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Buying or Selling Tenant-Occupied Homes 

Oregon's renter protections can make the process more complicated

Despite climbing interest rates, supply and demand in the housing market remains significantly unbalanced. There are still many more buyers looking for homes than units available. As a result, it remains a sellers' market, with prices up more than 20% from just one year ago.

Some investors who own and rent out homes or other types of dwellings (duplexes, townhomes, condos, etc.) decide to cash in their equity by selling their tenant-occupied units. For buyers competing in the limited supply of housing for sale in Central Oregon, finding the perfect house to purchase may pose additional challenges if it is currently inhabited by a tenant. Owners, too, must be able to navigate and comply with tenant protection laws in Oregon when selling.

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In order to help manage expectations for future use of a tenant-occupied property—whether for investment or personal use—buyers should consider retaining an attorney. Similarly, sellers should consult an attorney before listing currently leased property for sale. Real estate agents cannot review lease documents or advise on a specific landlord-tenant arrangements unless they are also licensed to practice law.

The following considerations apply: first, the type of tenancy (month-to-month, or fixed term); second, the length of occupancy time (especially if less than one year); third, the expiration date of the tenancy term; and fourth, the rights of the tenant under the specific lease contract. Oregon law is very tenant-protective with respect to termination. Among other things, if a tenant has lived in the dwelling for more than one year, the owner/landlord cannot terminate the tenancy for "no cause," but must have a "qualifying landlord" reason.

If an owner/landlord desires to sell leased property to a buyer and terminate the existing tenancy, that owner can only do so if the buyer intends to reside in the home after closing. If a buyer purchasing a tenant-occupied home wants to re-rent the property to a different occupant, that would not be a "qualifying landlord reason" to terminate. In addition to a showing of a "qualifying landlord reason," the owner must provide appropriate advance notice of termination to a tenant. This time period varies based on the type of tenancy.

A buyer could request that the seller work with a tenant to determine whether the tenant may consider voluntarily surrendering the property prior to the end of the term. This may be necessitated if the buyer is financing the purchase for residential purposes, because lenders require that the home be buyer-occupied within 60 days of closing.

Just as the housing market is still tight for buyers, rental units are also difficult to come by at reasonable rates. When considering a transaction involving a tenant-occupied home, communication and cooperation with all affected parties are key. Be sure to work with a knowledgeable real estate broker, as well as an attorney who can advise you on the intricacies of landlord-tenant law. With a reliable team helping you through the process, the additional challenges posed by these transactions can be addressed, whether you are looking to buy a home to live in, or one for investment purposes.

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