by Julie Preciado, Attorney, and Samantha Baker, Summer Associate
Sections of Portland’s Fair Access in Renting (FAIR) ordinance were recently amended to provide clarity regarding security deposits and other landlord requirements.
In Newcomb et al v. City of Portland, a coalition of landlords contended that FAIR contained vague and ambiguous sections, created steep penalties for landlords, and conflicted with statewide landlord-tenant regulations. As part of a settlement agreement, FAIR was amended to clarify ambiguity that previously existed in the law. Of particular importance to Portland residential landlords, the changes limit damages for landlords to $250 per violation and eliminate the “depreciation schedule” previously required in order to withhold from a security deposit for the repair or replacement of landlord-provided household items.
When Portland City Code (“PCC”) 30.01.087 went in to effect in 2020, it established strict standards on Portland landlords applicable to a tenant’s security deposit and requirements landlords must abide by to avoid violating local ordinance. These requirements include:
- placing limitations on the amount landlords may request for security deposits (one to one and one-half times one month’s rent, in most cases);
- requiring landlords to notify tenants in which financial institution their deposits are held, and whether the account is interest-bearing (landlords must also pay that interest to tenants at the end of their tenancy);
- placing certain limitations on withholding from security deposits for repairs;
- requiring “condition reports” at the commencement of tenancy for certain household items;
- requiring landlords to provide a written accounting to the tenant of rent payment history in a Rental History Form.
Most of PCC 30.01.087’s requirements on Portland residential landlords remain the same. Effective July 29, 2022, however, Ordinance Number 190905 changes PCC 30.01.087 in the following ways:
Damages Decreased
A landlord who fails to comply with any of the requirements of PCC 30.01.087 is now liable to tenant for only $250 per violation, plus actual damages, reasonable attorney fees and costs. Previously, a landlord was liable for double the amount of the tenant’s security deposit, plus reasonable attorney fees and costs.
No More Depreciation Schedules
In order for Portland residential landlords to withhold security deposit funds for the repair and replacement of any landlord-provided fixtures, appliances, equipment or personal property (similar to furniture, fixtures and equipment (“FFE”) found in commercial leases), those items must be identified in the Rental Agreement.
Previously, landlords were also required to attach to the Rental Agreement a depreciation schedule for each fixture, appliance, equipment or personal property in order to later apply security deposit funds for their repair or replacement. An itemized list is still required, but a depreciation schedule no longer is.
Carpet Cleaning No Longer Prohibited
As for flooring, Portland residential landlords could not previously apply tenants’ security deposit to the cost of cleaning or repair of flooring — except if necessitated by excess wear and tear, and any charge had to be limited to a discrete impacted area. The amendment removed all reference to “cleaning” – meaning PCC no longer governs the use of security deposit for carpet cleaning. Instead, Portland residential landlords must comply with the Oregon Residential Landlord Tenant Act (“ORLTA”) ORS 90.300(7)(c), which allows landlords to use security deposit funds for carpet shampooing if the carpet was cleaned or replaced before the tenant took possession and the written rental agreement provides that the landlord may deduct the cost of cleaning from the deposit.
The amended Portland ordinance now allows residential landlords also to apply tenants’ security deposit not only to the cost of repair, but also to replacement of flooring for certain areas of the home (although still not the whole home). To use security deposit funds for this purpose, the flooring repair or replacement must be “necessitated by use in excess of ordinary wear and tear” and the damage must be to a “discrete impacted area,” i.e. only “the area where the repair or replacement is needed, which may include “an entire room, closet, hallway, stairway, or other defined space, but not beyond.”
Regarding painting, landlords still may not apply a security deposit to the costs of interior painting, unless it is to repair specific damage in excess of ordinary wear and tear, or to repaint walls that were painted by the tenant without permission.
Condition Reports for Landlord-Provided Household Items
The third-party validation process previously in place has been removed, and a thorough step-by-step process has taken its place. The new process is as follows:
- The landlord and tenant schedule a time for a walkthrough of the unit and to complete a condition report, signed by both parties.
- If a mutually convenient time is not available, the landlord will complete the form, take photos, and share with tenant prior to commencement of the tenancy. The tenant may then complete an addendum to the condition report within 7 days following commencement of tenancy. If tenant does not do so, landlord’s condition report becomes final. If tenant does do so, landlord may dispute any items in the addendum in writing within 7 days. Unresolved disputes may be resolved in court.
- Landlord must update the condition report and the tenant must update its addendum report (if any), to reflect repairs and replacements during the term of the rental agreement.
Key Takeaways
Tenant’s rental agreement must itemize all items you may need to repair or replace upon the end of a tenancy. Upon commencement of a lease, landlord and tenant must each sign a condition report, or otherwise follow procedures to come to an agreement on condition of items, and the report must be updated throughout the tenancy as items are repaired or replaced. Finally, in keeping in line with ORTLA and the amended PCC ordinance, tenants are due a final accounting within 31 days of their tenancy termination, if you withhold any amount of the security deposit. The accounting must include an itemized list (sans depreciation schedule) of all repairs or replacements (which may now include repairs of flooring of a specific area). Although not new requirements, you should also remember to provide both a notice of rights regarding security deposits contemporaneously with the final accounting, and a rent payment history within 5 business days of a notice of intent to terminate. Finally, if you are found to be in violation of any of the requirements in PCC 30.01.087, tenant has the right to file a claim against you, and you may be liable for $250 per violation.
If you would like more information on, or compliance assistance with Portland residential tenancy requirements, please contact a member of Dunn Carney’s Real Estate Team.
