  If one or more of the rules you seek to adopt are opposed by a small but vocal minority who lobby the rest of the tenants against your change, consider meeting with them prior to giving notice of the proposed change, in an effort to mutually draft language that everyone would find acceptable.  If over 51% of the effected space still object, consider implementing the new rules for all new incoming tenants only.  That way, over time, the new rules will have wider and wider application as the older tenants

1. Keeping Track of Your Rules.  If there are more than one set of rules (i.e. old rules for existing tenants and new rules that are given to new tenants) make sure you keep track of which rules apply to which tenant.  Put copies of the applicable rules, together with the rental agreement and statement of policy, in each tenant's file.  Attempting to enforce the wrong rules against a tenant can result in disaster.  Show the date of the latest revision on the first page or, better yet, on the footer of each page.
2. Troublesome Issues.  There are some issues that seem to never go away.  Occupancy issues are one of those troublesome areas that frequently result in litigation.  If your community has rules limiting the time a visitor can stay, make sure it is clear and unambiguous.  Frequently tenants try to avoid these limits by calling their visitor a "house-sitter."  The best approach is to set a definite date, e.g. two weeks, and require that all persons who remain over that period of time must satisfy the same requirements as imposed on incoming tenants - e.g. background check, criminal check, references, etc.  Require that they sign the rental agreement.  If the existing tenant attempts to get around these occupancy rules by arguing that the person is there to provide necessary assistance because of certain physical or emotional disabilities, legal counsel should be immediately consulted due to Fair Housing implications.
3. Consistent Enforcement.  It is not uncommon for landlords and managers to grant exceptions and extensions of time for tenants to come into compliance with a particular violation.  However, landlords can get into trouble when they ignore some violators and enforce the rules against others.  Maintenance violations are a good example.  In order to enforce these rules you must be consistent.  Regular community inspections should be made.  Warnings should be given uniformly to all violators.  Thirty day notices should be given only as a last resort.  If the tenant requests an extension of time to comply, put the agreement in writing.  In those cases where legal action may need to be taken, make sure legal counsel reviews the case before filing the eviction.   Make sure your attorney is aware of your prior efforts to secure the tenant's compliance.  It is always best if the tenant's file shows a clear paper-trail of your efforts to secure voluntary compliance.

Rules and regulations are not foolproof.  Some tenants will always try to find reasons why they do not apply to them.  But clarity, consistency, and fair enforcement will go a long way in keeping peace and harmony in your manufactured housing community.

From one year to the next, the only certainty one can realistically expect is that rents will need to be adjusted just to keep pace with the utility increases that are coming one's way from the various providers. The annual questions are always, how much will they collectively go up, will they increase more than I am comfortable with recouping from my community residents, and will there be room to also keep up with inflation on my other increased operating costs? Double digit percentage rate increases aren't just exclusive to medical insurance companies. We have witnessed year-over-year, +20% increases with one sewer treatment provider alone and have seen huge increases from just about every utility with the possible exception of phone services.

Another concern about utility costs is the timing of when rates increase which do not necessarily coincide with the implementation of your next rental adjustment, leaving communities absorbing increased costs until the following year. Couple that with each and every time you try to recover these utility costs whereby you look like the quintessential greedy landlord, but in reality, you're just trying to maintain your margin. This should lead owners to question whether they can afford to continue to keep any utilities included in their rent.

A perfect illustration of a utility you should be proactive about is water, which is also normally the driving factor behind the sewer expense. You have probably heard that certain municipalities have increased their water rates despite a reduction in overall consumption. This has happened, in part, due to a need to fill a budgetary hole created by less revenue generated as a result of reduced consumption. Rates are high now and will continue to rise. A factor to consider is that over time, the EPA will have even greater scrutiny over water districts, increased regulation and testing requirements, and reduced maximum contaminant levels (MCLs) which will require better and more expensive treatment facilities. All this translates to more expense which will ultimately be passed on to the consumer. One thing is for certain - you don't want to be the last one in your service district to get out from under this payment responsibility.

You need to be aware that your business is under attack. Municipalities have grown to be creative in expanding their reach into your pocket by creating new sources of revenue by the addition of new fees and charges. As an example, the City of Oregon City has the following line item charges on its utility invoice: 1. Water Treatment, 2. Water Distribution, 3. Stormwater Management (aka surface water), 4. Pavement Maintenance (aka street sweeping), 5. Wastewater Collection, and 6. Wastewater Treatment. This is just one example, but this is not an exhaustive list. The City of Gresham has added what it claims to be a temporary police, fire, and park and recreation fee to their utility invoicing. The City of Everett has a charge on their utility bill for landfill fees. Tri Cities and Moses Lake have an emergency services charge on their utility billing. The City of Salem recently attempted to add street lighting and street maintenance to its list of fees and charges, but backed down under pressure from Commonwealth, MHCO, community owners, and community residents who protested their newly proposed fees which some considered to be a "tax". I'm sure there are also other examples which I have yet to learn about, but rest assured, new fees and charges are appearing with great regularity. The point is that we are under fire from the local municipalities which are attempting to circumvent the law by creating the equivalent of new taxes without them being referred to the voters as required by Oregon and Washington Law.

Many of the newer communities that were developed in the late 80's and early 90's opened their communities with utility charges separate from the rent while still paying the master bill and collecting the individual consumption charges from the residents in addition to their rent. Since then, there has been a growing trend for communities which have recognized this better model to pass through utilities to the residents over time to get out from under the burden of playing "catch up". This is more equitable to your residents, promotes conservation, and will more clearly show your valued community residents exactly what these municipalities are charging and how quickly their charges are increasing. Perhaps then, the residents may direct their ire to the appropriate party and focus their concerns in the direction it belongs with the goal of helping influence the cities or at least making them think twice before adding new fees and charges.

One final important point to consider, for decades residents and resident advocacy groups have lobbied for rent control in our states. We have successfully dodged those bullets each and every time, yet rent control bills surface every legislative session in one form or another. Imagine your state government passing legislation which restricts how much you can charge for the already affordable housing services you provide. Consider how much your utilities have increased over time and what would happen to your cash flow and the value of your community from not being able to recover 100% of this expense. Having utilities separate from the rent is a transparent pass through from the provider to the consumer, rather than a rent increase which would be restricted in some form, likely requiring justification with a potential review board.

If you have any utilities which are included in your rent, I strongly recommend that you consider passing this expense through to your residents. Commonwealth has a solution for accomplishing all of this with minimal cost to you. Please stay tuned for more information about our recommended solution to help you protect the investment you have made in your business in next week's follow up article.

If you have any questions or would like to discuss this, please feel free to contact me at 503.718.0622, Christy Mays - Washington Vice President at 425.952.2750, and/or Tom Petitt - Oregon Vice President at 503.718.0620

Article provided by Adam Cook, President of Commonwealth Real Estate Services. Adam joined Commonwealth in 1992 and has been particularly effective in utilizing his years of experience to improve the services we offer to our clients. During the past fourteen years, he has served as a board member in the Oregon community owner's trade association, Manufactured Housing Communities of Oregon (MHCO), helping to shape legislative efforts in Oregon. He served two years as the association's president.

1. Make sure that the rental agreement really applies to your situation.  The MHCO rental agreement comes in two flavors: (a) The month-to-month (or periodic") rental agreement

Answer.  No. There are many reasons for this answer:

The term “rent” is defined in ORS 90.100(37) as “…any payment to be made to the landlord under the rental agreement, periodic or otherwise, in exchange for the right of a tenant and any permitted petto occupy a dwelling unit to the exclusion of others and to use the premises.” Ergo,  rent already includes the tenant’s pet. You cannot charge twice for Fido.

Secondly, ORS 90.302 provides that landlords may charge certain “fees”; one of them is for violation of a written pet agreement or of a rule relating to pets in a facility, pursuant to ORS 90.530.

Here is a summary of ORS 90.530:

· A landlord may not charge a one-time, monthly or other periodic amount based on the tenant’s possession of a pet; 

· A landlord may provide written rules regarding control, sanitation, number, type and size of pets. 

· The landlord may require the tenant to sign a pet agreement and to provide proof of liability insurance. 

· The landlord may require the tenant to make the landlord a co-insured for the purpose of receiving notice in the case of cancellation of the insurance.

· A landlord may charge a tenant an amount for a violation of a written pet agreement or rules relating to pets not to exceed $50 for each violation

Landlords may also charge tenants a security deposit for their pets. See, ORS 90.300. However, alandlord may notcharge a tenant a pet security deposit for keeping a service animal or companion animal that a tenant with a disability requires as a reasonable accommodation under fair housing laws.

So, while landlords may not charge a separate amount for “pet rent”, the Oregon Legislature has built in several protections for landlords where their tenant(s) have pets.  

1. Avoid Ambiguity.  When writing a rule, make sure that it is understandable.  If a court or jury were called upon to enforce it, would they be able to understand it?  Is it fair?  Is the rule capable of different interpretations?  Is it too vague so as to give little or no guidance to the tenant?  Avoid using general terms which are so subjective that reasonable people could differ about what constitutes a violation.  If necessary, use an example.  If the rule must necessarily be open-ended (e.g. prohibiting loud and disturbing noise or offensive behavior), tie the violation to whether the conduct results in complaints from other tenants.  That way the issue does not become whether the manager is arbitrarily exercising his or her own discretion.
2. Updating the Rules.  Oregon landlord-tenant statutes can change every two years when the Legislature meets.  Circumstances and needs can change more frequently than that.  At least once a year, take a look at your rules to see if they are legally sufficient and whether they meet the community's present needs.  It is much easier to make smaller changes to the rules one or two at a time rather than trying to get the tenants to agree to a wholesale change of all the rules at once.  If your tenants are on leases, you have the right to submit new park documents (i.e. rules and rental agreement) not less than 60 days prior to the expiration of the lease term.  A tenant shall accept or reject the landlord's proposed new rental agreement at least 30 days prior to the ending of the term by giving written notice to the landlord.  If accepted, the rules and rental agreement will define your new rental relationship with the tenants.  It is one good way to update your rules, without having to go through a formal rules change.
3. Legally Adopting Your Rules.  If the tenants are on month-to-month tenancies, Oregon law requires that the landlord must give at least 30 days' advance written notice to make a change in the rules.  If 51% or more of the tenants affected by the rule change object within the 30 days of service of the notice, the change(s) will not go into effect.  However, if less than 51% object, the new rule(s) will become effective in 60 days from the date the notice was served on the tenants.  The law regarding the contents and timing of the notice of rule change must be strictly followed.  ORS 90.610 describes the process.  Read it carefully!  Simply sending a letter to the tenants informing them of a change in the rules is insufficient.  If the rules are not properly adopted they will not be enforceable.  Frequently, the landlord or manager will first learn that their rules were improperly adopted when they try to enforce them.  If one or more of the rules you seek to adopt are opposed by a small but vocal minority who lobby the rest of the tenants against your change, consider meeting with them prior to giving notice of the proposed change, in an effort to mutually draft language that everyone would find acceptable.  If over 51% of the effected space still object, consider implementing the new rules for all newincoming tenants only.  That way, over time, the new rules will have wider and wider application as the older tenants

4. Keeping Track of Your Rules.  If there are more than one set of rules (i.e. old rules for existing tenants and new rules that are given to new tenants) make sure you keep track of which rules apply to which tenant.  Put copies of the applicable rules, together with the rental agreement and statement of policy, in each tenant's file.  Attempting to enforce the wrong rules against a tenant can result in disaster.  Show the date of the latest revision on the first page or, better yet, on the footer of each page.
5. Troublesome Issues.  There are some issues that seem to never go away.  Occupancy issues are one of those troublesome areas that frequently result in litigation.  If your community has rules limiting the time a visitor can stay, make sure it is clear and unambiguous.  Frequently tenants try to avoid these limits by calling their visitor a "house-sitter."  The best approach is to set a definite date, e.g. two weeks, and require that all persons who remain over that period of time must satisfy the same requirements as imposed on incoming tenants - e.g. background check, criminal check, references, etc.  Require that they sign the rental agreement.  If the existing tenant attempts to get around these occupancy rules by arguing that the person is there to provide necessary assistance because of certain physical or emotional disabilities, legal counsel should be immediately consulted due to Fair Housing implications.
6. Consistent Enforcement.  It is not uncommon for landlords and managers to grant exceptions and extensions of time for tenants to come into compliance with a particular violation.  However, landlords can get into trouble when they ignore some violators and enforce the rules against others.  Maintenance violations are a good example.  In order to enforce these rules you must be consistent.  Regular community inspections should be made.  Warnings should be given uniformly to all violators.  Thirty day notices should be given only as a last resort.  If the tenant requests an extension of time to comply, put the agreement in writing.  In those cases where legal action may need to be taken, make sure legal counsel reviews the case before filing the eviction.   Make sure your attorney is aware of your prior efforts to secure the tenant's compliance.  It is always best if the tenant's file shows a clear paper-trail of your efforts to secure voluntary compliance.

Rules and regulations are not foolproof.  Some tenants will always try to find reasons why they do not apply to them.  But clarity, consistency, and fair enforcement will go a long way in keeping peace and harmony in your manufactured housing community.

Answer. It is unclear if there ever was an actual agreement between landlord and tenant that the overpayments were to be applied toward late fees. For purposes of this question, I will assume there was an understanding of sorts [what tenant intentionally overpays, without a reason?], but presumably not in writing; hence, this dispute. The lack of any written agreement invites an argument as to how the credits were to be applied. There is an argument this was “prepaid rent” under ORS 90.100(33) (Definitions). Prepaid rent is a payment for rent not yet due. Prepaid rent is treated much like a security deposit, and must be accounted for at the end of the tenancy. See, ORS 90.300 (Security Deposits; Prepaid Rent). Rent [prepaid or otherwise] cannot be applied to such things as fees or deposits. See, ORS 100(35) (Definitions). In this situation, without a written agreement specifically defining what the prepayments were, and how they were to be applied, I would say the tenant may have an argument that without his consent, the money could not be applied to anything except a rent that is already due. In other words, you may not apply the monies to non-rent charges. The landlord-tenant statutes don’t specifically address this type of situation, so it’s a toss-up whether the practice was legal or illegal. [I assume that your rental agreement specifies whether late fees must be assessed in writing. Typically, no writing is required – the fees just become due within a certain period of time.] In any event, I don’t think this is arrangement is a good practice without having it in writing. In the future, if both landlord and tenant want to continue the practice, it should be in writing and specifically address: (a) What the payments are; (b) When, how and under what circumstances they may be applied; (c) Whether any prior notice and/or written accounting is necessary; and (d) Whether interest will accrue to the tenant for the monies held by the landlord before they are applied.

Q: If I am thinking of selling my park, when do I have to send notice to my tenants?
 

A: ORS 90.842 requires an owner to give written notice of the owner's interest in selling the park before an owner markets a park for sale or when the owner receives an offer to purchase that the owner intends to consider, whichever occurs first. If possible, I advise my clients to send the notice before entering into a listing agreement and certainly before actively listing the property. 

This requirement has been in place since 2015 and HB 2364 did not modify it. In the last few years, my experience has been that the statute is triggered mostly when an owner receives an offer to purchase that it intends to consider.

Q: Does the notice need to be sent to each tenant individually versus all tenants (e.g. "Dear Mr. Johnson" vs. "Dear Tenant")?

A: The plain language of the law states "all tenants," but the 2014 Summary of Legislation states that the purpose of the bill is to require park owners to notify "individual park residents" if the owner is interested in selling the park. Because it appears that the original intent was to notify everyone, the safer course is to send the notice to each tenant individually.

If a tenants committee has been formed, and the purpose of the committee is (in part) to purchase the park, and you have met with the committee in the previous 12 months, you can send a notice to the tenants' committee in lieu of all tenants. Also note that you must send a copy of the notice to the Housing and Community Services Department. 

My practice, since 2015 has been to still send the notice to all tenants, even if an owner is aware of a tenants’ committee. This requirement was not changed with HB 2364. The statute did add that the requirement to send the notice to the Housing and Community Services Department must be done “in the manner prescribed by the department by rule.”  At the time of publication, I do not believe this rule has been promulgated; however, at this time, I would send a copy of the notice to the Manufactured Communities Resource Center.

Q: What does the notice have to include?

A: (1) The owner is selling the park; (2) The tenants, through a tenants committee, have an opportunity to purchase the park; (3) In order to compete to purchase the park, within 15 days after delivery of the notice, the tenants must form (or identify) a single tenants committee for the purpose of purchasing the park and notify the owner in writing of: (a) the tenants' interest in competing to purchase the park; and (b) the name and contact information of the representative of the tenants committee with whom the owner may communicate about the purchase; (4) The representative of the tenants committee may request financial information described in section 2(2) of the statute within the 15 day period; and (5) information about purchasing a park is available from the Housing and Community Services Department.

HB 2364 increased the time from 10 days to 15 days to allow the tenants to respond.

Q: Does 15 days really mean 15 days?

A: The law discusses "delivery of the notice." I advise my clients that all notices should be sent by first class mail and 3 days should be allowed for mailing just as if you were sending a 30-day notice or a 72-hour notice. Certificates of Mailing (Not certified mail!!) for each notice are strongly encouraged. By way of example, if you send the notice on June 1, then the "15 days" would run on June 18.

Q: What do the tenants have to do after I send them the notice?

A: If the tenants are interested in competing to purchase the park, within the 15 days, the tenants must notify the owner in writing of their interest in competing to purchase the park, the formation or identification of a single tenants committee formed for the purpose of purchasing the park and the name and contact information of the representative of the tenants committee with whom the owner may communicate about the purchase.

In practice, a non-profit entity, like CASA of Oregon, will notify you or your legal counsel of the tenants’ interest in competing to purchase your park. I have found CASA of Oregon to be professional and reasonable with both the manner of delivery of notices and information (electronic mail is preferred). In most cases, you (or your legal counsel) will not be dealing with the tenants’ committee but will be primarily communicating with CASA and their professional advisors.

Q: Do I have to give the tenants my tax returns, SSN and Mother’s Maiden Name?

A: No. But, during the 15 days of delivery of the notice, and in order to perform a due diligence evaluation of the opportunity to compete to purchase, your tenants (through CASA or another non-profit), may request specific financial information which may include: the asking price, if any (this provision contemplates that you may not yet know your asking price when you send your notice); the total income collected from the park and related profit centers, including storage and laundry, in the calendar year before delivery of the notice; the total operating expenses for the facility paid by the owner or landlord in the calendar year before delivery of the notice; the cost of all utilities for the park that were paid by the owner in calendar year before delivery of the notice; the annual cost of all insurance policies paid by the owner as shown by the most recent premium; the number of homes in the park owned by the owner; and the number of vacant spaces and homes in the park. Please note that I have seen requests that ask for additional information; providing information outside of what is outlined above is discretionary. The owner has 14 days to deliver the information to the tenants.

The changes above are three-fold: First, the owner has been given an additional 7 days to pull this information together. In practice, a well-organized owner should have this information all pulled together prior to sending the initial notice so there is no delay.  Second, the statute used to call for the information in the 12 months prior to sending the notice, now it is the calendar year. Figuring out this information across calendar years can be challenging. In practice, an owner may want to give information from the previous calendar year together with a year-to-date snapshot of the income and expenses. CASA may ask for 2-3 years’ worth of information; you are not required to give it, but there is nothing stopping you. Finally, “total operating expenses” were added. My practice has been to provide a P&L or pro forma that you would give to any other seller. Such information would likely exceed your obligations. 

Q:  Is the information protected from disclosure?

A: Yes. The statute allows an owner to designate all, or part of the financial information, as confidential. If the owner designates the financial information as confidential, the parties may establish a list of who can see the information and with whom the information can be shared. In practice, CASA has modified their confidentiality agreement to only allow members of CASA (and their legal and accounting professionals) to see the confidential information. If the confidentiality agreement is breached by the tenants, the owner may recover actual damages from the tenant or tenants.

What happens after I disclose the financial information?

A: Within 45 days after delivery of the financial information (or 45 days after the end of the 15 day period in the unlikely event the tenants do not request financial information), and if the tenants choose to compete to purchase the park, the tenants must: (1) form a corporate entity that is legally capable of purchasing property or associate with a nonprofit corporation or housing authority that is legally capable of purchasing real property or that is advising the tenants about purchasing the park in which the tenants reside; and (2) submit a written offer to purchase the park, in the form of a proposed purchase and sale agreement, and either a copy of the articles of incorporation of the newly formed entity .

The increase to 45 days is a substantial change to the statute. It used to be 15 days. While a bit more onerous, it is less than what was originally being proposed. 

Q: Do I have to accept the offer?

A: No. You may accept, reject, or submit a counteroffer. You should view the tenants (and negotiate with them) as you would any potential third-party purchaser. If the offer is far off or not commercially reasonable, you can reject the offer outright. While not required, I usually advise my clients to explain why it's not doable (e.g., unreasonable financing terms, not enough cash, long closing date, too much many contingencies). If the offer is close to the mark, you may want to counter with terms. In my opinion, the key is to deal with the tenants committee as you would any bona fide purchaser. don't treat them differently just because they are tenants.

Nothing in HB 2364 changed this, although a “good faith and fair dealing” requirement was added in the consideration and negotiation with the tenants group.  (See below).

Q: What if I just don’t want to sell to my tenants because they’re tenants?

A: In my opinion, this was the behavior that the Legislature was trying to address by adding in the “good faith and fair dealing” requirement. One of the problems with “good faith and fair dealing” is that it is not a specific action that can be measured, but an action that a future judge or jury will likely “know it when they see it.” There is no doubt that if an owner decided not to give a group of tenants an opportunity to compete to purchase or decided not to sell to the tenants when the terms were otherwise commercially reasonable (and better than other offers), just because they are tenants, that behavior would violate the statute. The penalty is severe. The owner could be facing a judgment equal to 10% of the purchase price of the facility plus attorney fees.

As you can imagine, as MHCO was attempting to understand what this would mean for owners, we wanted to understand what the intent of the language was. We were able to work with Chair Julie Fahey (now Majority Leader Fahey) to place some helpful language in the legislative record that would assist future owners (and their attorneys) in understanding what was (and was not) “good faith”. 

Chair Fahey’s comments, together with the examples of what is good faith will help any future owner navigate an offer from their tenants.
 

During consideration in the Committee, Chair Fahey was clear in stating that the purpose of the good faith language was not intended to give the tenants a “right of first refusal” nor to give tenants any special advantage over another third-party purchaser in negotiation; rather, the purpose is to strengthen the requirement that facility owners give a fair chance to their tenants to compete to purchase a facility. 

Furthermore, Chair Fahey stated that, “good faith on the part of the parties, both the tenants and any facility owner, is presumed.” A tenant or group of tenants would have to prove that that a facility owner was unwilling to consider an offer from tenants, to negotiate with tenants, or to sell to tenants solely because they are tenants (and no other commercially reasonable factors exists), would violate the statute, as amended.

Additionally, Chair Fahey shared some specific examples of what was acting or negotiating in good faith:

1. After giving the notice required by ORS 90.842, the facility owner enters into a non-binding letter of intent with a separate third-party potential purchaser. That non-binding letter of intent references the facility owner’s duty to consider, in good faith, any offer the tenants may make (this is a common practice, and one I advise my clients on as it allows an owner to move on two tracks). It is very important that the third-party purchaser be aware of and respect an owner’s obligation to consider the tenants’ offer;

2. After receiving an offer from the tenants, the landlord rejects the offer because the material terms of the offer are outside of what the facility owner would consider.  Material terms could include (but are not limited to): price; date of closing, amounts and timing of earnest money deposits; dates of due diligence and contingences and possible effect on date of closing; and whether earnest money is “hard”, or whether the earnest money will go hard; details of contingencies (including financing contingencies);

3. After receiving an offer from the tenants, the landlord rejects the offer because of other extenuating circumstances. Other extenuating circumstances could include (but are not limited to): the potential sale of a facility that would include other consideration besides cash (i.e. stock or property trades);
4. A landlord rejects an offer from the tenants and the landlord provides a rationale for the rejection that is true (please note that the rationale is not necessary, but providing a truthful rationale, is in of itself good faith); and

5. After receiving an offer from the tenants, the landlord makes a counteroffer that is commercially reasonable.

This is not an exhaustive list but provides good guidance on how an owner should consider any potential offer. Again, you should work with your legal professional as you navigate this issue.

Q: What happens if the tenants don't respond within the 15 days or don't respond within the 45 days of me providing financial information?

A: You have no further duties under the statute.

Q: What do I do if I think this process is only being invoked to harass me?

A: Call your lawyer. The parties (including the tenants) are required to act in a commercially reasonable manner. Depending on the conduct (and the ability to establish the conduct and motive) your attorney should be able to develop a strategy to combat poor behavior.

Q: I've entered into a purchase and sale agreement with a separate buyer, and I haven't followed the process. What should I do?

A: Call your lawyer – today.  It may be fixable but failing to follow this process allows affected tenants to obtain injunctive relief to prevent a sale to a third-party purchaser (which could cause you to be in breach with that third party purchaser) and to recover significant penalties. Bottom line is to be aware of your responsibilities and follow the statute.
 

Q: What do I do after I've completed the process?

A: You must file an affidavit certifying that you've complied with the process and that you have not entered a contract for the sale or transfer of the park to an entity formed by or associated with the tenants. The purpose of this affidavit is to preserve the marketability of title to parks. Additionally, there is a requirement that you notify the Housing and Community Services Department who the new owner is.

Q:  Are there exceptions to this statute?

A: Yes. The exceptions are listed in ORS 90.848. The most common exception is any sale or transfer in which the facility satisfies the purchaser’s requirement to make a like-kind exchange under section 1031 of the Internal Revenue Code. In other words, if you receive an unsolicited offer from a potential purchaser who is attempting to satisfy a 1031 exchange you are not required to give your tenants an opportunity to compete to purchase.

Bill Miner is currently Partner in Charge of the Portland office of Davis Wright Tremaine. DWT is a full-service law firm with 500 attorneys on both coasts and in Shanghai, China. The Portland office consists of approximately 80 attorneys and over 80 staff. He works with clients to resolve their legal problems through pre-litigation counseling, litigation, and mediation. He tries cases in state and federal courts and through private arbitration. His experience includes defending and prosecuting business torts; breach of contract claims; disputes between and among members of limited liability companies; residential and commercial real estate matters, including landlord-tenant, title, lien, and timber trespass disputes; and probate and trust cases. He is a frequent and popular speaker at MHCO seminars and conferences. You can reach Bill at: http://www.dwt.com/people/WilliamDMiner/