Security Deposit Reform - Portland Oregon Legislative Call to Action!

September 12, 2017

 

On September 27th at 2:30pm the Portland city council will be discussing and possibly voting on a new ordinance that will restrict what you can charge for deposits and add restrictions to what you can charge at move-out. The full text of this proposal is copied below after the end of this article. Now is the time to contact the mayor and Portland commissioners; click here (https://www.portlandoregon.gov/25999) to view the city council members page. Make sure you attend this council meeting and sign up to give public testimony. Whether you can make it to the meeting or not you should still call and email all the council members. Your voice really does carry a lot of weight and influence, you just have to let yourself be heard.

 

We can’t deny that things have become difficult for lower income tenants and I believe the intent of this ordinance is to help those tenants by limiting the move in costs. By running a property management company for the last 9 years I have used and interviewed many collection agencies. The absolute best ones are only able to collect tenant debts 25% of the time. It is true that most tenants move out with minimal or no damages that they can be charged for. Unfortunately, when a landlord has a tenant that does damage it easily gets up to $5,000 - $10,000 and higher in some cases. Most landlords own 5 or less units in the Portland area. For them tenant damages like this can create a severe financial hardship that leads to them being forced to sell or even going into foreclosure. If these landlords are able to cover this kind of expense then it typically eats up all of their reserve funds leaving them vulnerable to another expensive repair before they are able to replenish those funds. The hopeless reality is that 75% of tenant debts go unpaid. The only defense landlords have is getting a large deposit.  

 

If the intent is to protect the lower income tenants then the city should focus on this. With that said you can’t ignore the risk landlords are taking by lowering their security deposits. If the city restricts the amount of security deposits charged then they should back it up like the state did when they passed a law making section 8 housing rent income a protected class. They created a state fund that will reimburse landlords up to $5,000 for damage caused by a section 8 tenant. Then the state follows up with that tenant to collect the funds. This created a situation where landlords prefer to rent to section 8 tenants. It was a real win-win solution that solved a problem for tenants and landlords.

 

We do need innovative solutions to help those truly hurt by our low supply of rental units. We just need to make sure that we aren’t creating a situation that makes rental property investors look outside the city of Portland. The ultimate solution will be speeding up the addition of rental units to our market. Historically landlords adjust their rents very quickly based on demand and competition. The sooner the city takes action to help speed up the approval and construction of new rental units the sooner we will see things drastically improve for tenants.

 

Christian Bryant

President of IRC Real Estate & Property Management

www.IRCEnterprises.com

 

 

Proposed Security Deposit Reform

 

9/1/17 DRAFT POLICY

 

Exhibit A

 

30.01.087        Security Deposits.

 

A.     In addition to the protections set forth in the Act and Section 30.01.085, the following additional protections regarding security deposits apply to Tenants that have a Rental Agreement or a Dwelling Unit covered by the Act. 

 

B.     If a Landlord requires, as a condition of move in, first month’s Rent and last month’s Rent, a Landlord may not collect more than an amount equal to one-half of a month’s Rent as a security deposit.  If a Landlord requires, as a condition of move in, either first month’s Rent or last month’s Rent, a Landlord may not collect more than an amount equal to a month’s Rent as a security deposit.  This Subsection does not apply to providers of affordable housing that receive a public subsidy to provide such affordable housing.

 

C.     To the extent that a Landlord withholds an amount from a security deposit to repair damages to the premises beyond ordinary wear and tear, “ordinary wear and tear” shall mean, for purposes of this Section, deterioration that occurs without deliberate or negligent destruction, damage, or removal of any part of the premises, equipment, furnishings or appliances by the Tenant, a member of the Tenant household or other persons on the premises with the Tenant’s consent. To charge for carpets, a Landlord must take into consideration the cost only of the contiguous area where the carpet is required to be replaced due to damage, and may not take into consideration the original expense of the carpet for the entire Dwelling Unit.  A Landlord may not charge for interior painting of a residence, except what is necessary to repair specific damage made to a wall beyond ordinary wear and tear and to repaint walls that were painted by the Tenant without permission. Basic cleaning is presumed to be ordinary wear and tear and nothing in this Subsection shall be construed to mean that a Landlord may charge for cleaning costs that do not address damage or filth beyond ordinary wear and tear.

 

        In order to determine the amount reasonably necessary to repair a damaged item, unless rebutted by documentation of an item’s value to the contrary by the Landlord, the original purchase price of the following items is presumed to depreciate at the following rates:

 

carpet (7yrs),

refrigerator (15yrs),

oven/range/cooktop (15yrs),

dishwasher (10yrs),

bathtub/shower (20yrs),

toilet (20yrs),

clothes washer/dryer (13yrs),

vinyl/tile flooring (15yrs),

window screens (30yrs),

window blinds (10yrs),

interior doors (20yrs),

screen door/sliding glass door (20yrs)

garage door (35yrs)

 

 

        To determine an amount reasonably necessary to repair a damaged item subject to the foregoing depreciation rates, a Landlord must divide the original purchase price of the item by the number of years in the foregoing depreciation schedule to determine an amount to be allocated for each year (the “Annual Value”) in an item’s life span.  To determine the amount reasonably necessary that a Landlord can charge for an item, the Annual Value should be multiplied by number of years remaining in an item’s life span.  For example, a refrigerator damaged by a Tenant that originally cost $1,125 to purchase 5 years earlier, the $750 charge to the Tenant would be calculated as follows:  $1,125 / 15 years = $75 (Annual Value), $75 x 10 (remaining life span) = $750.  In order to use a different method of calculating the amount reasonably necessary that a Landlord can charge for an item, a Landlord must produce documentation of an item’s value contrary to the foregoing depreciation schedule.

 

D.     Within one week of move-in, a Tenant will complete and submit to the Landlord, a condition report (on a form provided by the Landlord) noting any and all damage in the Dwelling Unit (the “Condition Report”).   Within one week of move-out, the Landlord shall conduct a walk-through of the Dwelling Unit to document damage beyond ordinary wear and tear not noted on the Condition Report (the “Final Inspection”).  A Tenant, and/or the Tenant’s representative, has the right to be present for the Final Inspection, but may choose not to participate.  

 

       Any damage for which a Landlord intends to withhold a portion of a Tenant’s security deposit must be documented in writing and visual damage must be documented in photographs and provided to the Tenant at the same time as the written accounting required under ORS 90.300 (12).  To the extent that a Landlord seeks to charge labor costs greater than $200 to a Tenant, the Landlord must provide documentation demonstrating that the labor costs are reasonable and consistent with the typical hourly rates in the metropolitan region.  A Landlord may not charge for damage noted on the Condition Report.

 

E.     Within 2 weeks of receipt of a security deposit, a Landlord must deposit the money in a separate checking, savings, money market, or client trust account and provide the bank institution name and account number in writing to the Tenant.  If the account bears interest, the Landlord is required to pay such interest in full to the Tenant upon move-out unless it is used to cover any claims for damage. The Landlord must provide an annual receipt of the account and any interest earned to the Tenant based on date of tenancy or on a pre-determined annual date, whichever is agreed upon by both parties on move-in.  A Landlord may pool multiple security deposits in a single account so long as the account is separate from the Landlord’s personal funds, is not accessed except to deposit and withdraw Tenant deposits, and Landlord can provide an individual accounting of each Tenant deposit and the interest earned thereon.  A landlord shall have six (6) months from the effective date of this Subsection to comply with the requirements of this Subsection.

 

F.      A Landlord that fails to comply with any of the requirements set forth in Section 30.01.87 shall be liable to the Tenant for the security deposit, a penalty in the amount equal to two times the security deposit, as well as attorney fees and costs (collectively, “Damages”).  Any Tenant claiming to be aggrieved by a Landlord’s noncompliance with the foregoing has a cause of action in any court of competent jurisdiction for Damages and any such other remedies as may be appropriate.

 

G.     Contemporaneously with the delivery of the written accounting required by ORS 90.300 (12), the Landlord must also deliver to the Tenant a written notice of rights regarding security deposits (“Notice of Rights”).  Such Notice of Rights must specify all of Tenant’s right to damages under this Section. The requirement in this Section may be met by delivering a copy of this Section to the Tenant along with contact information for the nearest Legal Aid Services of Oregon office or the Oregon State Bar.

 

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