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Landlord/Tenant Law: Part 1

Working with tenant-occupied properties

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In today's market, it's not uncommon for single-family homes to be tenant occupied, specifically in Central Oregon. As a real estate professional, I reconcile some of this as a result of the Great Recession. As we are all aware, in 2008, we experienced a massive change in the real estate markets across the U.S. While I understand that details and statistics are not exciting, some statistics are required for perspective.

FLICKR / DAN MOYLE
  • Flickr / Dan Moyle

In July 2008, according to the Mortgage Bankers Association, the average number of home loans held by at least one full-time employee were being defaulted on at an average rate of 261 loans a week. Anecdotally, what resulted was a massive amount of inventory that was either scooped up inexpensively for a long-term investment (rental) or single-family home owners who had no other choice but to try to rent it out, and at the very least, save their credit and work with the tax depreciation options.

It's now 2019 and we're beginning to see many of those rentals/investments hit the open market. The reason: many of those real estate holdings have now hit the 10-year mark where the earnings/losses can no longer be depreciated out per U.S. tax code, and as such are considered "non-performing assets" in an investment portfolio. Long story short, it doesn't make sense for the investment portfolio any longer. So, now we're seeing an influx of tenant-occupied properties for sale.

In the last two months, more than 50% of the transactions I've closed have involved tenant-occupied properties—hence, why I feel it's important to discuss landlord/tenant law with your real estate professional.

When purchasing or selling a tenant-occupied property, it's crucial to be aware of state landlord/tenant laws. There seem to be quite a lot of confusion on what property owners' rights are versus tenants' rights.

Can a tenant refuse a property being marketed for sale?

The answer to this question is no. While a tenant is considered to have legal possession to the property during the rental period, a tenant cannot dispute or refuse a property owner's right to list the property for sale. Nor can a tenant legally hinder the sale or transfer of a property.

24 Hour Notice:

The State of Oregon requires that written 24-hour notice be given to the tenant in order to enter or be on the premises. This applies to real estate showings, as well. The tenant has the right to deny access and the property owner must comply, should a tenant ask to reschedule entering the premises. If the tenant agrees to allow showings, inspections and appraisals on a shorter-notice time frame, it's highly suggested to have such an agreement in writing and signed and documented by all parties involved. Should a tenant consistently refuse access, there are protections in place that allow a property owner/landlord recourse to ensure access. I highly suggest consulting with a legal professional regarding these rights.

Leases/Rental Agreements:

In the State of Oregon, a tenant's lease or month-to-month rental agreement transfers with the sale of the property. For example, say a tenant is on a 1-year lease and is 6 months into the contractual lease period. The lease remains in effect for the duration of the contract, regardless of the buyer's intent to occupy the property. Essentially, the tenant remains in possession of the property and the lease terms cannot change. In the State of Oregon, tenant/landlord law has a provision where a tenant can buy out their lease early. The same does not apply for a property owner/landlord. The lease buyout clause is not reciprocal, and a landlord cannot buy a tenant out of the lease and require the tenant to relinquish possession of the property.

Stay tuned for my part 2 of this series the week after next that will continue to explore and explain tenant/landlord law.

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