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Housing Providers Sue Kate Brown
Allege preventing plaintiffs from receiving amounts due under their rental agreements

Almost at the exact same moment that the gavel swung down on the third special session, a lawsuit was filed against Kate Brown, the City of Portland and Multnomah County over the eviction moratoria laws enacted by all three jurisdictions which essentially require a single sector of the economy -- residential housing providers -- to fund an estimated $400 million and growing statewide welfare program. The complaint, which would ordinarily merely describe the plaintiff's standing, or right to sue, added descriptions of the plaintiffs, their work, as well as their losses.

One of the plaintiffs is Moe Farhoud, the owner of Stark Firs Property Management. Far from being the unfeeling, unkind landlord scapegoated by some in the legislature and the media, he had a dream to provide those who encountered challenges in life with a second chance at success. Mr. Farhoud therefore seeks to rent many units at his properties to tenants who have had prior criminal records, bankruptcies, credit problems, and who have otherwise encountered circumstances which would limit their ability to rent dwelling units. He is currently owed more than $1 million in back rent.

Plaintiffs Tyler and Crystal Sherman own 22 housing units throughout Oregon. Tyler Sherman was 20 years old and working as a maintenance man for a property management company when he decided that he wanted to build his own rental business. He purchased his first duplex as a home and an investment. He went on to buy multiple other properties before meeting Crystal a few years later. The Shermans often purchased properties that were vacant and in need of major repairs. They have worked evenings, weekends, holidays, and late nights on roofing, cleaning, painting, gutting, and remodeling poorly maintained properties into clean, safe, affordable homes.

Several of the Shermans’ tenants have refused to pay rent since March of 2020. On information and belief, none of these tenants have lost employment due to the COVID-19 crisis. To date, these tenants owe them in excess of $8,000 in back rent.

2020 HB 4213 passed in the first special session, 2020 HB 4401 passed in the third special session. The suit also references several ordinances passed by the City of Portland and Multnomah county having to do with eviction moratoria.

According to the suit, "the Eviction Moratoria have the effect of:

a. Preventing Plaintiffs from terminating any tenancy for non-payment of rent, late charges, utility charges, and certain other service charges or fees, otherwise owing under their rental agreements with tenants;
b. Preventing Plaintiffs from exercising their contractual rights to exclude individuals from their properties and take possession of Plaintiffs’ units pursuant to Plaintiffs’ rental agreements;
c. Preventing Plaintiffs from charging late fees, penalties, or any other amount reflecting the time value of rent that was not paid in a timely fashion;
d. Preventing Plaintiffs from pursuing judgments for past-due rent absent any effect on tenants’ possession;
e. Preventing Plaintiffs, once tenants do eventually begin to pay rent, from applying those rent payments to the unpaid rental balance;
f. Preventing Plaintiffs from collecting unpaid rent until six months after the end of the declared emergency, whenever that time may be;
g. Preventing Plaintiffs from availing themselves of debt collection services by preventing Plaintiffs from reporting past due accounts to collection agencies;
h. In many cases, preventing Plaintiffs from ever receiving amounts due under their rental agreements.

The complaint goes on to say, that "The Eviction Moratoria are unconstitutional in several respects. First, the Eviction Moratoria impair the obligations of Plaintiffs’ rental agreements by removing the most important methods of enforcement of which Plaintiffs may avail themselves under their rental agreements: penalties for late payments and termination of the tenancy." It continues, "plaintiffs will likely bear the cost of this state-run public benefit program entirely on their own" and because of this "the Eviction Moratoria violate the Fourth Amendment’s prohibition on unreasonable seizures."

Critics of the recent eviction moratorium legislation -- widely known to be the work of State Representative Julie Fahey (D-Eugene) -- have pointed out that as the moratoria continue, an exit strategy becomes increasingly more difficult to craft and more painful to execute. Continuing the moratoria can only have the effect of creating broken tenants, broken housing providers and/or broken markets in which housing is less available, of less quality, and more expensive -- in the long run worse for tenants.

The lead attorney on the lawsuit, John DiLorenzo is no stranger to suing the State of Oregon. He's no stranger to winning, either. He was the architect of the successful $1.3 billion lawsuit against the State of Oregon brought by Linn and 12 other counties in Oregon, as well as 151 local taxing districts alleging breach of contract for the state's failure to maximize timber revenue on land managed by the state on behalf of the counties and districts. The state is awaiting appeal while interest accrues at a sickening rate.



Indeed, as if the state knew that litigation was inevitable, the bill just passed, contains a kernel of a legal defense against such a suit. The newly-passed, but not-yet-signed-into-law HB 4401 offers a pre-emptive strike against such a suit.

Sec. 1. The Legislative Assembly finds and declares that:
(1) The provisions of [the moratoria laws] might affect the terms and conditions of certain contracts entered into in this state.
(2) The effects of the provisions of [the moratoria laws] are not substantial because the provisions have a limited scope and duration and are necessary to protect the public health, safety and welfare. For these reasons the provisions do not undermine a contractual bargain, interfere with a party’s reasonable expectations or prevent a party from safeguarding or reinstating the party’s rights.
(3) Even if a provision of [the moratoria laws] has the effect of undermining a contractual bargain, interfering with a party’s reasonable expectations or preventing a party from safeguarding or reinstating the party’s rights, the provision is appropriate and reasonable to carry out the significant and legitimate public purpose of responding to the declaration of a state of emergency issued by the Governor on March 8, 2020, for the COVID-19 pandemic or the state of emergency issued by the Governor on September 8, 2020, for the wildfires.

One cannot help but wonder how the state, which has used the "impediment of contracts" argument as a successful defense against every attempt at PERS reform can now sustain this line of reasoning and re-write rental contracts throughout the state.

--Staff Reports

Post Date: 2020-12-22 17:59:10Last Update: 2020-12-24 13:19:58

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