COVID Protocols For Showing Homes Listed For Sale

These guidelines require the consent of third parties, e.g. sellers, buyers, tenants, buyer brokers, inspectors, appraisers, property managers, contractors, plumbers, and others involved in the home purchase/sale transaction. Accordingly, they should be provided with a copy of these requirements. Any questions or concerns expressed should be directed to the Supervisor where appropriate.

Screening: All prospective visitors to the home should be screened in advance. Brokerages should create a screening process to be used uniformly for every visitor. See PMAR COVID-19 “Suggested Visitor Screening Questionnaire” below, for example. Continue reading “COVID Protocols For Showing Homes Listed For Sale”

Introduction. Almost as soon as the COVID pandemic flared up, I began to receive calls asking whether the virus could constitute the basis for refusing to perform under a pending Sale Agreement. One broker reported that the buyer wanted out of the contract because of “uncertainty”.

These are not altogether unreasonable reactions to performance; after all, we’ve never experienced anything like this pandemic before. However, over the years, comparable issues have arisen, the most obvious being wars, strikes, and natural disasters. So let’s take a look at how the courts have dealt with these events in the past. Continue reading “Is COVID-19 a Defense to Breach of the Oregon Real Estate Sale Agreement?”

Mortgage rates have just dropped to the lowest level in almost 50 years, compelling both homeowners and home buyers to get off the couch to take advantage of record-level savings on their mortgage.

“The average 30-year fixed-rate mortgage hit a record 3.29% this week, the lowest level in its nearly 50-year history,” said Sam Khater, chief economist of mortgage giant Freddie Mac. “Meanwhile, mortgage applications increased 10% last week from one year ago and show no signs of slowing down.”

To put this record rate in perspective, 3.29% even dips below levels seen during the housing crisis. The average 30-year fixed-rate mortgage dropped to 3.31% in 2012. [More: Go to link here.]

The average U.S. rate for a 30-year fixed mortgage dropped to 3.29% this week

Go to link here.

Introduction. This question is important for at least two reasons:

It determines the time after which neither party can withdraw from the transaction without facing legal consequences; and
It determines the time from which events, such as contingencies, begin and end.

Section 32 (Definitions/Instructions). Here is what the Sale Agreement says:

(8) The phrase “signed and accepted” in the printed text of this Sale Agreement, or any addendum or counteroffer, however designated (collectively, “the Agreement” or “the Sale Agreement”), shall mean the date and time that either the Seller and/or Buyer has/have: (a) Signed their acceptance of the Agreement received from the other party, or their Agents , and (b) Transmitted it to the sending party, or their Agent, either by manual delivery (“Manual Delivery”), or by facsimile or electronic mail (collectively, “Electronic Transmission”). When the Agreement is “signed and accepted” as defined herein, the Agreement becomes legally binding on Buyer and Seller, and neither has the ability to withdraw their offer or counteroffer, as the case may be.

Breaking Down The Text of Subsection (8). Several rules emerge:

Signing alone is not acceptance.
For acceptance to occur (of the offer, the counteroffer, or counteroffer to counteroffer, etc.) it must be signed by the recipient and transmitted to the other side (or their agent).[1]
Until acceptance, an offer or counteroffer may be withdrawn without legal consequences.
Although not expressly stated above (perhaps it should be) transmitting a signed acceptance late, i.e. after the deadline, is not per se’ binding on either party – since the late transmission is a nullity unless the parties expressly agree otherwise, or through performance, act in a manner affirming the contract. In such cases, best practice is for both parties to agree in writing to treat the contract as binding.
It is not sufficient to merely sign an acceptance to make a contract binding – the signed document must be hand-delivered or electronically sent (i.e. email or facsimile) to the party (or their agent) making the offer or counteroffer. Let’s refer to these forms of delivery as “transmission”.
Once timely transmission of the signed acceptance occurs, a legally binding contract is formed. Note that it is “transmission” of the signed acceptance that counts – not receipt by the other party. Thus, if a seller signs their acceptance of an offer and it is immediately emailed back to the buyer or buyer’s agent, the contract is binding, even though the buyer is unaware that the transmitted document remains unopened in their inbox.
Once the contract becomes binding, legal consequences arise: (a) A buyer cannot withdraw their offer without risking the loss of the earnest money deposit;[2] and (b) A seller cannot refuse to close without triggering a specific performance and/or damage claim from the buyer.[3]
Transmission by email is essentially the same as hand delivery.

Triggering Performance Dates. Once the Sale Agreement becomes binding based under the above rules, the buyer contingency periods are triggered.[4] Item (10) of Section 32 (Definitions/Instructions) provides:

Time calculated in days after the date Buyer and Seller have signed and accepted this Agreement shall start on the first full business day after the date they have signed and accepted it.

For example, if the Sale Agreement became binding on Wednesday, January 15, 2020 – that is, the date seller’s agent transmitted their client’s signed acceptance to the buyer’s agent – calculating a 10-business day contingency period would occur as follows:

Thursday, January 16, 2020 – is the first business day of the inspection contingency period;
Friday, January 17, 2020 – is the second business day;
Monday, January 20, 2020 through Friday, January 24, 2020 are the 3^rd through the 8^th business days; and,
Monday, January 27, 2020 and Tuesday January 28, 2020 would represent the 9^th and 10^th business days.[5]

Broker Tips on Dates and Deadlines. Below are some reminders to avoid arguments down the road. Both the seller’s and buyer’s brokers should coordinate with each other to confirm important dates and deadlines:

Business days do not include weekends or holidays;
If a day is listed in ORS 187.010 as a holiday in Oregon OR in 5 US Code §6103 it is not a business day.
Don’t get confused with dates the Governor may declare certain days as holidays for state employees – these are days that have been so designated in collective bargaining agreements, such as the Friday after Thanksgiving – which is not listed in ORS 187.010 or 5 US Code §6103.
If it does not appear in either the above statutes/codes, it’s not a “holiday” for purpose of the OREF Sale Agreement; if it appears in one of the above lists, it is a “holiday”. Hint: The two lists are the same, except for Columbus Day.
Remember that Columbus Day is not a “business day” because even though Oregon doesn’t recognize it in ORS 187.010, it is recognized in 5 US Code §6103; therefor it is a holiday under the Sale Agreement.

If in doubt about a particular day, treat it as a business day, which will have the effect of making the contingency period end too early rather than too late. [The same rule applies to calculating all important deadlines – better to be safe than sorry!] ~Phil

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[1] Technically, one making an offer (or counteroffer) is called the “offeror” and the one receiving the offer (or counteroffer) is the “offeree”.

[2] The Sale Agreement provides that in the event of a buyer’s default, the earnest money can be forfeited to the seller – but this is the seller’s sole remedy. This is why listing agents need to be careful about allowing the seller to accept a small earnest money deposit; the lower the deposit, the easier it is for the buyer to walk away.

[3] The Sale Agreement provides that if the seller refuses to perform, the buyer may file a claim asking that the arbitrator make an award of “specific performance” to the buyer, forcing the seller to sell. Significantly, this is not a buyer’s sole remedy; he or she can also seek damages in addition to specific performance.

[4] I say “buyer contingencies” because all of the pre-printed contingencies in the Sale Agreement are for the buyer’s benefit, such as inspection, title, financing, private well, septic, lead based paint. Unless waived or expired, a buyer may terminate the transaction based upon the occurrence of a contingency. For example, a buyer can terminate the transaction under the inspection contingency by rejecting the inspection report, if properly and timely exercised.

[5] Note that pursuant to item (13) of Section 10 (Definitions/Instructions), except for calculating the federal lead- based paint contingency period, the last day of the buyer’s inspection contingency period ends at 5:00 PM on January 28, 2020.

In residential real estate transactions, there are two basic forms of policies:

The Owner’s Policy. This is the standard policy of title insurance that buyers obtain upon closing. In Oregon, customary practice is that sellers pay for this policy.
The Lender’s Policy. This is the policy required by lenders when they make a residential purchase money loan to a buyer. In Oregon, buyers customarily pay for this policy. It covers more risks than those in the Owner’s Policy.

Continue reading “Who’s Going To Review Your Preliminary Title Report Before Closing?”

Discussion: The Portland Ordinance, 30.01.085 (“Portland Renter Additional Protections”) here, now in effect, has identified the occurrence of certain events that, if triggered, would require landlords to pay Relocation Assistance (“RA”) to tenants. [References below to the “Ordinance” will refer to 30.01.085; references to the Oregon Residential Landlord-Tenant Act, ORS Chapter 90, will be referred to as the “Act”; and references to the new state law governing rent increases, will be referred to as “SB 680” here.]

Apparently, there is some thought that this Ordinance is “preempted” by SB 608. That is not my opinion. I say this because the Portland Ordinance is more restrictive to landlords than SB 608.

Although I have not conducted any serious research on the subject, SB 608’s rent cap is 7.00% plus the September-to-September average change in CPI for All Urban Consumers. Today that would mean rent increases under SB 608 cannot exceed 10.4%. Portland’s Ordinance limits rent increases to under 10%, without triggering a relocaton assistance charge of several thousands of dollars. If the Portland Ordinance had a rent increase formula resulting in a higher cap than SB 608 (meaning it was more favorable to landlords, i.e. less restrictive than the state law), I would say it was preempted. That is not the case under the present laws. But the content on this website is NOT legal advice. Readers should secure an independant legal opinion from their own attorney or self-proclaimed expert. ~PCQ

The Ordinance applies to all rented Dwelling Units within Portland’s city limits, whether they are managed by an owner, a sublessor, or property management company. However, not all properties that list Portland as their mailing address are located within the city limits.

“Portland Maps” is the official city site used to determine properties subject to the RA policy. See, https://www.portlandmaps.com/. To verify the location of a rental property, click on the Portland Maps link and enter the property address. Once it appears, there are related several links, one of which is “Jurisdiction”. If the Jurisdiction link states “Portland,” the rental property is subject to the mandatory RA policy, unless otherwise exempted, as discussed below.

EVENTS TRIGGERING RELOCATION ASSISTANCE

No-Cause Eviction
1. Landlord must pay Relocation Assistance (“RA”) to Tenant at least 45 days before termination of the tenancy
Increase of 10% or more in Rent or “Associated Housing Costs”[1]
1. Tenant must give written notification to Landlord requesting RA within 45 days of Rent Increase Notice
  1. Landlord must pay RA within 31 days of Tenant’s request for RA
2. Substantial Change of Lease Terms
  1. Tenant must give written notification to Landlord requesting RA within 45 days of substantial change
    1. Landlord must pay RA within 31 days of Tenant’s request for RA
  2. Non-Renewal of Lease
    1. Landlord must pay RA to Tenant at least 45 days before termination of the tenancy

Note: With the exception of No. 2 (Rent increases of 10% or more) and No. 3 (Substantial Change of Lease Terms) the two remaining events do not require the tenant to make a written request for RA. Payment is simply expected to occur within the required time from the triggering event.

AMOUNT OF RELOCATION ASSISTANCE

$2,900 for a studio or single room occupancy (“SRO”) Dwelling Unit
$3,300 for a one-bedroom Dwelling Unit
$4,200 for a two-bedroom Dwelling Unit
$4,500 for a three-bedroom or larger Dwelling Unit.

Note: If a Landlord is paying RA required under the Act, and Relocation Assistance is also required by the Ordinance for the same Termination Notice, the Relocation Assistance required by the Ordinance may be reduced by the relocation assistance required by the Act if both payments are paid at the same time and as a single payment. [2]

TENANT’S RECEIPT OF RELOCATION ASSISTANCE AFTER RENT INCREASE OF 10% OR MORE

Following receipt of the RA, the tenant has 6 months from the date of the increase to either:
1. Pay it back, and thereafter become obligated to pay the increased rent in accordance with notice of increase; or
2. Provide the landlord with a notice to terminate the rental agreement in accordance with the Act.
In the event the tenant fails to pay the RA back to the landlord or provided the landlord with the termination notice on or before the expiration of the six-month relocation period, the tenant will be in violation of the ordinance.

Note: A violation of any law or ordinance is also breach under most well-drafted rental agreements or leases, for which landlord may issue a curable notice of default. Accordingly, it appears this would be one method of commencing recovery of the RA should the tenant fail to terminate and repay the RA. The other would be to file a claim in the county Small Claims Court.

Note: The other three triggering events for RA assume the tenancy is terminated, so tenant has no option to accept or reject the landlord’s action – therefore no repayment issue. However, in the event of a substantial change in the lease terms, it would seem possible that the landlord and tenant might reach agreement to continue the lease under the amended terms, in which case, the tenant would be required to return the RA, just the same as a rent increase of 10% or more.

EXEMPTIONS FROM PAYING RELOCATION ASSISTANCE

Relocation Assistance does not apply to the following, so long as the Landlord has submitted a required exemption application form to Portland Housing Bureau for which it has issued an exemption acknowledgement letter, a copy of which the Landlord must be provided to the Tenant:

Rental agreement for week-to-week tenancies;
Tenants that occupy the same dwelling unit[3] as the landlord;
Tenants that occupy one dwelling unit in a Duplex where the Landlord’s principal residence is the second Dwelling Unit in the same Duplex;
Tenants that occupy an Accessory Dwelling Unit that is subject to the Act in the City of Portland so long as the owner of the Accessory Dwelling Unit lives on the site;
A Landlord who temporarily rents out their principal residence during an absence of not more than 3 years;
A Landlord who temporarily rents out their principal residence during the Landlord’s absence due to active duty military service;
A Dwelling Unit where the Landlord is terminating the Rental Agreement in order for an Immediate Family member[4] to occupy the Dwelling Unit;
A Dwelling Unit regulated or certified as affordable housing by federal, state or local government is exempt from paying Relocation Assistance for a Rent increase of 10 percent or more within a rolling 12-month period:
a. so long as such increase does not increase a Tenant’s portion of the Rent payment by 10 percent or more within a rolling 12-month period; or
b. in Lease Agreements where the Rent or eligibility is periodically calculated based on the Tenant’s income or other program eligibility requirements and a Rent increase is necessary due to program eligibility requirements or a change in the Tenant’s income.
Note: This exemption does not apply to private market-rate Dwelling Units with a Tenant who is the recipient of a federal, state, or local government voucher;
Note: This exemption applies to Rent Increases and does not apply to Termination Notices.
A Dwelling Unit subject to the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970;
A Dwelling Unit rendered immediately uninhabitable not due to the action or inaction of a Landlord or Tenant;
A Dwelling Unit rented for less than 6 months with appropriate verification of the submission of a demolition permit prior to the Tenant renting the unit;
A Dwelling Unit where the Landlord has provided a Fixed Term Tenancy and notified the Tenant prior to occupancy, of the Landlords intent to sell or permanently convert the Dwelling Unit to a use other than as a Dwelling Unit subject to the Act.

Note: Remember that before being entitled to an exemption, the landlord needs to provide a copy of the Portland Housing Bureau’s acknowledgment letter to the Tenant.

LANDLORD DUTIES FOLLOWING PAYMENT OF RELOCATION ASSISTANCE

Landlord must include a Notice of Tenant’s Rights and Obligations (the “Notice”) and the eligible amount of Relocation Assistance with issuance of the following:
1. Termination Notice;
2. Any Rent Increase Notice;
3. Relocation Assistance payment.
Landlord must notify the Portland Housing Bureau of all payments to tenants of Relocation Assistance within 30 days of making such payments.

ADDITIONAL LANDLORD LIABILITY FOR VIOLATION OF ORDINANCE

Any Tenant claiming to be aggrieved by a Landlord’s noncompliance with the above regulations in the Ordinance, “has a cause of action in any court of competent jurisdiction for Damages and such other remedies as may be appropriate.”
Damages include the following:
An amount up to 3 times the monthly Rent;
Actual damages;
Relocation Assistance; and
Reasonable attorney fees and costs.

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[1] “Associated Housing Costs.” include, but are not limited to, fees or utility or service charges, means the compensation or fees paid or charged, usually periodically, for the use of any property, land, buildings, or equipment. For purposes of Portland’s rent increase ordinances, housing costs include the basic rent charge and any periodic or monthly fees for other services paid to the Landlord by the Tenant, but do not include utility charges that are based on usage and that the Tenant has agreed in the Rental Agreement to pay, unless the obligation to pay those charges is itself a change in the terms of the Rental Agreement.

[See, https://www.portlandoregon.gov/citycode/28481#cid_708924]

[2] Note: Charges to a landlord for exceeding the Oregon rent cap laws, or for other violations under the recently enacted SB 608, are not identified as “relocation assistance”. That law provides at Section 1: “(9)(a) If a landlord terminates a tenancy in violation of subsection (3)(c)(B), (4)(c), (5), (6) or (7) of this section: (A) The landlord shall be liable to the tenant in an amount equal to three months’ rent in addition to actual damages sustained by the tenant as a result of the tenancy termination; and (B) The tenant has a defense to an action for possession by the landlord. (b) A tenant is entitled to recovery under paragraph (a) of this subsection if the tenant commences an action asserting the claim within one year after the tenant knew or should have known that the landlord terminated the tenancy in violation of this section.”

[3] Under Portland City Code 33.910 a “Dwelling Unit” is a building, or a portion of a building, that has independent living facilities including provisions for sleeping, cooking, and sanitation, and that is designed for residential occupancy by a group of people. Kitchen facilities for cooking are described in Section 29.30.160 of Title 29, Property and Maintenance Regulations. Buildings with more than one set of cooking facilities are considered to contain multiple dwelling units unless the additional cooking facilities are clearly accessory, such as an outdoor grill.

[4] Per the City’s Administrative Rules, the term “Immediate Family” means “… parent, foster parent, step-parent, parent in law, sibling, foster sibling, step sibling, sibling in law, grandparent, grandparent in law, child, step child, foster child, grandchild, aunt, uncle, niece, or nephew. An Immediate Family member cannot be an Owner of the Dwelling Unit, their spouse, or their domestic partner. The Immediate Family member must have reached the age of majority (18) or be a legally recognized emancipated minor.”

Generally. In its most basic sense, the OREF Sale Agreement is an offer to purchase property; it describes the price and terms of sale, the contingencies, the closing process, and the closing date. Once signed by seller and buyer, the document is delivered to escrow and, in most cases, the earnest money is deposited in trust at the title insurance company.

The purpose of this article is not to discuss the different provisions in the Sale Agreement, but when it becomes “binding”. This is important because after it becomes binding three things occur: Continue reading “Oregon Contract Law: Offers, Counteroffers, And Their Withdrawal”

On January 18/22, the Treasury Department and the Internal Revenue Service issued their final regulations regarding the new 20 percent deduction on qualified business income created by the 2017 Tax Cuts and Jobs Act. Until the regs were finally published, there had been uncertainty about the interpretation of some provisions.

26 U.S. Code § 199A now permits owners of sole proprietorships, S corporations, or partnerships to deduct up to 20% of their earned business income. The purpose of the provision was to allow small businesses to keep pace with the tax cuts offered to corporations under the Act. Continue reading “Real Estate Professionals and the Qualified Business Income Rule”

Summary of Mediation & Arbitration under Sections 37-38.3 of the OREF Residential Real Estate Sale Agreement.

The 2019 OREF forms revisions did not make any major changes[1] to the alternative dispute resolution (“ADR”) provisions of Sections 37-38.3.

But before addressing the arbitration process, it is critically important for brokers and their clients to understand that mediation is an essential first requirement in the ADR process under the OREF Sale Agreement. Accordingly, I will address that process first, since the vast majority[2] of disputes are resolved at this stage. Continue reading “Oregon Real Estate Disputes – Litigation vs. Mediation & Arbitration (Part II)”