Metes and Bounds of Real Estate and Land Use La · Mr. Litwak is the author of the first casebook...

Friday, October 12, 2012 9 a.m.–4:30 p.m.

Oregon State Bar Center Tigard, Oregon

6.5 General CLE credits

Cosponsored by the Real Estate & Land Use Section

Metes and Bounds of Real Estate and Land Use Law

Metes and Bounds of Real Estate and Land Use Law ii

METES and BOUndS OF REaL ESTaTE and Land USE Law

SECTiOn PLannERS

Thomas E. Bahrman, Bahrman Law LLC, BendJennifer M. Bragar, Garvey Schubert Barer, Portland

dustin R. Klinger, Miller Nash LLP, VancouverJeffrey B. Litwak, Columbia River Gorge Commission, White Salmon, WA

OREGOn STaTE BaR REaL ESTaTE & Land USE SECTiOn EXECUTiVE COMMiTTEE

Christian E. Hearn, ChairJeffrey B. Litwak

John C. Pinkstaff, Past ChairThomas E. Bahrman, Treasurer

Tod A. Bassham, SecretaryDina E. AlexanderJennifer M. Bragar

Joshua A. ClarkLaura Craska CooperLaurie E. Craghead

Liz FancherPatricia A. Ihnat

Dustin R. KlingerNorma S. Freitas, Advisory Member

The materials and forms in this manual are published by the Oregon State Bar exclusively for the use of attorneys. Neither the Oregon State Bar nor the contributors make either express or implied warranties in regard to the use of the materials and/or forms. Each attorney must depend on his or her own knowledge of the law and expertise in the use or modification of these materials.

Copyright © 2012

OREGON STATE BAR16037 SW Upper Boones Ferry Road

P.O. Box 231935Tigard, OR 97281-1935

Metes and Bounds of Real Estate and Land Use Law iii

TaBLE OF COnTEnTS

Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Faculty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

1a. Changes to Oregon Servicing and Foreclosure Laws—Presentation Slides . . . . . . . . 1A–i— Christopher R. ambrose, Ambrose Law Group LLC, Bend, Oregon

1B. SB 1552 and Changes to Oregon Foreclosure Laws: are You Ready? Presentation Slides . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1B–i— Kelly L. Harpster, Harpster Law LLC, Lake Oswego, Oregon

2. Condominiums and HOas—Building, Buying, and Bickering . . . . . . . . . . . . . . . . 2–i— Rebecca Biermann Tom, Barg Tom PC, Portland, Oregon

3. Environmental due diligence—Sifting Through the dirt . . . . . . . . . . . . . . . . . . . 3–i— Kirsten J. day, Perkins Coie LLP, Portland, Oregon— Priscilla E. Hampton, Perkins Coie LLP, Portland, Oregon

4. Third-Party Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–i— dina E. alexander, Radler White Parks & Alexander LLP, Portland, Oregon

5. Periodic Review: an idea whose Time Has Passed? . . . . . . . . . . . . . . . . . . . . . . . 5–i— Jeffrey G. Condit, Miller Nash LLP, Portland, Oregon

6. negotiating Conditions of approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–i— Gregory S. Hathaway, Hathaway Koback Connors LLP, Portland, Oregon— Zachary P. Mittge, Hutchinson Cox Coons Orr & Sherlock PC, Eugene, Oregon

7. Basics of Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–i— John M. Junkin, Garvey Schubert Barer, Portland, Oregon

8. LUBa Practice and Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–i— Tod a. Bassham, Land Use Board of Appeals, Salem, Oregon— Jeffrey B. Litwak, Columbia River Gorge Commission, White Salmon, Washington

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Metes and Bounds of Real Estate and Land Use Law v

SCHEdULE

8:00 Registration

9:00 SB 1552 and Changes to Oregon Foreclosure Laws—are You Ready?

F New requirements under SB 1552F Foreclosure mediation program updateF The impact of Niday on SB 1552 and judicial foreclosuresChristopher R. ambrose, Ambrose Law Group LLC, BendKelly L. Harpster, Harpster Law LLC, Lake Oswego

9:30 Condominiums and HOas—Building, Buying, and Bickering

F Forms of ownership—condominiums vs. single-family homesF HOAs, CC&Rs, and how they affect homeowner rights and responsibilitiesF What to do when disputes ariseMarisol Ricoy Mcallister, Farleigh Wada Witt, PortlandRebecca Biermann Tom, Barg Tom PC, Portland

10:30 Break

10:45 Environmental due diligence—Sifting Through the dirt

F Understanding the basicsF Avoiding common environmental pitfallsF Protecting your client and closing the dealKirsten J. day, Perkins Coie LLP, PortlandPriscilla E. Hampton, Perkins Coie LLP, Portland

11:45 Third-Party Legal Opinions

F The structure of an opinion letterF Specific types of opinionsF Accepted standards in opinion practicedina E. alexander, Radler White Parks & Alexander LLP, Portland

12:15 Lunch

1:15 Periodic Review: its Time Has Passed

F History and outline of the periodic review processF The process as applied to Urban Growth Boundary AmendmentsF Traps for the unwaryJeffrey G. Condit, Miller Nash LLP, Portland

1:45 negotiating Conditions of approval

F How flexible are local government conditions of approval?F Opportunities for applicants and opponents; issues that are off limitsF Tips for negotiating conditionsGregory S. Hathaway, Hathaway Koback Connors LLP, PortlandZachary P. Mittge, Hutchinson Cox Coons Orr & Sherlock PC, Eugene

2:45 Break

Metes and Bounds of Real Estate and Land Use Law vi

3:00 Basics of CondemnationF The process: Get it right the first timeF The parcel: The unities—more than propertyF Just compensation and fair market value: it’s only an opinionF Just compensation and the impact: what’s left?F The trial: explaining cap rates to 12 jurorsJohn M. Junkin, Garvey Schubert Barer, Portland

3:30 LUBa Practice and ProcedureF LUBA practice and procedure dos and don’tsF Using LUBA’s rules to your advantageF Tips for deciding when—and when not—to raise procedural issuesTod a. Bassham, Land Use Board of Appeals, SalemJeffrey B. Litwak, Columbia River Gorge Commission, White Salmon, WA

4:30 adjourn

SCHEdULE (Continued)

Metes and Bounds of Real Estate and Land Use Law vii

FaCULTY

dina E. alexander, Radler White Parks & Alexander LLP, Portland. Ms. Alexander is a member of the firm’s Real Estate and Corporate practice groups. She advises clients on issues that arise in all stages of a large-scale development project’s life cycle, including land acquisition, joint ventures, equity and debt financing, construction contracts, condominiums, leasing, sale matters, and workouts. Ms. Alexander is a member of the American Bar Association, the Multnomah Bar Association, Commercial Real Estate Women, and Oregon Women Lawyers. She also is a member of the Oregon State Real Estate & Land Use Section Executive Committee and chairs its Legislative Committee. She is admitted to practice in California, Oregon, and Washington.

Christopher R. ambrose, Ambrose Law Group LLC, Bend. Mr. Ambrose specializes in real estate, real estate finance, mortgage lending, and mortgage banker and broker law. He is past president of the Oregon Mortgage Lenders Association and a member of the Oregon and Washington Associations of Mortgage Professionals and various other real estate and mortgage organizations. He is admitted to practice in California, Oregon, and Washington.

Tod a. Bassham, Land Use Board of Appeals, Salem. Mr. Bassham has been a board member of the Land Use Board of Appeals since 1999. He was previously a staff attorney for LUBA. Mr. Bassham is the 2013 chair-elect of the Oregon State Bar Real Estate & Land Use Section.

Jeffrey G. Condit, Miller Nash LLP, Portland. Before joining the firm in 1998, Mr. Condit served as City Attorney for Lake Oswego and County Counsel in Benton County. His practice focuses on government, education, and administrative law and land use planning for public- and private-sector clients. Mr. Condit is a member of the Oregon State Bar Real Estate & Land Use, Constitutional Law, Appellate Practice, Government Law, and Sustainable Future sections, a member of the American Bar Association and the Multnomah Bar Association. Mr. Condit is a board member and past president of the Oregon Law Institute of Lewis & Clark College, Oregon state chair of the International Municipal Lawyers Association, a member of the National Association of College and University Attorneys, a member of the Oregon Council of School Attorneys, and a member and past president of the Oregon City Attorneys Association. He is an adjunct professor teaching Legal Processes in Land Use Planning at Portland State University.

Kirsten J. day, Perkins Coie LLP, Portland. Ms. Day is of counsel with Perkins Coie LLP. Her experience includes real estate company management responsibilities, dispute assessment, negotiating and managing regulatory environmental compliance agreements, and other legal/business questions and issues faced by real estate companies. She maintains bar membership in California and Oregon.

Priscilla E. Hampton, Perkins Coie LLP, Portland. Ms. Hampton focuses her practice in the areas of environmental and natural resources law, assisting clients with permitting, compliance, and regulatory matters under state and federal environmental laws. She also handles matters involving natural resources project development, defense of administrative and civil enforcement actions, environmental due diligence in real property and business transactions, and environmental litigation.

Kelly L. Harpster, Harpster Law LLC, Lake Oswego. Ms. Harpster is a real estate and business litigator who has worked on residential foreclosure issues since the foreclosure crisis in Oregon began. She recently served on the Attorney General’s Foreclosure Avoidance Mediation Workgroup, currently serves on the mediation program’s Advisory Committee, and has trained foreclosure mediators and housing counselors across the state.

Metes and Bounds of Real Estate and Land Use Law viii

Gregory S. Hathaway, Hathaway Koback Connors LLP, Portland. Mr. Hathaway’s statewide land use practice focuses on acquiring the necessary land use and regulatory entitlements to develop property. Mr. Hathaway’s experience includes representing large retailers, resort and golf course development, and government agencies in the land use process, including Tri-Met in securing land use approval for its Westside Light Rail Project. Mr. Hathaway previously served as County Counsel and Acting County Administrator for Washington County.

John M. Junkin, Garvey Schubert Barer, Portland. Mr. Junkin has a significant condemnation practice, typically on behalf of the property owner. He was the Washington County Counsel until 1996, where, among other things, he had significant experience in taking cases on behalf of the condemner. He has written numerous publications and lectured on condemnation.

Jeffrey B. Litwak, Columbia River Gorge Commission, White Salmon, WA. Mr. Litwak serves as counsel for the Columbia River Gorge Commission, the interstate compact agency for the Columbia River Gorge National Scenic Area. He also is an adjunct professor of law at Lewis & Clark Law School, where he currently teaches seminars on interstate compact law and land use law and previously taught administrative law. Mr. Litwak is on the Council of State Governments’ National Center for Interstate Compacts advisory board and is the 2013 chair of the Oregon State Bar Real Estate & Land Use Section. He also is a member of the Oregon State Bar Administrative Law Section Executive Committee and a member of the Washington State Bar Association Administrative Law Section Board of Trustees. Mr. Litwak is the author of the first casebook on interstate compact law, Interstate Compacts: Case and Materials (Semaphore Press, v. 1.1 2012).

Marisol Ricoy Mcallister, Farleigh Wada Witt, Portland. Ms. McAllister’s practice emphasizes real estate and business law. She advises clients involved in simple and complex real estate transactions and developments. She is on the Oregon Real Estate Agency’s approved list of condominium lawyers. She also advises clients in business transactions, represents financial service providers on lending transactions, represents landlords and tenants in commercial leasing matters, negotiates and drafts construction contracts for various projects, advises clients with construction lien matters, and regularly assists clients in resolving lien disputes. Ms. McAllister is an active member of the Portland Chapter of Commercial Real Estate Women, serving on its marketing committee, and is a founding member of the Oregon Hispanic Bar Association.

Zachary P. Mittge, Hutchinson Cox Coons Orr & Sherlock PC, Eugene. Mr. Mittge practices primarily in the areas of land use law and real property law. He has advised a variety of individuals, businesses, neighborhood associations, nonprofits, homeowners’ associations, and the city of Winston, Oregon, on land use matters and has represented both applicants and opponents before local governments, the Land Use Board of Appeals, and the Oregon Court of Appeals.

Rebecca Biermann Tom, Barg Tom PC, Portland. Ms. Tom’s principal areas of practice include the development and sales of planned unit developments, resorts, and condominiums, including mixed use, commercial, and residential projects, commercial leasing, acquisitions, and financing. Ms. Tom has been a frequent speaker at legal education seminars on the subjects of condominium and planned unit developments and leasing. She is a member of the American Bar Association, Commercial Real Estate Women Portland Chapter, and Oregon Women Lawyers. She also serves on the Oregon State Bar Real Estate & Land Use Section Executive Committee.

FaCULTY (Continued)

Chapter 1a

Changes to Oregon Servicing and Foreclosure Laws—Presentation Slides

Christopher r. Ambrose

Ambrose Law Group LLCBend, Oregon

Chapter 1A—Changes to Oregon Servicing and Foreclosure Laws—Presentation Slides

Metes and Bounds of Real Estate and Land Use Law 1A–ii


Metes and Bounds of Real Estate and Land Use Law 1A–1

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METES AND BOUNDS OF REAL ESTATE AND LAND USE LAWOctober 12, 2012

Oregon State Bar Real Estate and Land Use Section

CHANGES TO OREGON SERVICING AND FORECLOSURE LAWS

Chris Ambrose, Attorney | Ambrose Law Group, LLC

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HOW DID WE GET HERESearching For Answers - 2008

• Loan Originator Enforcement – SB 2064. Loan originator restrictions. Pre-National Mortgage Licensing System enforcement.

• Mortgage “Rescues” and Foreclosure Notification – HB 3630. Foreclosureconsultants" and "equity purchasers“ restrictions and licensing.

• Mandatory Mediation Bill Fails to Pass



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Searching For Answers - 2009• Foreclosure Prevention – SB 628. Requirement that the lender or loan servicer notify a

homeowner facing foreclosure of the right to a meeting (either face-to-face or by phone) and that the lender/loan servicer assess whether the borrower is eligible for a loan modification.

• Mortgage Lending – HB 2188. Restriction on the sale of negative amortization loans; Requirement that lenders provide translated disclosures when loans are marketed and negotiated in languages other than English.

• Federal Mortgage Lending Standards – HB 2189. Allows the DCBS to enforce new federal law that require additional disclosures to borrowers and restrict loan servicing abuses and misleading advertising. National Mortgage Licensing System Registration.

• Debt management Services – HB 2191. New license requirement for “debt management service providers,” including including debt settlement companies and loan modifiers.

• Deficiency Judgment – HB 3004. Generally precludes lenders that foreclose on a borrower with an 80/20 loan from collecting from the second loan if the home sells for less than what the borrower owes; subject to many restrictions.

• Tenants in Foreclosure – SB 952. This bill helps Oregon renters living in foreclosed homes by requiring advance notice of the foreclosure proceedings and providing protections related to leases and security deposits.


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Searching For Answers - 2010• Loan Modification Affidavits – HB 3610.

Modifies the affidavit requirement regarding loan modifications.

• Second Position Trust Deeds – HB 3656.Clarification of prior 2009 law regarding restrictions on 80/20 loans and collection of deficiency judgments after foreclosure.




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Searching for Answers - 2011• Update – Tenants in Foreclosure – SB 491.

Changes the time required for a tenant to receive notice of foreclosure from 30 days to 90 days, consistent with federal law. The extended notice provisions sunset in 2014 to conform to federal law.

• Debt Cancellation Post Foreclosure – HB 2916. Clarifies rights of lenders when 1099’s are issued after short sales.


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Foreclosure Activity and Home Price Index - OR (TM - RealtyTrac)



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• December 2011– Oregon ranked 16th in foreclosure inventory at

2.7% (percentage of homes with a mortgage that are in foreclosure)

– Up .2% compared with December 2010



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March 5, 2012 – SB 1552 Passes House and Senate

• Introduction of SB 1552 on February 1, 2012; Bill approved by House and Senate on March 5, 2012. Multiple challenges during process and multiple issues to be resolved.

• 25 other states with mediation provisions of some form, ranging from mandatory mediation to voluntary mediation – broad range of successes, e.g. Conn. (4/5 keeping homes); Florida (statewide managed mediation program terminated 12/11; Washington H.B. 1362 /S.B. 5275 (approved April 2011) (creating statewide foreclosure mediation program administered by state Department of Commerce)

• Senate Bill 1552 passed the Oregon House and Senate late on March 5, 2012. It was signed Governor Kitzhaber on April 11, 2012.

• Effective Date: April 11, 2012. Operative Date for most provisions: July 11, 2012.

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WHAT THE LAW DOES• Judicial v. nonjudicial foreclosure. Applies only

to nonjuducial foreclosures.

• Increase costs of nonjuducial foreclosure– $100.00 for each recorded notice of default – pay to

county clerk for purposes of mediation fund.– Costs of mediation to be shared, but

borrower/grantor’s share may not exceed $200.00 and mediator may waive.

• Increase time for nonjudicial foreclosures under most circumstances.



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WHAT THE LAW DOES(Commencement of mediation)

• It requires a beneficiary or beneficiary’s agent to send a notice of mediation and to enter into mediation for purposes of agreeing to “foreclosure mediation measures.” Foreclosure mediation measures include options pertaining to forbearance, modification, deeds in lieu of foreclosure, and short sales.

– Typically - Notice of Default recorded in county; Notice of Sale sent to identified parties concurrently

– However, if a “residential trust deed,” then a Notice of Mediation must be sent 60 days before the notice of sale is served/mailed..

– Mediation Service Provider schedules mediation for not earlier than 45 days and not later than 90 days

– Mediation Service Provider specifies date at least 30 days before scheduled mediation date to confirm that borrower/grantor will enter into mediation.

• Foreclosure Process essentially extended by at least 60 days and likely more –nonjudicial foreclosure process likely will take 200 plus days.

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WHAT THE LAW DOES(Housing Counselor Requirement)

• Requires the borrower (grantor) to consult with a housing counselor prior to mediation if foreclosure is initiated by beneficiary.

• Counselor requirements set by AG workgroup.



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WHAT THE LAW DOES(Mediation)

• Mandates certain documents that must be produced at the mediation, including documentation showing the chain of title for the property, including assignments of the trust deed and note. Consequences if beneficiary fails to bring documents or cannot locate documents? Conversion to judicial foreclosure?

• Mandates that the beneficiary’s representative with settlement authority appear in person at the mediation unless the mediator allows an exception. A location out-of-state is not in and of itself a basis for an exception.

• Agreement reached regarding a foreclosure avoidance measure or confirmation that there is no agreement. Neither party is obligated to reach agreement and the failure to reach agreement does not preclude foreclosure.

• Conclusion of Mediation – Mediation Service Provider to provide beneficiary/agent with certificate of compliance (form to be provided by AG). No certificate; no nonjudicial foreclosure. Judicial foreclosure? Do it again?

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WHAT THE LAW DOES(At Risk Borrower Mediation)

• Allows a borrower who is at risk of default to commence the mediation process before a notice of default is recorded.– When is a borrower “at risk of default” that will enable the

borrower to commence the process?

• Similar process to lender-initiated process, but…– What if lender elects to judicially foreclose?– What if borrower initiates the mediation process and there’s no

resolution, and then lender starts foreclosure process again –need for second opportunity for mediation?

– Does not appear to be a requirement that the borrower/grantor meet with a counselor before commencing mediation under this provision.



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WHAT THE LAW DOES(Affidavit of Noncompliance)

• Affidavit of Noncompliance (Section 4a)– If beneficiary/lender determines that a grantor/borrower is not eligible for

any foreclosure avoidance measure or that the grantor has not complied with the terms of a foreclosure avoidance measure to which the grantor has agreed, a notice of noncompliance may be provided

– Form provided by DOJ – to be sent at least 30 days before date set in trustee’s notice of sale

– Application to all foreclosures or just residential trust deeds?– Application to all residential trust deed foreclosures (even if beneficiary

exempt) or just those that have proceeded through mediation?– Give borrowers notice of commencement of foreclosure and opportunity

to commence litigation or seek resolution with beneficiary/lender.• Imposes a $500.00 penalty for each violation in addition to actual

damages. A court also may award attorneys’ fees in favor of the borrower only.

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WHAT THE LAW DOES(Application / Dual Track)

• Changes the definition of “residential trust deed.” It previously applied to trust deeds against real property occupied as a principal residence of the borrower at the time of the commencement of the foreclosure action. That has been changed to the principal residence of the borrower at the time of the default.

• Arguably puts an end to dual track processes in which the lender is both foreclosing and working through the mediation process. However, notice of default already may be recorded.



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WHAT THE LAW DOES NOT DO• It does not require the borrower to mediate. If the borrower fails to

act or rejects mediation, the borrower is not required to meet with a housing counselor or proceed through mediation. Timelines are set in place that the borrower must follow if he/she desires to mediate. If the borrower elects to mediate and follows the procedures, the beneficiary must do so.

• Does not address junior lienholders or mortgage insurance companies. What are the consequences if junior lienholders are not in attendance? Should they be invited to attend? What if mortgage insurer refuses to authorize a foreclosure avoidance measure?

• The law does not change the deficiency laws in Oregon, In general, no deficiency rights under residential trust deeds whether nonjudicial or judicial.

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WHAT THE LAW DOES NOT DO(Exemptions)

• The requirement to enter into mediation with a grantor does not apply: A) Toan individual, a financial institution (ORS 706.008), a mortgage banker(ORS 86A.100), or a licensee (ORS 725.010), if the individual, financialinstitution, mortgage banker or licensee provides to the Attorney General asworn affidavit that states that during the preceding calendar year theindividual, financial institution, mortgage banker or licensee did notcommence or cause an affiliate or agent of the individual, financialinstitution, mortgage banker or licensee to commence more than a total of250 actions to foreclose a residential trust deed by advertisement andsale under ORS 86.735 or a residential mortgage by suit under ORS88.010.

– This is a significant carve out for a number of lenders, but still will not be a carveout for the bulk of homeowners who have loans with the primary residentiallenders.

• Affidavit due within 30 days after operative date (Was August 4, 2012) for calendar year 2012 and not later than Jan. 31 for each subsequent year, or at time notice of default is to be recorded.



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WHAT THE LAW DOES NOT DO

• The mediation mandate and most of the other changes do not apply to investment property, second homes (unless they become principal residences), bare land, and commercial property.

• The law does not preclude judicial foreclosures, in which an actual lawsuit is filed against the borrower.

• The law does not impose a penalty for lender or servicers who do not respond to a request for mediation by an “at risk borrower.”

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• The law does not resolve the issues pertaining to MERS, which are subject to court consideration at this time.– Niday v. GMAC– Bain v. Metropolitan Mortgage (WA)– Oregon Supreme Court has accepted four questions

certified to it from the Federal District Court of Oregon:

• May an entity such as MERS, that is neither a lender nor successor to a lender, be a “beneficiary” as that term is used in the Oregon Trust Deed Act?



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• May MERS be designated as beneficiary under the OregonTrust Deed Act where the trust deed provides that MERS“holds only the legal title to the interests granted by Borrowerin the Security Instrument, but, if necessary to comply withlaw or custom, MERS (as nominee for Lender and Lender’ssuccessors and assigns) has the right to exercise any or allof those interests?

• Does the transfer of a promissory note from the lender to asuccessor result in an automatic assignment of the securingtrust deed that must be recorded prior to the commencementof nonjudicial foreclosure proceedings under ORS 86.735(1)?

• Does the Oregon Trust Deed Act allow MERS to retain andtransfer legal title to a trust deed as nominee for the lender,after the note secured by the trust deed is transferred fromthe lender to a successor or series of successors?

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• The law does not differentiate between borrowers who are in default arising out of economic necessity v. those who have elected to strategically default.

• Short sale option.



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MEDIATION PROGRAM

• Establishment of Attorney General Workgroup regarding Administrative Rules– Foreclosure Avoidance Mediation Program– Mediator Standards– Counseling Services – Mediation Guidelines

• Result - Foreclosure Avoidance Mediation Program (Oregon Department of Justice)– http://www.doj.state.or.us/consumer/pages/foreclosur

e_mediation.aspx

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DOJ SERVICING LAWS• OAR 137-020-0800. During the 2010 legislative

session, lending and the extension of credit was made part of the Unlawful Trade Practices Act. Until then the case law indicated otherwise. (Now see ORS 646.605(6) defining real estate, goods and services.) This opened up claims for attorneys' fees and statutory damages. The DOJ has authority to issue rules under that UTPA.

• DOJ issued temporary rules to address perceived problems prevalent in the servicing of residential mortgages.



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PURPOSE OF OAR 137-020-0805

• Purpose: The purpose of this rule is to declare as unfair or deceptive in trade or commerce certain practices relating to the servicing of a residential mortgage loan.

• Permanent Rules Adopted July 23, 2012, effective July 24, 2012.

• http://www.doj.state.or.us/consumer/pdf/mortgage_servicing_rules.pdf

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PROHIBITED CONDUCT• Prohibited Conduct: A mortgage loan servicer engages in unfair or

deceptive conduct in trade or commerce if the mortgage loan servicer:– (a) Assesses a late fee or delinquency charge for a payment received from a

borrower by the payment’s due date or within any applicable grace period;– (b) Assesses or collects any default-related fee or charge that the servicer is not

legally authorized to assess or collect under the terms of the residential mortgage loan, deed of trust, or mortgage;

– (c) Misrepresents to a borrower any material information regarding a loan modification;

– (d) Misrepresents any information set forth in an affidavit, declaration, or other sworn statement detailing a borrower’s default and the servicer’s right to foreclose;

– (e) Fails to provide a borrower with notice that the borrower’s request for loan modification has been denied or rejected within 10 days of the denial or rejection, but in no event, less than 20 days before a scheduled trustee sale;

– (f) Fails to comply with the requirements of 12 USC 2605(b), 12 USC 2605(c), 12 USC 2605(d), or 12 USC 2605(e), as in effect on January 1, 2012; and,

– (g) Fails to deal with a borrower in good faith.• “Good faith” means honesty in fact and the observance of reasonable standards of fair

dealing.



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SUMMARY OF INITIAL RESULTS THREE MONTHS INTO PROGRAM

• Bulk of foreclosure handled by five largestlenders – need “buy-in.”– Very little buy-in thus far

• Vast majority of lenders will be exempt – need tocomply with affidavit requirements.

• Potential affect on short sales.• Likely Increase in judicial v. nonjudicial

foreclosures, particularly when combined withMERS issues (Niday).

• Increase in costs.

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• Likely increase in time for completion of nonjudicialforeclosure process.

• Servicers subject to possibly harsh penalties if fail tofollow AG servicing rules, e.g., by failing to act “in goodfaith.”

• May be increased litigation.• More borrowers exploring strategic defaults and using

mediation process for negotiation opportunity.• 2013 Legislation – Phase II.



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Updated Foreclosure Activity and Home Price Index – OR (TM – RealtyTrac)

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Searching For Answers - 2013

Chapter 1B

SB 1552 and Changes to Oregon Foreclosure Laws: are You Ready? Presentation Slides

Kelly l. hArpster

Harpster Law LLCLake Oswego, Oregon

Chapter 1B—SB 1552 and Changes to Oregon Foreclosure Laws: Are You Ready? Presentation Slides

Metes and Bounds of Real Estate and Land Use Law 1B–ii


Metes and Bounds of Real Estate and Land Use Law 1B–1

SB 1552 AND CHANGES TO OREGON FORECLOSURE LAWS: ARE YOU READY?

© 2012 Harpster Law LLC

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An Update on FAMP



Current State of FAMP

• Small number of default mediations proceeding

• Small number of non-exempt lenders participating in “at risk” mediations

• Legislature will consider technical fixes and could expand the scope of the program

Issues with FAMP

• No enforcement mechanism for lender refusals to participate in “at risk” mediation

• Does not require mediation in judicial foreclosures

• Technical issues and lender reaction to certain notice and document requirements



Common Misconceptions

• “At risk” mediation is voluntary• “At risk” mediation does not require housing

counseling• “Dual Track” notices apply only to grantors

in mediation or to non-exempt lenders


• The MSP will scrutinize the chain of title• Lenders are required to participate in “good

faith” and will be subject to sanctions and borrower lawsuits

• The statute requires lenders to offer relief to non-eligible borrowers




• Junior lienholders cannot participate in mediation

• Mediation will encourage strategic defaults• Foreclosure mediation is something strange

and new, untested and unproven

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The Impact of Niday



Niday v. GMAC

• Decided on July 18• “A beneficiary that uses MERS to avoid

publicly recorded assignments cannot rely on a non-judicial foreclosure process that requires that very thing—publicly recorded assignments.”

Two Specific Holdings

• The lender, not MERS, is the beneficiary• All assignments, even those that occur by

operation of law when a note is assigned or negotiated, must be reflected in the public land records to foreclose non-judicially



Post-Niday

• Steep drop in recording of new NODs• Marked increase in judicial foreclosure

filings• A resulting slow start for the foreclosure

mediation program

The Post-Niday Debate

• Should the Legislature amend the OTDA• To make MERS a lawful beneficiary?• To eliminate the recording requirement?• To retroactively bless completed sales?



The Post-Niday Debate

• Will the Oregon Supreme Court reverse?• Will a shift to judicial foreclosures be bad

for homeowners?• Should the mediation program be expanded

to cover judicial foreclosures?

Chapter 2

Condominiums and HOas—Building, Buying, and Bickering1

rebeCCA biermAnn tom

Barg Tom PCPortland, Oregon

1 © 2012 Rebecca Biermann Tom.

Contents

I. Building—Advising Developers of Condominiums and Planned Communities. . . . . . . . 2–1A. CCB License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–1B. Conditions of Approval and Encumbrances Affecting the Development . . . . . . . . 2–2C. Planned Communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–3D. Condominiums. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–5E. Turnover; Transitional Advisory Committees . . . . . . . . . . . . . . . . . . . . . . . 2–8

II. Buying—Advising Clients Considering the Purchase of a Condominium Unit or Home or Lot in a Planned Community . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–9A. Form of Sale Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–9B. Rescission Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–9C. Review of Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–10D. Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–12E. CCB Review and Research on Builder. . . . . . . . . . . . . . . . . . . . . . . . . . . 2–12F. Homebuyer Protection Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–12

III. Bickering—Potential Problems with Homeowners’ Associations . . . . . . . . . . . . . . . 2–12A. Advising HOAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–13B. Advising Owners in Condominiums and Planned Communities . . . . . . . . . . . 2–15

AppendixesA. CCB Suggested Maintenance Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . 2–17B. CCB Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–19C. Sample Checklist for New Condominium Sales . . . . . . . . . . . . . . . . . . . . . 2–25D. Notice of Compliance with Homebuyer Protection Act . . . . . . . . . . . . . . . . . 2–27E. Attorney General Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–29

Chapter 2—Condominiums and HOAs—Building, Buying, and Bickering

Metes and Bounds of Real Estate and Land Use Law 2–ii


Metes and Bounds of Real Estate and Land Use Law 2–1

This presentation addresses residential and mixed use developments, as opposed to purely commercial developments. Condominiums in Oregon are governed by the Oregon Condominium Act, which is set forth in ORS Chapter 100. Planned communities are governed by the Oregon Planned Community Act, which is set forth at ORS 94.550 to 94.785. Attorneys who desire to practice in this area must familiarize themselves with these acts.

i. BUiLdinG—adViSinG dEVELOPERS OF COndOMiniUMS and PLannEd COMMUniTiES

a. CCB License

A threshold issue when representing housing developers is to determine whether the client is required to obtain a license from the Oregon Construction Contractors Board (“CCB”). Many developers are under the impression that they are in compliance with the law if they hire a licensed general contractor to build their projects. However, “contractor” is defined under ORS 701.005 as a person who constructs or arranges for construction work. Under ORS 701.021, a contractor’s or developer’s license is generally required for a person to undertake any construction work. Certain exemptions from licensing can be found at ORS 701.010. While an exception to the licensing requirement exists for work performed on one’s own property, that exception does not apply if the work is being performed or contractors are hired with the intent to sell the structure. An important exemption from the license requirement is available to an owner who contracts for licensed contractors to perform the work and the following apply: (1) the work is done wholly or partially within the same calendar year; (2) the work is on not more than three existing residential structures of the owner; and (3) if the work requires a building permit, a licensed residential general contractor performs or oversees the work. ORS 701.010(6). “Residential structure” is defined to include a single-family house; a structure that contains one or more dwelling units and is not more than four stories above grade, a condominium, rental residential unit, or other residential dwelling unit that is part of a larger structure, if the property interest in the unit is separate from the property interest in the larger structure; a modular home constructed off-site, a manufactured dwelling, a floating home as defined in ORS 830.700; or an appurtenance to a residential structure. ORS 701.005(15)(a). The foregoing definition expressly excludes mixed-use properties. ORS 701.005(15)(b).

So long as the client is hiring a licensed general contractor to build the project and will not perform any construction work on the project itself, it will likely qualify for the developer’s classification of license, which does not require any prerequisite education and testing (unlike the general contractor’s license category). See ORS 701.042. Both categories of license require a surety bond in the amount of $20,000 and public liability and property damage insurance with limits of at least $500,000 per occurrence that includes products and completed operations coverage. The bond and insurance can be cost-prohibitive and difficult to obtain, especially for condominium and townhome projects and developers without previous experience.

In addition, builders of residential structures are required to offer a one-year warranty against defects in materials and workmanship and provide their buyers with a recommended maintenance schedule for the structure at the time the warranty is offered. See ORS 701.320 and 701.335. The CCB’s suggestion for maintenance schedules is included with these materials, but licensees may develop their own maintenance schedule appropriate for the improvements. See Appendix A. The maintenance schedule must include the following minimum information:

F Definitions and descriptions of moisture intrusion and water damage;

F An explanation of how moisture intrusion and water damage can occur;

F A description and recommended schedule for maintenance to prevent moisture intrusion;

F Advice on how to recognize the signs of water damage; and

F Appropriate steps to take when water damage is discovered.



Developers of new construction condominiums are required to provide buyers with a one-year warranty pursuant to ORS 100.185, but the requirements of the CCB warranty and the Condominium Act warranty are not the same, and both apply. Licensed contractors contracting for work on a residential construction project must also provide owners with three notices:

F Consumer Protection Notice;

F Notice of Procedure; and

F Information Notice to Owner About Construction Liens.

The notices can be found on the CCB website at http://www.oregon.gov/CCB/Contractor_Forms.shtml, and copies are included with these materials. See Appendix B. The forms must be signed by both the contractor and the property owner/buyer and given at the time of contract.

Additional CCB obligations include the requirement of a written contract for projects with a contract price of more than $2,000, a one-day rescission right for consumers, and use of the CCB license number in contracts and advertising. The rescission right allows consumers to cancel a construction contract for the construction, improvement, or repair of a residential structure by delivery of written notice of cancellation to the contractor by midnight of the business day following the date of the contract. This is separate from the five-day rescission right required for buyers of residential condominium units.

Failure to obtain a CCB license when required can have significant negative impacts, which may include the following.

F A buyer could cite the CCB statutes in a construction defect action, in an attempt to use unlicensed status as proof of a pattern of unlawful or otherwise substandard construction practices. This could aid a plaintiff in achieving a higher damage award against the developer than if the developer were appropriately licensed.

F CCB can fine the client up to $5,000 per violation. ORS 701.992.

F A buyer might utilize your client’s unlicensed status as a basis for refusing to close the purchase of the unit or home.

F Prosecution for a Class A misdemeanor. ORS 701.990.

F Injunctions and cease and desist orders. ORS 701.098.

B. Conditions of approval and Encumbrances affecting the development

Attorneys representing developers need to review all land use approvals, design review approvals, and other governmental permits or approvals applicable to the project. These decisions are binding on the developer and the property and may include conditions of approval that specify how common property is to be owned and maintained, require particular easements, and require development restrictions that must be incorporated into the declaration of covenants, conditions, and restrictions (the “CCRs”). The local jurisdiction may also require its approval for amendments and termination of certain provisions of the CCRs. The conditions of approval may require the CCRs to be recorded with the subdivision plat, and, in such instances, the homeowners’ association (“HOA”) must be established prior to the plat recording.

The developer’s attorney should review the subdivision plat prior to recording to ensure that the conditions of approval are complied with, all required easements are shown, and the CCRs appropriately reflect the layout and labeling shown on the plat. In addition, the attorney should confirm the developer’s entity name and signature block are correct and confirm the plat notes are accurate.

If the project will include townhomes, local jurisdictions require a maintenance agreement for joint maintenance of certain shared building elements, such as building footings, roofing, and party walls. Most jurisdictions have a prescribed form for the townhome maintenance agreement, but

http://www.oregon.gov/CCB/Contractor_Forms.shtml

http://www.oregon.gov/CCB/Contractor_Forms.shtml



attorneys may be able to persuade the jurisdiction to allow the required maintenance provisions to be incorporated into the CCRs (with jurisdiction approval required to amend these sections of the CCRs).

Additional easement documents may need to be prepared, beyond the easements that are typically included in CCRs. Some examples are stormwater detention easements and shared driveway and utility easements for adjacent lots. The local jurisdiction may have a required form for particular easements, which will need to be reviewed and possibly revised to conform to the particular development. Any desired changes to the jurisdiction’s form will require approval by the applicable planner and possibly the jurisdiction’s attorney.

Practitioners also need to obtain a title report or subdivision guarantee for the property and copies of all exception documents and the vesting deed. The title may reveal a master association that applies to the property or other easements or development restrictions impacting the project. Certain maintenance responsibilities required by such documents may be best performed by the owners’ association and, if so, the obligation should be specifically noted in the CCRs so that the association will be aware of it. Review of the vesting deed will confirm the entity that actually owns the property, which is not always who the client thinks holds title. The property may need to be conveyed to the correct entity or the CCRs and easements may need to be revised to conform to the party hold in title or to include a consent in the CCRs to the encumbrance by the developer entity.

C. Planned Communities

1. Planned Community act. The Planned Community Act (“PCA”) applies to planned communities. ORS 92.550(18)(a) defines a “planned community” as “a subdivision under ORS 92.010 to 92.190 that results in a pattern of ownership of real property and all the buildings, improvements and rights located on or belonging to the real property, in which the owners collectively are responsible for the maintenance, operation, insurance or other expenses relating to any property within the planned community, including common property, if any, or for the exterior maintenance of any property that is individually owned.” Pursuant to ORS 94.550(18)(b), a “planned community” does not include a condominium, planned community that is exclusively commercial or industrial, or a timeshare plan. Planned communities may have common areas or may just have property that is to be maintained by the HOA, whether such obligation arises from a decision by the developer (such as exteriors of townhomes or front yards) or is required by the local jurisdiction in its conditions of approval. Common areas in planned communities is typically owned by the HOA but may be owned by all HOA members as tenants in common. The former is preferable for owners in the planned community from a potential liability perspective, as well as lessening the risk that title is not conveyed to successor lot owners when lots are sold.

Attorneys must review ORS 94.550 to determine the class of planned community applicable to the client’s project. The classification of the planned community depends on the estimated annual assessments and the number of lots in the development, as well as the potential for annexation of additional lots. If the project is a Class I planned community, all provisions of the PCA apply, including ORS 94.595 (requires developer to conduct a reserve study and establish reserves for commonly maintained property that will require major maintenance, repair, or replacement in more than one and less than 30 years, as well as painting for commonly maintained property with exterior painted surfaces), and ORS 94.604 (requires a transitional advisory committee for communities that contain or may contain at least twenty lots when 50% of the lots in the community have been sold). For Class II planned communities, all provisions except ORS 94.595 and ORS 94.604 apply. If the project is a Class III planned community, the PCA does not apply unless the CCRs so provide. ORS 94.570(3).

Developers of Class I and II planned communities must record CCRs and bylaws in the county in which the project is located and are required to establish the HOA as a nonprofit corporation, which will also be governed by the Nonprofit Corporations Act set forth in ORS Chapter 65. ORS 94.580 sets



forth the requirements for the CCRs and ORS 94.635 includes the requirements for the HOA’s bylaws. Attorneys should confirm that the common areas are deeded to the HOA, free from the lien of any trust deeds recorded by the developer’s lender. That conveyance is sometimes overlooked by the parties and can be difficult to rectify if not discovered until years later when the development entity is defunct.

Attorneys practicing in this area should also become familiar with the requirements of the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), the Federal Housing Authority (“FHA”), and the Department of Veterans Affairs (“VA”) applicable to planned communities or planned unit developments to ensure that the CCRs and bylaws drafted by the attorney comply with the requirements of those agencies, so that their clients’ buyers will not be precluded from obtaining traditional financing due to failure to comply with such requirements. These requirements are broad in scope and change frequently.

Practitioners seeking further information about developing planned communities and the drafting of the CCRs, bylaws, and articles of incorporation for HOAs are encouraged to review the materials prepared by J. David Bennett and Karna Gustafson in Chapter 10 of Regulation and Taxation of Real Estate, published by the Oregon State Bar. The PCA is modified in most sessions of the Oregon legislature, so attorneys practicing in this area need to keep up with legislative updates.

2. Sales in Planned Communities

a. Oregon Law. ORS 90.016 provides that no person may negotiate to sell any lot in a subdivision until a tentative plan has been approved by the applicable jurisdiction. However, that statute allows a person to negotiate to sell a parcel proposed for partition prior to tentative approval of the partition. Sales of subdivision lots and partitioned parcels may not close until recording of the subdivision plat and partition, respectively. ORS 92.015(1). If the Planned Community Act applies, the lot or home may not be conveyed until the CCRs are recorded in the county in which the planned community is located. ORS 94.565(2). As noted above, if the developer will be selling new residential structures, it must comply with the CCB’s requirements for a written contract, one-year warranty against defects, and delivery of required notices to the buyer.

b. interstate Land Sales Full disclosure act. In addition to Oregon statutory requirements, developers of lots and condominium units and who intend to sell lots or units in interstate commerce are subject to the Interstate Land Sales Full Disclosure Act (“ILSFDA”). See 15 U.S.C. 1701 et seq. Any developer who advertises its project on the internet, advertises in media that is distributed in more in than one state, or corresponds with potential buyers in other states by any method is engaged in interstate commerce. Developers potentially subject to the ILSFDA must confirm whether they qualify for an exemption from registration or register with the Bureau of Consumer Financial Protection (“CFP”). 15 U.S.C. 1702 and 12 C.F.R. 1010 set forth partial and complete exemptions from the ILSFDA. A full exemption means that the project is not subject to the ILFSDA, whereas a partial exemption results in application of certain anti-fraud provisions of the ILFSDA. Most exemptions are self-determining and do not require a filing with CFP. See 12 C.F.R. 1010.4(d).

One of the most commonly used full exemptions is for completed homes and units and for homes and units that are not yet completed and that the seller commits to complete within two years after the date of contract. 15 U.S.C. 1702(a)(2). For up to 180 days from the date of the first contract for the sale of a unit or home in the project, the developer may reserve the right not to proceed with the project if a specified percentage of presales are not achieved. Unless the developer terminates the existing sale agreements within the 180-day period if the required presale percentage is not achieved, the developer is obligated to complete the buildings within the two-year period. 12 C.F.R. 1010.5. The 180-day period for minimum presales does not extend the two-year period for building completion. Id. Other exemptions include projects that include less than 25 lots or units, the sale of lots to a builder or investor who acquires the property for the purpose of lease or resale, and projects with fewer than 100



lots. Other exemptions are also available. This paragraph is not intended to be an exhaustive explanation of the ILFSDA. Practitioners must become intimately familiar with the federal statutes and rules.

In addition to rescission rights of buyers that can extend for up to two years from the date of signing the sale agreement (even after closing), sellers who fail to comply with provisions of the ILFSDA can be fined up to $10,000 and be imprisoned for up to five years or be subject to civil penalties of $1,000 per violation (but not in excess of $1,000,000 in one year).

d. Condominiums

1. Oregon Condominium act. Condominiums are creatures of statute. The creation, administration, and sale of condominiums are governed by the Oregon Condominium Act, set forth in ORS Chapter 100 (“OCA”). The OCA is not modeled on a uniform act and tends to be amended in every session of the Oregon legislature. Practitioners in this area must inform themselves of legislative updates.

Condominiums generally consist of units and common elements. A unit in Oregon must consist of a building or part of a building, a parking or storage space, or a moorage space or floating structure that meets particular requirements and is defined by the boundaries described in the condominium declaration. ORS 100.020(3). Each unit is required to have an interest in the common elements of the condominium and may not include any portion of land. Id. Common elements are those portions of the condominium property other than the units and are categorized as general or limited common elements. Limited common elements are reserved in the declaration for the use of less than all unit owners and general common elements consist of all portions of the condominium other than the units and limited common elements. See ORS 100.005(15) and (17). The declaration is required to identify the common elements and may not provide that there are no common elements. See ORS 100.105 and 100.020(3). Typical limited common elements include decks, patios, storage areas, yards, and parking spaces. General common elements generally include the structural elements of the condominium, roofs, siding, windows, exterior doors, lobbies, elevators, corridors, courtyards, exercise facilities, common rooms, and the land, but they may vary. A unit buyer acquires a fee simple ownership interest in his or her unit, as well as a tenancy in common ownership interest in the common elements. Unlike planned communities, condominium HOAs do not typically own the commonly used areas of the project.

Condominiums in Oregon are created by the recording of the declaration and plat. Condominiums are required to have an owners’ association and, unless the project contains or will ultimately contain four units or less (other than parking and storage units), must be incorporated as a nonprofit corporation under the Oregon Nonprofit Corporations Act. ORS 100.405. Articles of incorporation and bylaws are required for the condominium HOA, as well as a number of other documents identified below. Developers of new condominiums (other than conversion condominiums) are required to use an approved form of unit sales agreement for sales that includes a one-year warranty on the units and common elements that conforms to ORS 100.185.

Condominiums may be created in Oregon on a leasehold or property held in fee simple ownership. If the project will be a leasehold condominium, the ground lease must be recorded, and the owner of the property must sign the condominium declaration consenting to the property being submitted to the OCA. ORS 100.102(2).

Condominiums may consist of newly constructed improvements or may be converted from other uses. A “conversion condominium” is one in which a building, improvement, or structure that is residential, in whole or in part. ORS 100.005(10). Improvements that are wholly commercial are not considered to be conversion condominium property. Conversion condominiums are subject to additional requirements set forth in ORS 100.300 to 100.320, including required notices to current tenants, restrictions on when construction may occur, restrictions on rent increases, notice to the local



jurisdiction of the intended conversion, and a requirement to offer the units for sale to current tenants prior to offering them for sale to others. In addition, local jurisdictions are expressly allowed to adopt ordinances requiring a developer to pay moving expenses of the tenants. ORS 100.320. The City of Portland and the City of Eugene have adopted such ordinances. The City of Eugene and other local jurisdictions have adopted additional conversion requirements as well, including such requirements as submission of rental housing studies and hiring of a housing counselor for tenants. Developers’ attorneys must confirm whether the local jurisdiction in which the proposed condominium is located have adopted any requirements for conversion condominiums.

Condominiums may be developed in one stage or multiple stages, as may desired by the developer to accommodate anticipated financing for construction and pace of sales. The two methods available for staging a condominium are by annexation of additional property and reclassification of variable property in a flexible condominium. The developer must explicitly reserve rights in the declaration to add additional units and common elements to the condominium. ORS 100.105. If the annexation method is desired, the declaration must provide a description of the general plan of development, identify the legal description of the additional property that may be annexed, state the maximum number of units to be included in the condominium, state the date such rights shall terminate, and describe the method of allocating undivided interests in the common elements, voting rights, right to common profits, and liability for common expenses. ORS 100.105(2). If the condominium is created as a flexible condominium containing variable property, the declaration must include a general description of the plan of development, identification of the number of variable property tracts in the condominium that may be reclassified into units and common elements, specification of whether the tracts are withdrawable from the condominium or nonwithdrawable, statement of the date after which the right to reclassify the tracts terminates (which may not exceed seven years from the first unit conveyance), statement of the maximum number of units in the condominium, and description of the method of allocating undivided interests in the common elements, voting rights, right to common profits, and liability for common expenses. ORS 100.105(7). The variable property tracts must be included in the plat for a flexible condominium.

Additional units and common elements for later phases of the condominium are thereafter created by recording a supplemental declaration and supplemental plat for the applicable stage or tract. The requirements for the supplemental declaration and supplemental plat are set forth in ORS 100.115. Those documents must be approved by the REA and city or county surveyor, as applicable, as with the original declaration and plat. Failure to reclassify or withdraw variable property by the termination date identified in the original declaration results in automatic reclassification of the variable property tracts into common elements. Developers need to be advised of this potentially disastrous result and encouraged to calendar the termination date with reminders a significant period prior to such termination date. For this reason, annexation is typically the preferred method for staging condominiums.

Developers should also be strongly encouraged to hire a surveyor for the project who is experienced with condominium plats. Use of an inexperienced surveyor can result in needless delays and additional expense from extra attorney fees for reviewing the plat, educating the surveyor as to necessary revisions, and working with the county or city surveyor, as well as additional interest incurred on the developer’s construction loan for delays in recording the condominium plat and commencing unit closings. Attorneys must always review the draft condominium plat and confirm that the declaration and plat are consistent with unit boundaries, legal descriptions, name and signature block for the developer, identification of common elements, and plat notes.



2. Sales of Condominiums

a. Oregon Law. Developers of residential condominiums may not enter into binding sale agreements for units until they obtain Oregon Real Estate Agency (“REA”) approval of all required condominium documents and the REA issues a disclosure statement for the project. ORS 100.635. Developers are allowed, however, to enter into nonbinding reservation agreements for units. Reservation holders must be able to terminate the reservation and receive a refund of their deposits for any reason. Unit sales may not close until the condominium documents have been approved by the REA and the plat has been approved by the local city or county surveyor, as applicable, and the declaration, bylaws, and plat have been recorded with the county recorder’s office in the county in which the project is located. A condominium purchaser’s funds are required to be held in escrow until closing, unlike home sales generally. ORS 100.700(2). In addition, the unit must be released from any blanket financial encumbrance (other than those arising from CCRs, easements, and the like). ORS 100.785.

For purposes of the OCA, a “developer” is a “declarant or any person who purchases an interest in a condominium from declarant, successor declarant or subsequent developer for the primary purpose of resale.” ORS 100.005(13). This definition is broader than simply the declarant, which is the entity or person who forms the condominium. Owners of units who do not acquire the unit primarily for resale and lenders who acquire units and sell them all in a block are not required to submit a filing to the REA.

There are two types of condominium filings in Oregon—presale and standard. A presale filing is appropriate when the condominium plat is not yet complete and the developer desires to start sales activity. When presale approval is obtained, the developer may enter into binding unit sale agreements. The standard filing is submitted when the condominium plat is available and ready to be submitted to the county or city surveyor, as applicable. ORS 100.635 and 100.645 set forth the documents that must be submitted to the REA for condominiums with residential units. The Real Estate Agency will provide sample filing forms upon request. For a residential condominium project, developers must submit to the REA a completed filing form, required documents list, confirmation that the condominium name is acceptable (provided by the county surveyor or assessor, as applicable in the jurisdiction in which the condominium is or will be located), declaration, bylaws, unit sales agreement, notice to purchasers of five-day cancellation right, articles of incorporation for the owners’ association (filed with the Secretary of State’s Corporation Division, if for a final filing), disclosure statement with budget attached, receipts for the disclosure statement, declaration and bylaws, a completed checklist, evidence of authority of the signer for the development entity (a copy of the entity’s governing documents or a resolution will suffice), subdivision guarantee or title report with a legal description for the condominium property that matches that of the declaration and plat, exception documents, vesting deed, and either a site plan (for presale filings) or a copy of the proposed plat (for final filings). In addition, the developer must submit a copy of its marketing materials, if such materials have been developed. Conversion condominiums also require the submission of an affidavit confirming the developer’s compliance with the statutes requiring notice to the tenants and offers to the tenants. For presale filings, the declaration, bylaws, and articles must be marked “proposed,” the receipts must identify the project as a “proposed condominium,” and a copy of an escrow agreement for project sales and an authorization for the Real Estate Commissioner to inspect the escrow accounts must be submitted. Nonresident developers must also submit with the filing an irrevocable consent to service on the Real Estate Commissioner if the developer cannot be served within Oregon. ORS 100.655. Finally, a deposit of $100 for REA review fees must be submitted with any filing. ORS 100.670.

The REA has five business days to acknowledge receipt of a complete filing and forty-five calendar days thereafter to review the documents and provide comments or the filing is deemed approved. ORS 100.675. However, in order to record the final declaration, bylaws, and plat to form the condominium, the declaration must be signed on behalf of the Real Estate Commissioner. The



developer is responsible for reporting any material changes to the information submitted within ten days after the change occurs. ORS 100.645.

Buyers must be provided with the proposed or recorded declaration and bylaws, disclosure statement, and notice of five-day cancellation rights and receipts signed by the buyer for such documents. The receipts must be retained for three years and are subject to inspection by the Real Estate Commissioner. Whenever possible, it is preferable for developers to hire a licensed real estate broker who is experienced in the sale of new condominium units because they are familiar with these requirements as well as the unit sales agreement forms. If an inexperienced broker will be used, attorneys should encourage the developer to let them meet with the broker to discuss the particular requirements for new condominium sales in Oregon. A sample checklist for the broker is included in these materials. See Appendix C.

Practitioners seeking further information about developing condominiums in Oregon and the drafting of the condominium documents are encouraged to review the materials prepared by J. David Bennett and Karna Gustafson in Chapter 7 of Regulation and Taxation of Real Estate, published by the Oregon State Bar.

b. Federal Law. As noted in Section 1.3(2)(b) above, the ILSFDA also applies to the sale of condominium units, and attorneys need to confirm whether a registration must be filed with CFP or whether a full or partial exemption from registration is available for the project.

Attorneys practicing in this area should also become familiar with the requirements of Freddie Mac, Fannie Mae, the FHA, and the VA applicable to condominiums to ensure that the condominium documents drafted by the attorney comply with the requirements of those agencies, so that their clients’ buyers will be more likely to obtain traditional financing. Project approvals may be obtained from some of the agencies for condominiums, which help reassure potential lenders that their unit loans will be able to be sold in the secondary mortgage market. These agencies typically require a certain number of units be under contract before final approval will be issued, owner-occupancy of at least 51% of the units, not more than 15% of units be in arrears on payment of assessments, and the condominium is not the subject of litigation.

E. Turnover; Transitional advisory Committees

With both condominiums and planned communities, the developer typically retains certain special declarant rights, including the right to appoint all directors and officers of the HOA. The PCA allows the developer to retain administrative control for a limited or unlimited duration. ORS 94.600. For planned communities, the CCRs must include any special declarant rights and specify the date upon which the developer will turn over control to the owners, if the developer reserves that right. Because developers want to preserve buyers’ ability to acquire financing, CCRs will typically follow the FHA, VA, and other federal agencies’ restrictions on such reserved rights and provide for turnover after sale of 75% of the lots in the planned community, including any lots that may be annexed.

Developers of condominiums may also reserve the right to control the HOA and appoint all directors and officers of the HOA, but the OCA specifically requires that turnover of administrative control occur at a specific point. Before turnover, certain condominiums and planned communities also require that a transitional advisory committee meeting be held and a committee elected to allow for a gradual transition of control from the developer to the owners. These committees are required for Class I planned communities of at least 20 lots or with a reserved right for the developer to annex lots to the community and for condominiums with at least 20 units or to which units may be added by a supplemental declaration. See ORS 94.604 and ORS 100.205. For condominiums, the transitional meeting is required to be called by the developer within sixty days after the sale of 50% of units in a single-stage condominium or 50% of the total units that may be submitted in a multiple-stage condominium. For



planned communities, the developer must call the transitional meeting within sixty days after the sale of 50% of the existing lots.

For single-stage condominiums, the period of reserved control by the developer must end by the earlier of: (1) three years from the date the first unit is conveyed; or (2) the date of conveyance of 75% of the units to persons other than the developer. ORS 100.200(2)(a). For staged or flexible condominiums, reserved control of the HOA must end by the earlier of: (1) seven years from the date the first unit is conveyed; or (2) the date of conveyance of 75% of the units that may be created or annexed to persons other than the declarant. ORS 100.200(2)(b). A developer may voluntarily turn over control earlier than the prescribed time limit, however.

A turnover meeting must be called by the developer within 90 days after expiration of the period of developer control for condominiums and planned communities. ORS 94.616 and ORS 100.210. If the developer fails to call the meeting, any owner may do so. Notice of the meetings must be provided to the owners as required by the OCA or PCA, as applicable. Both the OCA and PCA specify the documents and items that must be delivered to the association by the developer at the turnover meeting, including such things as the governing documents, minute books of the HOA, reserve study, maintenance plan, financial statement, resignations of current board members and officers, tangible personal property of the HOA, bank accounts, plans, contracts, insurance policies, and permits. See ORS 94.616(3) and ORS 100.210(5).

At the turnover meeting, owners elect a new board of directors to govern the HOA. The number of directors is specified in the bylaws for the HOA. The developer is allowed to cast votes in the election for any lots or units it owns as of that date. Developers sometimes have their attorney attend the turnover meeting to be available for questions that may arise from owners that relate to the governing documents or to explain the purpose of the turnover and the responsibility of the HOA from that point forward to maintain common areas and common elements, as applicable, and to enforce the CCRs. Developers need to be aware that if they elected to accrue reserve amounts owed on units or lots, those accrued reserve amounts on lots or units the developer still owes at turnover must be paid by no later than the turnover meeting. This can be a substantial sum, particularly for condominiums for which reserve assessments are required to commence as of the date of the first unit conveyance.

ii. BUYinG—adViSinG CLiEnTS COnSidERinG THE PURCHaSE OF a COndOMiniUM UniT OR HOME OR LOT in a PLannEd COMMUniTY

When advising clients who are considering the purchase of a unit in a condominium or a home or lot in a planned community, there are a number of matters to consider. The following information relates to representation of an individual or individuals acquiring units or homes, as opposed to developers or lenders interested in acquiring a failed project.

a. Form of Sale agreement

If the property is a new condominium or the seller is a developer subject to the OCA, the seller is required to use only the form of unit sales agreement approved by the REA. A buyer’s ability to negotiate the terms of the unit sales agreement is limited, given the constraints of the approved form and a seller’s resistance to negotiating different terms for numerous buyers. Developers of planned communities typically will only use their own form of sale agreement as well, but they are not constrained to do so by statute.

B. Rescission Rights

Purchasers acquiring condominium units from developers in Oregon are entitled to a five-business-day right of rescission. ORS 100.730. Business days exclude Saturdays and holidays (but, curiously, do not expressly exclude Sundays). Notice of the rescission rights must be provided to buyers with the unit sales agreement. The five-day period is measured from the latest to occur of: (1)



the date the purchaser signs the unit sales agreement; (2) the date the purchaser signs a receipt for the disclosure statement; or (3) the date the purchaser signs a receipt for the declaration, bylaws, and any supplements or amendments to those documents.

As noted earlier in these materials, CCB-licensed contractors and developers are also required to provide buyers with a one-day rescission right, which can be exercised in writing until midnight on the next business day following the date the contract was signed. ORS 701.310.

Buyers may also have a rescission right under the ILSFDA. If the project is not exempt from registration with the CFP, buyers may revoke the sale agreement for up to seven days after signing the sale agreement. 15 U.S.C. 1703(b). In addition, if a seller fails to comply with the ILSFDA by providing a property report or uses a sale agreement that does not comply with the Act, the buyer may revoke the contract for up to two years after the date of signing the contract even if the sale was already closed. 15 U.S.C. 1703(c) and (d). This remedy has been utilized by many buyers in the recent recession, particularly in Florida.

C. Review of Governing documents

In reviewing the sale agreement, the practitioner should confirm that, in addition to title review, financing, and inspection contingencies, there is a contingency included for review and approval of the HOA documents, including the CCRs or condominium declaration, bylaws, rules and regulations adopted by the board of directors of the HOA, financial statements of the HOA, latest reserve study and budget for the HOA, inspection reports for the common elements or common area improvements and HOA-maintained property (such as exteriors of townhomes), and minutes of at least the last year’s board of director meetings and annual meetings of the board and owners. In addition, inquiry must be made to the board of the HOA or the property manager for the HOA to determine whether there are any pending special assessments, current or pending litigation, the percentage of lots or units in arrears on payment of HOA assessments, and, for condominiums, the number of units that are owner-occupied primary or secondary residences. FHA and Fannie Mae currently require that no more than 15% of condominium units are in arrears on assessments, that the condominium is not the subject of litigation, and that at least 51% of units are owner-occupied. Failure to meet these requirements can adversely impact the ability to obtain financing for units in the project. The financial statements, budget, and reserve study need to be carefully reviewed to confirm the HOA is solvent and is responsible in collection of funds necessary for the operation of the condominium or planned community common areas and reserve replacements.

1. Use Restrictions. In reviewing these documents, particular attention must be paid to the use restrictions that may impact the client, especially rent restrictions and architectural guidelines and review requirements. In condominiums, the bylaws are required to contain the use restrictions, and in planned communities, they are contained in the CCRs. Further restrictions can be found in rules and regulations adopted by the board of directors of the HOA. If the client is interested in conducting business from his or her residence, review the HOA documents to confirm that the proposed business use is allowed, whether signage is allowed and on what terms, if desired by your client, and whether consent must be obtained from the board of directors of the HOA to allow such use.

If the client desires to build on the lot in the planned community, the sale agreement or an amendment should include a condition for the buyer’s benefit requiring the approval of the HOA of the desired improvements in order for the client to be required to close his or her purchase. The condition needs to allow sufficient time to get through the design, submission, review, and approval process. If the client desires to make alterations to an existing unit or home, confirm the type of alterations that must be approved by the HOA and the required process. Again, a condition should be included in the sale agreement for the buyer’s benefit to obtain the necessary approvals. If the client is acquiring a condominium unit or home that is still under construction at the time of contract, the client will need to



comply with the developer’s timelines for finish selections and selection of options (which may result in a modification of the purchase price). Developers of planned communities may require buyers to pay for the custom modifications prior to closing, as the construction funds available for the overall project may not include funds sufficient for custom changes. Condominium developers are prohibited by the OCA from receiving any buyer funds prior to closing but may require the buyer to deposit funds into escrow sufficient to pay for the entire cost of the custom modifications and may provide that the entire deposit be forfeited in the event of the buyer’s failure to close his or her purchase.

2. Rentals and Rental Restrictions. If your client is acquiring a unit or home that is currently occupied by tenants, as is increasingly the case in today’s real estate market, you need to confirm your client’s intentions about retaining the tenant. The lease term is unaffected by conveyance of the unit or home and a client who desires to occupy the residence upon closing may be disappointed to discover he or she cannot terminate the tenant’s occupancy at will. Any such termination will be governed by the terms of the lease and the Residential Landlord and Tenant Act, set forth in ORS Chapter 90. The sale agreement will need to include a contingency for the client’s review of the lease and any property management agreement.

Even if the residence is not currently rented, attorneys should confirm their clients’ intentions with regard to rentals and review the HOA documents and rules and regulations for rental restrictions. Because the availability of financing can be affected by the percentage of rentals in a condominium project and many developers and condominium owners desire to limit rentals to enhance the value of their properties, many condominium projects have adopted rental restrictions in some form. The typical percentage limitation on rentals in condominiums ranges from 30% to 49%, and documents vary widely on how owners become eligible or retain eligibility to rent their units. Some allow rentals on a first-come, first-served basis, while other projects grandfather in rentals for units that were rented at the time the restrictions were adopted. Some HOAs impose special fees on rentals beyond the typical move-in, move-out fees for any transfer, on the theory that renters use less care in moving furniture through the common elements or using the common elements in general and cause damage. Some HOAs have adopted extreme rules and regulations against rentals, including exorbitant “renter education” fees to teach the renters about occupying property in a condominium or prohibiting transfer of a lease to successor owners without the consent of the HOA. Potential buyers must be made aware of the existence of such provisions.

3. disclosure Statement for Condominiums. For condominiums being acquired from a developer, buyers must be provided a copy of the disclosure statement for the project. The disclosure statement includes information about the promised common element improvements and the developer’s future plans for additional phases of the development, as well as the current or projected budget for the HOA. If the project is still under construction, the disclosure statement must provide information about the status of construction and the scheduled completion date for the buildings, recreational facilities, and common elements. For conversion condominiums, the disclosure statement also includes the approximate date of installation of and a statement of the condition of all structural components and major mechanical and utility installations in the condominium, as well as an estimate of the remaining life of the roof, siding, plumbing, electrical, HVAC system, asphalt, sidewalks, and decks. Ideally, the reserve study and budget for the HOA is based on this information.

4. insurance. The CCRs and bylaws spell out the types of insurance the client will be required to obtain and, in the case of condominiums, can indicate whether the client will be responsible for insuring the HOA’s deductible for claims. The client should be advised to provide the portions of the documents containing the insurance requirements to their insurance agent.



d. inspections

A buyer’s inspection rights for the purchase of a condominium unit must include an ability to inspect the common elements of the condominium, and practitioners must carefully review the inspection reports, as well as those obtained from the HOA. The common elements typically include the building siding, roof, structural elements, lobbies, corridors, mechanical rooms, ventilation systems, exterior doors, windows, patios, decks, and outdoor areas. The condominium documents specify the party responsible for maintaining these areas, so a client can be notified of its responsibilities. Invasive inspections will typically not be allowed, but the inspection report can reveal potential problems with moisture, mold, and leaks, for example.

E. CCB Review and Research on Builder

Attorneys should review information available about the developer on the CCB, to confirm the developer is licensed and whether the developer or builder has a history of complaints. CCB license history can be obtained at https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/ccb_index.htm. The CCB results include information about related entities, which can be helpful as many developers have project-specific development entities to isolate potential liabilities or to accommodate differing investors from project to project. Additional internet searches can reveal news stories about construction defects, lawsuits, embezzlement from the HOA funds, and the reputation of the developer. Even if troubling information relates to a different project from the property under contract, clients should be made aware of the seller’s history, and the client can reach his or her own conclusions about whether to proceed. Clients should also be encouraged to talk with other owners in the project, if possible. These conversations can reveal the reputation of the developer as well as the board of directors of the HOA, which may not always function in a business-like manner.

F. Homebuyer Protection act

If the condominium unit, single-family residence, or residential structure that contains not more than four dwelling units has been completed within three months prior to the closing date or has had $50,000 or more of construction work performed within three months prior to the closing date, the seller is required to comply with the Homebuyer Protection Act (“HPA”). ORS 87.007. Attorneys should confirm that notice has been provided to the buyer of the manner in which the seller will comply with the HPA. The CCB’s prescribed form of notice is included with these materials and is required to be provided to the buyer by no later than the closing date. See Appendix D. The methods of compliance for the seller include: (1) purchase or provide title insurance for purchaser issued without exception for potential construction liens; (2) retain 25% of the sale price in escrow for at least 90 days after construction was completed without a lien filing or 135 days after a lien is filed and until all filed liens are released or waived; (3) provide a bond or letter of credit in an amount equal to at least 25% of the sale price; (4) obtain written waivers from every person that claims or perfects a construction lien that exceed $5,000 and provide copies of the waivers to the purchaser on or before the closing date; or (5) complete the sale after the deadline for perfecting construction liens has passed. Please note that with respect to title insurance, the Oregon Attorney General’s office has opined that the seller is allowed to require the buyer to pay the cost of the necessary title endorsement to cover potential construction liens as a means of providing such coverage. See Appendix E. To obtain such an endorsement, the seller will be required by the title insurer to provide an affidavit concerning payment of all contractors, subcontractors, and suppliers and to indemnify the title company against such liens.

iii. BiCKERinG—POTEnTiaL PROBLEMS wiTH HOMEOwnERS’ aSSOCiaTiOnS

The proliferation of planned communities and condominiums in recent decades in Oregon, as elsewhere in the country, has led to increased legal work representing HOAs, homeowners who live

https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/ccb_index.htm



within communities governed by HOAs, and developers engaged in skirmishes with the HOAs they established.

a. advising HOas

Legal matters in representing HOAs can include advising the boards of these nonprofit corporations and unincorporated associations on matters as diverse as corporate procedure; interpreting governing documents; collections; preparing amendments to governing documents and securing approvals of such amendments from governing agencies; foreclosing the HOA’s lien on members’ lots and units; preparing rules and regulations to supplement the CCRs and bylaws; reviewing and negotiating property management agreements and other contracts; assisting with enforcement of use restrictions against members and occupants of lots and units; assisting the HOA with securing financing approvals from Fannie Mae, FHA, VA, or Freddie Mac; and litigation seeking damages for construction defects.

Much of the governing law for HOAs is found in either the OCA or the PCA, as applicable, but can also arise from the Oregon Nonprofit Corporations Act for HOAs that are also nonprofit corporations. Condominium boards have limited authority to grant easements, licenses, and easements to the common elements and must be advised about the limitations on that authority. See ORS 100.405(6). The OCA also limits the duration of management agreements, service contracts, or employment contracts entered into by or on behalf of the association while the developer controlled the HOA. ORS 100.485. Such agreements must be for terms of no longer than three years and must be terminable without penalty by the HOA upon not less than 30 days’ written notice given not more than 60 days after the turnover meeting. Id.

Board members must be made aware of their responsibility and obligation to maintain common areas and the common elements of the condominium, as more specifically provided in the CCRs, bylaws, and condominium declaration, as applicable. For condominiums and Class I planned communities, boards have an obligation to annually review or update the reserve study for property it is obligated to maintain. In addition, all HOAs must adopt an annual budget for the operation and maintenance of the community and reserves, file tax returns, file annual corporate reports to the REA and the Corporation Division (for HOAs that are nonprofit corporations), collect assessments, responsibly hold the association’s funds, hold annual meetings of the association, keep appropriate levels of insurance in place in compliance with the governing documents, and enforce the CCRs against the owners and occupants of homes and units in the community. This is a lot of responsibility for volunteer board members. Despite some limited protection in the Oregon Nonprofit Corporations Act in ORS 65.369 for actions that do not rise to the level of gross negligence or willful misconduct and indemnification provisions in some association articles of incorporation and bylaws, serving on the HOA board carries with it the potential for personal liability if the board members act in a manner that is not consistent with the business judgment rule. If not required by the governing documents, boards should be advised to obtain directors’ and officers’ liability insurance. Professional community association management companies are of critical importance for many communities, provided the managers are experienced in managing HOAs. The costs for hiring such managers are a common expense.

HOA actions may be subject to such federal laws as the Fair Housing Amendments Act of 1988, Americans with Disabilities Act, Federal Fair Debt Collection Practices Act, and Federal Communications Commission statutes and regulations. HOA boards can run afoul of these laws in administering disabled accessible parking spaces and accessible entrances throughout common areas of the project, enforcing use restrictions in a discriminatory manner against children, elderly, disabled persons, or ethnic minorities, failing to allow a disabled person to make alterations to her unit or the common areas to accommodate her disability, refusing to allow an assistance animal that does not



comply with pet restrictions in the CCRs, or enforcing a prohibition on all sizes of satellite dishes when an owner desires to place one on a limited common element.

Some of the more contentious matters facing HOA boards involve enforcement of the use restrictions, such as offensive noise and smells, pet restrictions, or pet waste deposited in common areas. Some boards fail to understand that they have a duty to all owners in the community to enforce rules. Fines can be a powerful tool in enforcement of the use restrictions. If the CCRs, bylaws, or declaration do not include a fine schedule, the board should be advised to adopt one and give notice to the owners. ORS 94.630(1)(n) and ORS 100.405(1)(k).

HOA board meetings must be open to all unit owners except for certain matters allowed to be considered in executive session, including consultation with legal counsel about existing or potential litigation or criminal matters, personnel matters, negotiations of contracts with third parties, and collection of unpaid assessments. ORS 94.640(7) and ORS 100.420(1). Except in the case of emergency, the board of directors must vote in an open meeting whether to meet in executive session and, in such circumstances, must announce the general nature of the action to be considered and the circumstances under which the deliberations can be disclosed to owners. Id. A contract or action considered in executive session does not become effective unless the board votes on the contract or action in an open meeting. Id. The PCA and OCA have specific requirements on governance matters ranging from notices to owners to how votes are allowed to be conducted. Practitioners need to be familiar with these requirements to effectively advise HOA boards.

Boards of condominiums and planned communities that include attached housing units also need to be aware of their responsibilities to maintain the property, obtain inspections of the property at reasonable intervals, and, if a problem emerges that may be the result of a construction or design defect, investigate the issue and possibly pursue claims against the developer for such issues. These issues do not often arise in planned communities without attached housing unless there is a significant common building. This has become a lucrative area for plaintiff attorneys in Oregon, but boards need to carefully review their governing documents to determine if an owner vote is required to pursue such a cause of action or to authorize the board to incur attorney fees and costs over a specified dollar amount.

Some condominium and planned community declarations and bylaws provide that disputes between the HOA and the developer are subject to mediation and arbitration. Aside from such provisions, the OCA and PCA require that before initiating litigation or an administrative proceeding in which the HOA and an owner have an adversarial relationship, the party that intends to initiate the proceeding must offer to use any dispute resolution program available in the county in which the condominium is located. ORS 94.630(4) and ORS 100.405(11). This requirement does not apply to actions to collect assessments (other than assessments of fines) or to circumstances in which a party will suffer irreparable harm. Id. The HOA for a planned community is required to provide notice to owners of its intention to institute litigation or administrative proceedings to recover damages for certain defects and damage to common property or property for which the HOA is responsible to maintain, repair, and insure and an opportunity for the owners to elect to opt out of such litigation. ORS 94.662. The OCA has a similar requirement in ORS 100.490.

Opportunities may also arise for attorneys to assist the HOA with amending its governing documents. Differing amendment requirements apply to particular types of amendments (e.g., modifying unit boundaries, dividing commercial units, changing the assignment of limited common elements) for condominium documents, and attorneys should thoroughly review the OCA to determine which provision applies. Generally, approval of 75% of the owners is required to amend a condominium declaration, and 75% of the total votes is required to amend CCRs of a planned community, unless a higher percentage is required in the document. See ORS 94.590 and ORS 100.135. A majority of owners



may amend the bylaws, with the exception of certain provisions concerning rental restrictions, age or pet restrictions, and limits on the number of persons who may occupy units that require approval of 75% of the owners or a greater percentage specified in the bylaws. See ORS 100.135 and 100.410. The documents should also be reviewed to determine whether the proposed amendment must be submitted to mortgagees prior to adoption, as Fannie Mae and the other federal agencies involved with mortgages have certain approval requirements that must be met.

All condominium declaration amendments must be filed with the REA and approved by the Real Estate Commissioner before recording to be effective. ORS 100.110. REA approval is also required for bylaws amendments for the first five years after the original bylaws were recorded. ORS 100.410(6).

B. advising Owners in Condominiums and Planned Communities

Representation of owners who live in condominiums and planned communities can be challenging. Often, they are engaged in conflicts with neighbors over perceived violations of the community’s governing documents or rules and regulations. In such circumstances, you can represent the client’s interests in attempting to persuade the board of directors to enforce the use restriction. If the board fails or refuses to do so, your client may need to resort to litigation against the offending neighbor directly to enforce the restrictions. Condominium unit owners have such rights under ORS 100.545 and may recover attorney fees if the owner prevails pursuant to ORS 100.470. CCRs of planned communities often include such enforcement rights for aggrieved owners as well, and ORS 94.719 provides prevailing party attorney fees for such actions.

Occasionally, an owner may seek legal assistance in challenging an action of the board of directors of the HOA. As an example, a board may exceed its authority and adopt special fees applicable only to renters for potential move-in damage or education regarding living in a condominium. Such restrictions in a residential condominium must be adopted by means of an amendment to the bylaws that is approved by 75% percent of the owners. Often this can be resolved by a letter from the attorney to the board of directors, which will then usually seek advice from its own attorney and, hopefully, rectify its error. If not, the client may need to pursue litigation as noted above.



aPPEndiX a—CCB SUGGESTEd MainTEnanCE SCHEdULE

Effective July 1, 2008, contractors that build new homes must provide special informationto homebuyers about moisture intrusion and water damage, and provide a homemaintenance schedule in accordance with ORS 701.335. The following information wasprepared by the Oregon Construction Contractors Board (CCB) to help contractorscomply with this requirement.

What is moisture intrusion and water damage? “Moisture intrusion” means water –whether liquid, frozen, condensed or vaporized – that penetrates into your home. “Waterdamage” means damage or harm caused by moisture intrusion that reduces the value orusefulness of your home.

How does moisture intrusion and water damage occur? Some causes of moistureintrusion and water damage are:

• Missing or loose roofing materials or flashing

• Window sills or door frames without adequate caulking or weather-stripping

• Lack of caulking in siding, mortar in masonry, or grout in exterior ceramic tileinstallations

• Degraded paint on exterior siding or surfaces

• Overflowing or clogged gutters

• Gutter drains or downspouts that are not a sufficient distance from thestructure

• Improper drainage slope next to foundation

• Plant materials too close to the structure or foundation

• Sprinklers that overspray onto the structure or foundation

• Non-working interior ventilation systems

How can you tell if your home has water damage? Signs of water damage mayinclude dampness, staining, mildew (blackened surfaces with a musty smell), or softnessin wood (a possible sign of dry rot).

What to do if you see signs of water damage: If water damage is discovered, youshould investigate its source. Take steps to repair or replace any building parts ormaterials that allowed the moisture intrusion. You may need to take additional steps,depending on the extent of the water damage.

If you have specific questions about maintaining your new home, ask your contractor. Ifyou need professional assistance in conducting a maintenance inspection, you may wishto contact your contractor or a licensed home inspection business.

Moisture Intrusion & Water DamageInformation For Home Owners

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6-10



1. Make sure your contractor is properly licensed before you sign a contract. Visit www.oregon.gov/ccb,and click on the link, Check on a Contractor’s License, or call our offices at 503-378-4621. To belicensed in Oregon, contractors must take training and pass a test on business practices and law. Licens-ing is not a guarantee of the contractor’s work.

• A license requires the contractor to maintain a surety bond and liability insurance -The CCB surety bond provides a limited amount of financial security if the contractor is ordered topay damages in contract disputes. It is not intended to be a safety net for consumer damages.Consumers with large projects may wish to look into performance bonds. Liability insurancecoverage provides for property damage and bodily injury caused by the contractor. It does notcover contract disputes, including poor workmanship.

• If your contractor is not licensed - the CCB bond and dispute resolution services will not beavailable to you.

2. What you should know about bids, contracts, and change orders:• Bids - Do not automatically accept the lowest bid - A low bid may make it necessary for the con-

tractor to use lower quality materials and to cut corners in workmanship.• Contracts and Change Orders - Always get it in writing. Your contractor is required to provide

a written contract if the contract price is more than $2000. The CCB recommends that all con-tracts be in writing.

• Contracts should be as detailed as possible - Some items to include are materials and costs,permits, estimated start and completion dates, debris removal, and arbitration clauses. Makesure the contractor’s name, CCB number, and contact information is included in the contract.

• Read and understand your contract before signing it - Don’t be pressured into signing yourcontract without taking the time needed to go through it. Make sure it includes enough detailsto avoid misunderstandings and to protect you and your property.

3. Additional contract information you should know:• A Payment Schedule - should be included in the contract. Stick to the schedule and never pay

in full for a project before the work is complete.• Special Note on Liens - Subcontractors and material suppliers that work on your project are often

paid by the general contractor. If a general contractor fails to pay, the subcontractor may file a lienon your property. For information on construction liens, visit the CCB’s Consumer Help Page atwww.oregon.gov/ccb, or contact an attorney.

• Warranty on new residential construction - Contractors must make an offer of a warranty whenconstructing a new residential structure. Consumers may accept or refuse the warranty.

4. If you should have a problem with your contractor - You can file a complaint with the CCB againsta licensed contractor within one year of the substantial completion of work on your project. Contactthe CCB office at 503-378-4621 for help.

Visit the CCB website at for more information on having a successful project.www.oregon.gov/ccb

Oregon law requires contractors to provide the homeowner with this notice at the time of written contract, forwork on a residential structure. This notice explains licensing , bond and insurance requirements, and stepsthat consumers can take to help protect their interests.

START OUT YOUR PROJECT RIGHT

CONTRACTOR: CCB#: PROPERTY OWNER:

Signature Date Signature Date

Consumer Protection NoticeActions to help make your project successful

f:CPN 4-26-2011

(ORS 701.330 (1))



CONTRACTOR: CCB#: HOMEOWNER:

Print Contractor Name (as it appears on contract) Print Homeowner Name (as it appears on contract)

Signature of Authorized Representative Date Signature Date

Notice of ProcedureRegarding Residential Construction

Arbitrations and Lawsuits(ORS 701.330)

Oregon law contains important requirements that homeowners must follow beforestarting an arbitration or court action against any contractor, subcontractor,or supplier (materials or equipment) for construction defects.

Before you start an arbitration or court action, you must do the following:

1. Deliver a written notice of any conditions that you believe are defective to thecontractor, subcontractor, or supplier that you believe is responsible for thealleged defect.

2. Allow the contractor, subcontractor, supplier, or its agent, to visually inspect thepossible defects and also allow the contractor, subcontractor, or supplier to doreasonable testing.

3. Provide the contractor, subcontractor, supplier, or its agent, the opportunity tomake an offer to repair or pay for the defects. You are not obligated to acceptany offer made.

There are strict procedures and deadlines that must be followed under Oregon law.Failure to follow those procedures or meet those deadlines will affect your right to startan arbitration or court action.

You should contact an attorney for information on the procedures and deadlinesrequired under Oregon law.

f:noticeofprocedure/adopted12-04-07

Your contractor is supplying this notice to you as required by Oregon law.



This is not a lien. Your contractor is required by law to provide this notice to inform youabout construction lien laws. This notice explains the construction lien law, and gives stepsyou can take to protect your property from a valid lien. As an owner, you should read thisinformation notice carefully. This information notice is required to be given if you contractfor residential construction or remodeling, if you are buying a new home, or at any timethe contract price exceeds $2,000.

This notice is not intended to be a complete analysis of the law. You should consult an attorneyfor more information.

(over)

• Under Oregon law, your contractor and others who provide labor, materials, equipment, orservices to your project may be able to claim payment from your property if they have not beenpaid. That claim is called a Construction Lien.

• If your contractor does not pay subcontractors, employees, rental equipment dealers,materialssuppliers, or does not make other legally required payments, those who are owed money mayplace a lien against your property for payment. It is in your best interest to verify that allbills related to your contract are paid, even if you have paid your contractor in full.

• If you occupy or will occupy your home, persons who supply materials, labor, equipment,or services ordered by your contractor are permitted by law to file a lien against your propertyonly if they have sent you a timely Notice of Right to Lien (which is different from thisInformation Notice), before or during construction. If you enter into a contract to buy a newly-built, partially-built, or newly-remodeled home, a lien may be claimed even though you havenot received a Notice of Right to a Lien. If you do not occupy the building, a Notice of Rightto Lien is not required prior to filing a lien.

Common Questions and Answers About Construction Liens

Can someone record a construction lien even if I pay my contractor? Yes. Anyone who has notbeen paid for labor, material, equipment, or services on your project and has provided you with a validNotice of Right to Lien has the right to record a construction lien.

What is a Notice of Right to Lien? A Notice of a Right to Lien is sent to you by persons who haveprovided labor, materials, or equipment to your construction project. It protects their construction lienrights against your property.

What should I do when I receive a Notice of Right to Lien? Don’t ignore it. Find out whatarrangements your contractor has made to pay the sender of the Notice of Right to Lien.

When do construction liens need to be recorded? In Oregon, construction liens generally needto be recorded within 75 days from the date the project was substantially completed, or 75 days fromthe date that the lien claimant stopped providing labor, material, equipment, or services, whicheverhappened first. To enforce a lien, the lien holder must file a lawsuit in a proper court within 120 daysof the date the lien was filed.

Note to Contractor: This notice must be delivered personally, or mailed by registered mail, certified mail, or by first-classmail with a certificate of mailing. Ask the signing parties to provide you with an original or copy to retain in your files. Youshould retain proof of delivery of this notice for at least two years.

Information Notice To Owner AboutConstruction Liens

(ORS 87.093)



CONTRACTOR: CCB#: PROPERTY OWNER:

Print Name (as it appears on contract) Print Name (as it appears on contract)

Signature Date Signature Date

Steps That Consumers Can Take to Protect Themselves

• Contact the Construction Contractors Board (CCB) and confirm that your contractor islicensed. The law requires all construction contractors to be licensed with the CCB. Check acontractor’s license online at the CCB consumer website: www.oregon.gov/ccb, or you can call503-378-4621.

• Review the Consumer Protection Notice (ORS 701.330(1)), which your contractor must provideto you at the time of contract on a residential structure.

• Consider using the services of an escrow agent to protect your interests. Consult your attorneyto find out whether your escrow agent will protect you against liens when making payments.

• Contact a title company about obtaining a title policy that will protect you from constructionlien claims.

• Find out what precautions, if any, will be taken by your contractor, lending institution, andarchitect to protect your project from construction liens.

• Ask the contractor to get lien waivers or lien releases from every subcontractor, materialsprovider, equipment provider, and anyone else the contractor is responsible for paying. Do thisbefore you give your contractor a progress payment.

• Have a written contract with your contractor. A written contract is required for projects greaterthan $2,000. An original contractor that fails to provide a written contract as required by law, maynot place a construction lien against the owner’s property.

• If you receive a Notice of Right to Lien, ask for a statement of the reasonable value of thematerials, labor, equipment, or services provided to your project from everyone who sends youa Notice of Right to Lien. If the information is not provided in a timely manner, the sender of theNotice of Right to Lien may still be able to file a construction lien, but will not be entitled to attorneyfees.

• When you pay your contractor, write checks made jointly payable to the contractor,subcontractors, materials, equipment, or services providers. The checks name both thecontractor and the subcontractor, materials or equipment provider. The checks can only be cashedif both the contractor and the subcontractor, materials or equipment provider endorses it. Thisensures that the subcontractor and other providers will be paid by your contractor, and caneliminate the risk of a lien on your property.

• Should you have a dispute with your contractor, you may be able to file a complaint with theCCB and be reimbursed in whole or in part from the contractor’s bond. For more details about helpavailable through the agency, write to the CCB at PO Box 14140, Salem, OR 97309-5052 or call503-378-4621.

• Consult an attorney. If you do not have an attorney, consider contacting the Oregon State BarReferral Service at 503-684-3763 or 1-800-452-7636.

f:information_notice_liens.adopted1-01-10

Signing this Information Notice verifies only that you have received it. Your signature does not give your contractor or thosewho provide material, labor, equipment, or services, any additional rights to place a lien on your property.

Job Site Address:



aPPEndiX C—SaMPLE CHECKLiST FOR nEw COndOMiniUM SaLES

Prior to issuance of disclosure Statement:

___ Reservation agreement and escrow agreement

after issuance of Presale disclosure Statement:

___ Disclosure statement

___ Receipts for disclosure statement

___ Unit sales agreement—signed by purchaser(s)

___ Unit sales agreement—signed by declarant

___ Copy of proposed declaration

___ Copy of proposed supplemental declaration, if applicable

___ Copy of proposed bylaws

___ Receipt for declaration and bylaws

___ Copy of proposed articles of incorporation

___ Copy of escrow agreement

___ Copy of preliminary title report and exception documents

___ Copy of fully executed unit sales agreement and notice to purchaser

___ Verify compliance with financing requirements of unit sales agreement

___ Notification of closing date

after Recordation of declaration and Bylaws:

___ Disclosure statement (revised)

___ Receipts for disclosure statement

___ Unit sales agreement (revised)—signed by purchaser(s)

___ Unit sales agreement—signed by declarant

___ Copy of recorded declaration

___ Copy of recorded supplemental declaration, if applicable

___ Copy of bylaws

___ Receipt for declaration and bylaws

___ Copy of filed articles of incorporation

___ Copy of escrow agreement

___ Copy of preliminary title report and exception documents

___ Copy of fully executed unit sales agreement and notice to purchaser

___ Verify compliance with financing requirements of unit sales agreement

___ Notification of closing date



aPPEndiX d—nOTiCE OF COMPLianCE wiTH HOMEBUYER PROTECTiOn aCT

F/HPAform2 12-1-2010

Notice of Compliance with the Homebuyer Protection Act (HPA)(ORS 87.007)

In compliance with Oregon law, the below mentioned Seller has selected to comply with the requirements of ORS 87.007.

1. ADDRESS or DESCRIPTION OF PROPERTY Address or Location City, State Zip Code

2. DATE OF PURCHASE (CHOOSE ONE)A. ORS 87.007 (which includes the provisions listed in part B of this form) does not apply to the sale of the above

described Property.

B. ORS 87.007 applies to the sale of the above described Property. Seller complied with ORS 87.007(2) by (check which one applies):

1. Title Insurance as provided for in ORS 87.007(2)(a).

2. Retained in Escrow not less than 25 percent of the sale price as provided for in ORS 87.007(2)(b).

3. Bond or Letter of Credit as provided for in ORS 87.007(2)(c).

4. Written Waivers received from every person claiming a lien as provided for in ORS 87.007(2)(d).

5. Completed Sale After the Deadline for perfecting liens as provided for in ORS 87.007(2)(e).

3. SELLER INFORMATION Company Name (if applicable)

Agent of Company or Individual Seller

Title of Company Agent (if applicable)

Signature Date

4. BUYER INFORMATION Buyer Name

Agent of Company or Individual Buyer

Title of Company Agent (if applicable)

Signature Date



F/HPAform2 12-1-2010

InstructionsThese instructions are provided to assist sellers of residential property with the Oregon Homebuyer Protection Act (HPA), codified in ORS 87.007. The HPA protects residential property buyers against construction liens filed in county records after the sale of the property where such liens arise out of new construction, additions or remodeling within 90 days of the date of the sale.

Disclaimer These instructions do not constitute legal advice. For questions, please contact an attorney.

Who must complete this form? A residential property owner selling –

• A new single family residence, condominium unit or residential building (containing four or fewer dwelling units), or

• An existing single family residence, condominium unit or residential building (containing four or fewer dwelling units) that had at least $50,000 worth of improvements, additions or remodeling completed within 90 days of the date of the sale.

Instructions for Section A If the property fits the description above, but the seller knows that no person may file a lien against the property, the seller may check the box in Section A of the form.

Instructions for Section B If the seller knows that it is possible for someone to file a lien against the property, the seller must check Section B of the form and at least one corresponding box that applies to the action the seller took, or will take, to comply with the HPA.

Box 1 Title Insurance – The seller has or will purchase or provide an owner’s extended coverage title insurance policy or equivalent that does not except filed or unfiled claims of lien. A standard title insurance or a lender’s title insurance policy may not be sufficient. See ORS 87.007(2)(a).

Box 2 Retain in Escrow – The seller will arrange to retain in escrow an amount of not less than 25 percent of the sales price of the property. The escrow will pay any claims of lien not paid by the seller filed after the date of the sale. Any unused funds will be released to the seller upon fulfillment of the following conditions:

• Claims of lien have not been filed against the property and at least 90 days have passed since the date the construction was completed.

• One or more claims of lien were filed against the property, at least 135 days have passed since the date the liens were filed, and the liens were released or waived. See ORS 87.007(2)(b).

Box 3 Bond or Letter of Credit – The seller has or will maintain a bond or letter of credit. A Construction Contractors Board bond, required for licensure under ORS chapter 701, is not sufficient. See ORS 87.007(2)(c).

Box 4 Written Waivers – The seller has or will obtain written waivers from every subcontractor or supplier who claims liens of $5,000 or more. Provide copies of the waivers to the buyer no later than the date of the sale. (The CCB recommends consulting an attorney for assistance with preparing forms for waivers).

See ORS 87.007(2)(d).

Box 5 Completed Sale after the Deadline – The sale will not be completed until at least 75 days after the completion of all construction. See ORS 87.007(2)(e).

Additional Instructions The seller and the buyer must sign and date the form on or before the closing date of the sale. Both parties should retain a copy of the form. Compliance with the HPA is the sole responsibility of the seller.



aPPEndiX E—aTTORnEY GEnERaL OPiniOn

1162 Court Street NE, Salem, OR 97301-4096 Telephone: (503) 947-4520 Fax: (503) 378-6424 TTY: (503) 378-5938

DEPARTMENT OF JUSTICE GENERAL COUNSEL DIVISION

MEMORANDUM

DATE: December 17, 2003 TO: Carl Lundberg, Deputy Administrator Insurance Division FROM: Kathleen Dahlin, Assistant Attorney General Business Activities Section SUBJECT: HB 3539 Requirements for Title Insurance

DOJ File No. 440-030-GB0642-03 The 2003 Oregon legislature enacted legislation to protect homebuyers from certain liens. You ask the following questions: 1. Assuming that on owner of residential property subject to Oregon Laws 2003, chapter 778, chooses to comply with subsection 2(2) by providing title insurance, must the owner provide title insurance equivalent to the sales price or contract price of the construction, or may the owner satisfy the requirement by providing a lower amount of coverage, e.g. the amount covered by the lender’s policy? The law contemplates that the owner will provide an Owner’s Extended Coverage (OEC) title insurance policy providing coverage for filed and unfiled liens, or an equivalent. Generally, those policies are written based on the sales, or contract, price of the construction. A lender’s policy will not substitute for such coverage or satisfy the requirements of subsection 2(2). 2. Does Oregon Law 2003, chapter 778, section 2(2)(a) require that an owner providing title insurance actually purchase and pay for the insurance, or may the owner satisfy the requirement by agreeing to share the purchase price with the buyer? While the law does not require that the owner pay the purchase price for an OEC policy, traditionally title companies either require that the owner pay such cost or that the owner pay an amount determined by filed rates (which often exceeds the amount paid by the buyer for a lender’s policy). In any event, the law does not contemplate any change in the existing rating structure for title policies. Unless the parties agree otherwise, the owner will continue to pay the rate charged owners, and the buyer the rate charged buyers, as determined by the title companies.

HARDY MYERS Attorney General

PETER D. SHEPHERD Deputy Attorney General



Carl Lundberg October 3, 2012 Page 2 Because we answer the question as indicated, we need not address your question regarding whether the Insurance Division can, or must, enforce any requirement that one of the parties to the sale pay for the title insurance. A. Newly Adopted Homebuyer Protection from Liens The 2003 law applies to the sale of: (1) new single family residences; (2) new condominium units; (3) new residential buildings with four or fewer units; (4) existing single family residences where there was original construction (e.g. additions) for $50,000 or more within three months of the sale; (5) existing condominium units where there was original construction for $50,000 or more within three months of the sale; (6) existing residential buildings with four or fewer units where there was original construction for $50,000 or more within three months of the sale; (7) existing single family residences where there were improvements (e.g. remodels or repairs) for $50,000 or more within three months of the sale; (8) existing condominium units where there were improvements for $50,000 or more within three months of the sale; and (9) existing residential buildings with four or fewer units where there were improvements for $50,000 or more within three months of the sale. Or Laws 2003, ch 778, sec 2(1). The new law requires that:

(2) For the purposes of protecting purchasers of residential property with respect to claims of lien that arise before the date the sale of the residential property is completed but may be perfected under ORS 87.035 after the date the sale of the property is completed, when an owner of record sells residential property to a purchaser, the owner shall provide such protection by one of the following methods: (a) Purchase or otherwise provide title insurance on behalf of the purchaser by a policy issued: (A) Without exception for filed and unfiled claims of construction lien existing at the date of closing of the purchase; and (B) On forms and at rates filed with, but not disapproved by, the Director of the Department of Consumer and Business Services.

Or Laws 2003, ch 778, sec 2(2)(a). A person who provides labor, materials or equipment for construction has a lien upon the structure that is constructed. ORS 87.010(1). That person must give the owner of the structure a notice of the right to lien when providing their labor, materials or equipment. ORS 87.021; 87.023. The person claiming the lien must “perfect” the lien not later than 75 days after the person ceases to provide labor, materials or equipment, or 75 days after the completion of construction, whichever is earlier. ORS 87.035. A lien is perfected by filing a claim of lien with



Carl Lundberg October 3, 2012 Page 3 the recording officer of the county where the structure is located. ORS 87.035(2). Thus, under Oregon law, the situation can arise where a person sells a home upon which there is a lien, but the lien has not yet been perfected. If the transaction is completed, and the lien is perfected, the homebuyer will then own a home subject to the lien. Assuming the seller does not pay the debt and satisfy the lien, the homebuyer may have to pay off the debt to remove the lien, or face foreclosure and sale of the home. The 2003 legislature sought to rectify this situation by creating several methods by which the seller could provide protection to the homebuyer.1 One of those methods was for the owner to “purchase or otherwise provide” title insurance without exception for filed or unfiled liens. B. Title Insurance Before analyzing the statutes and answering your questions, we examine the function and nature of title insurance. Title insurance is insurance for owners of property or others with an interest in the property against loss by encumbrance, defective titles, invalidity or adverse claim to title. ORS 731.190. Unlike ordinary insurance that involves risk assumption through the pooling of risks, title insurance eliminates risks in order to prevent losses caused by title defects. http://www.oldrepublictitle.com. To provide this service, title insurers perform an extensive search of public records to determine whether there are any adverse claims to the real estate at issue. Id. Those claims are either eliminated before issuance of the title policy, or the policy contains “exceptions” from coverage for those claims. Id. There are two types of title insurance – owner’s policies and lender’s policies. http://tms.ecol.net. An owner’s policy protects the buyer from unpredictable factors, ranging from human error to forged documents that might emerge after a sale is complete. Id. A lender’s policy protects the buyer’s lender against loss due to unknown title defects, and guarantees that the lender has a valid first lien against the property. Id. There are two basic types of owner’s policies – ALTA2 standard coverage policies and ALTA Owner’s Extended Coverage (OEC) policies. http:// www.LTGC.com. ALTA standard coverage3 is issued on both residential and commercial property. Id. It insures against errors in deeds, forgery, fraudulent conveyances, mistakes in public records, and errors in estate proceedings. Id. It does not insure against liens for labor, materials or equipment furnished before the policy date. Id.

1 The 2003 legislation superseded and repealed earlier legislation enacted by the 2001 legislature, which

was subsequently “sunset” in a 2002 special session. See Or Laws 2002, ch 6; Or Laws 2001, ch 311,

2 ALTA is the acronym for “American Land Title Association,” an association of title insurers that is responsible for creating the forms used by nearly all title insurers nationwide. http://www.alta.org.

3 This refers to the ALTA 1987 (Amended 1992) Standard Policy. Id.



Carl Lundberg October 3, 2012 Page 4 The other owner’s policy, the OEC policy4 (also referred to as a “plain language policy”) is issued only for residential, single-family property. Id. It contains the same protections as the standard policy, but some additional coverage such as protections for the homebuyer from lien (and right to lien) for labor, materials or equipment furnished before the policy date. Id. In order to provide an OEC policy, a title insurer will likely require final affidavits and agreements from the parties stating that there are no liens and may, for new construction, require a new survey. Id. Both standard owner’s and OEC policies provide coverage up to the amount of policy. That amount is generally determined by the sale or contract price of the home. The OEC provides inflation protection over the first five years of home ownership, meaning that the policy amount automatically increases 10% each year for the first five anniversary dates of the policy. Id. A lender’s policy, in contrast to an owner’s policy, does not insure the owner, but insures the lender. Historically, lenders have demanded, and obtained, policies that eliminate many of the title exceptions that apply in a standard owner’s policy. http://www.fascona.com. Thus, the lender’s policy may provide protection against construction liens, while an owner’s policy, in the standard transaction, did not. Id. All title insurers are required to file their forms and rates with the Insurance Division. ORS 737.205. A title insurer’s rate filings are subject to review by the division and, unless disapproved, take effect within a period of time after filing. ORS 737.320. Similarly, the division reviews forms for title insurance. ORS 742.003. Unless disapproved, the title insurer may use the forms reviewed. ORS 742.003; 742.005. With respect to who generally pays for these policies, the parties will enter into agreements regarding their real estate transaction. The title company is obligated to follow the terms of the agreements. http://www.alta.org. Unless the parties indicate otherwise, title insurers often charge the seller with the cost of the OEC policy, and the buyer with the cost of the lender’s policy. The former is ordinarily issued for the sales price of the property, while the latter is issued for the amount of the loan.5 Some title insurers charge a split cost based on a rating schedule, with a larger amount charged to the seller and a smaller amount to the buyer.6 Presumably, all of the forms and rating protocols used in Oregon have been reviewed, and not disapproved by the division.7

4 This refers to the ALTA Residential 1997 (OEC) Policy. Id. 5 Information provided by AmeriTitle, Salem, Oregon (December 12, 2003). 6 Information provided by First American Title, Salem, Oregon (December 12, 2003).

7 Unlike other insurance transactions, Oregon law permits persons other than the insured to purchase title

insurance for the insured. See ORS 746.130(2)(b).



Carl Lundberg October 3, 2012 Page 5 C. Analysis of Oregon Law To interpret Oregon Laws 2003, chapter 778, section 2(2), we apply the template outlined in PGE v. Bureau of Labor and Industries, 317 Or 606, 610 – 12, 859 P2d 1143 (1993). Noting that the court’s task is to discern the intent of the legislature, the PGE court requires analysis of the text and context of the statute at the first level. In the analysis, words of common usage will be given their plain, natural and ordinary meaning. If, but only if, the legislature’s intent is not clear from the text and context inquiry, the court will then consider legislative history. If, after consideration of text, context and legislative history, the intent of the legislature remains unclear, then the court may resort to general maxims of statutory construction to aid in resolving any remaining ambiguity. We can determine from the plain meaning of the language the type of policy that the statute contemplates. The provision at issue provides that that, for the purpose of protecting purchasers of residential property, an owner of record may provide protection through the vehicle of title insurance. The title insurance provided must protect the owner, not the lender. The law contemplates that the seller will provide a title insurance policy “without exception for filed and unfiled claims of construction lien existing at the date of closing.” Or Laws 2003, ch 778, sec 2(2)(a)(A). Given this directive, only an OEC policy, or its equivalent, would provide this coverage.8 A standard owner’s policy, with exceptions, would not.9 See also note 10. While, ordinarily, such policies are issued in an amount equivalent to the sales price or fair market value of the property, the language in the new law does not impose that requirement. The legislative history of the enactment reinforces the conclusion that there is no specific “amount” of coverage required.10 As to who must pay for the policy, the language provides that the owner of record must “purchase or otherwise provide” title insurance on behalf of the homebuyer. The plain, natural and ordinary meaning of the word “provide” is “to supply for use.” Webster’s Third New Int’l Dictionary (1993), p. 1826. Thus, the legislature authorized two methods by which title insurance could be made available. The owner could purchase the insurance or the owner could, by agreement with the purchaser, arrange to supply title insurance, but not necessarily by assuming the cost of such insurance.

8 According to the information that you provided, once a title company removes an exception from any owner’s standard policy, the resulting policy is often referred to as “owner’s extended coverage.” For purposes of this discussion, only a standard policy without exception for filed and unfiled liens would satisfy the requirements of Or Laws 2003, ch 778, sec 2(2).

9 One problem this raises is that OEC policies cover only single-family residences. The new law covers

residential buildings consisting of four or fewer units. An owner selling such a building could not obtain an OEC policy. If the owner could furnish an equivalent policy, such as a standard policy removing all exceptions for filed and unfiled liens, then the owner could comply with this requirement.

10 After discussing title insurance and bonds, the bill sponsor, Rep. Jeff Merkley, noted that “I think it is the

consensus of the working group not to seek full indemnification but to take a significant step in alerting the consumer and providing a level of protection, a much more significant level than exists in the law now.” Senate Committee on Judiciary (HB 3539), August 19, 2003, testimony of Rep. Jeff Merkley, Tape 197A.



Carl Lundberg October 3, 2012 Page 6 The new law does not contemplate any change in the forms or rates for title policies.11 Presumably, title insurers will continue to provide coverage “on forms and at rates filed with, but not disapproved by, the Director of the Department of Consumer and Business Services.” Or Laws 2003, ch 778, sec 2(2)(a)(B). Sellers will continue to pay the rates charged, generally to provide the OEC policy, and the buyers will pay, if that is the company’s protocol, for a lender’s policy.

11 This was apparently a concern with the bill as introduced. The original language in subsection (2)(a) read:

(2) For purposes of protecting purchasers of residential property with respect to claims of

lien that may be perfected under ORS 87.035 after the date the sale of the property is completed, when an owner of record sells residential property to a purchaser, the owner shall provide such protection by one of the following methods:

(a) Purchase or otherwise provide title insurance on behalf of the purchaser that

guarantees payment of any claims of liens that are perfected under ORS 87.035 after the date that the sale of the property is completed. The title insurance shall remain in force until full payment is made on all claims of lien on the property that are perfected under ORS 87.035 after the date the sale of the property is completed. Any claims of lien that are perfected after the date of the sale of the property and that are not paid by the owner who sold the property shall be paid from the title insurance policy described in this paragraph.

House Bill 3539. In his initial testimony on this legislation, Rep. Merkley discussed that the intent of the legislation was to enable homebuyers to acquire the higher level of extended title insurance coverage generally required by lenders, but not always sought be homebuyers (and not always available to builders). House Committee on Judiciary (HB 3539), April 18, 2003, Tape 149A, testimony of Rep. Jeff Merkley. Rep. Merkley referred to the coverage as “ALTA Extended,” apparently meaning the OEC policy. Id. Jack Munro, representing Oregon Land and Title, testified that he had only recently reviewed the bill and had concerns that the title insurance policies sold in Oregon were not consistent with the bill language. House Committee on Judiciary (HB 3539), April 18, 2003, Tape 149A, testimony of Jack Munro. When asked by Representative Ackerman whether there was any insurance product on the market that would meet the requirements of House Bill 3539, section 2, subsection 2(a), Mr. Munro replied “no.” Id. It was agreed that, if the bill passed out, the title insurance company would work with Representative Merkley to create language that would complement title insurance as it existed. Id.

Chapter 3

Environmental due diligence—Sifting Through the dirt1

Kirsten J. DAy

Perkins Coie LLPPortland, Oregon

prisCillA e. hAmpton

Perkins Coie LLPPortland, Oregon

1 The information contained in this outline should not be relied upon as comprehensive. These materials are not intended by Perkins Coie LLP or any of the presenters as legal advice but are merely presented for discussion and illustrative purposes.

Contents

I. Before You Start Drafting or Negotiating, Understand the Big Picture . . . . . . . . . . . . . 3–1A. Understand the Property and the Market . . . . . . . . . . . . . . . . . . . . . . . . . . 3–1B. If You Are Representing a Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–1C. If You Are Representing the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–1D. What Is the Deal Structure? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–1E. How Much Risk Is Your Client Willing to Tolerate? . . . . . . . . . . . . . . . . . . . . 3–1

II. What Can You Learn About the Property Before the Purchase and Sale Agreement Is Signed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–2A. What Does the Seller Already Know About the Property? . . . . . . . . . . . . . . . . 3–2B. What Can the Buyer Learn About the Property? . . . . . . . . . . . . . . . . . . . . . . 3–2C. Whether You Are Representing the Seller or the Buyer . . . . . . . . . . . . . . . . . . 3–2D. Is Your Client Local? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–2

III. Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–2A. Confirm How Due Diligence Will Be Handled . . . . . . . . . . . . . . . . . . . . . . . 3–2B. Phase I Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–2C. Phase II Environmental Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–2D. Complete Other Environmental-Related Due Diligence. . . . . . . . . . . . . . . . . . 3–3

IV. Environmental Issues in Negotiating the Purchase and Sale Agreement: What Should You Consider? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–3A. Timing of Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–3B. Confidentiality Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–3C. Buyer Protections in the Purchase and Sale Agreement . . . . . . . . . . . . . . . . . . 3–4D. Seller Protections in the Purchase and Sale Agreement . . . . . . . . . . . . . . . . . . 3–4

V. Results of Due Diligence: Negotiating Closing Contingencies and Post-Closing Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–4A. Is the Seller Willing to Take an Adjustment to the Purchase Price?. . . . . . . . . . . . 3–4B. Does the Buyer Need to Negotiate a Prospective Purchaser Agreement (PPA)

Prior to Closing the Purchase of the Property? . . . . . . . . . . . . . . . . . . . . . . . 3–4C. Does the Buyer Need to Obtain a No Further Action (NFA) Letter Prior to

Closing the Purchase of the Property? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–5D. If Remediation Is Required, When Will Remediation Be Completed? . . . . . . . . . . 3–5

Chapter 3—Environmental Due Diligence—Sifting Through the Dirt


Table of Contents (continued)

E. Will There Be Ongoing Monitoring or Other Institutional Controls Required?. . . . . 3–5F. Should the Buyer Consider Environmental Insurance? . . . . . . . . . . . . . . . . . . 3–5

AppendixesA. ECSI Website . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3–7B. DEQ Prospective Purchaser Agreement Fact Sheet . . . . . . . . . . . . . . . . . . . 3–13C. DEQ Liability Management Tools Fact Sheet . . . . . . . . . . . . . . . . . . . . . . . 3–15



i. BEFORE YOU STaRT dRaFTinG OR nEGOTiaTinG, UndERSTand THE BiG PiCTURE

a. Understand the Property and the Market

1. What property type is it? Industrial, office, or retail? Developed or raw land? Single tenant? Owner-occupied?

2. Understand what encompasses the “property” (land, buildings, improvements, appurtenant rights, fixtures, intangible rights).

3. Understand the market: Is there more demand or supply for this property type? Is redevelopment by the buyer for another use a possibility?

4. Is the property particularly valuable, notwithstanding the general market climate (size of property, particular improvements, specialized use, etc.)?

5. What is the financing climate for the relevant property type and transaction?

6. Is this a “distressed property” (i.e., REO property owned by a bank or special servicer?)

B. if You are Representing a Seller

1. What is your client’s main goal? Sell quickly? Maximize sales price? Protect itself against post-closing liability? Is this deal part of a larger corporate transaction?

2. How long has your client owned the property?

3. What type of owner is your client? “Coupon clipper” with little involvement (or knowledge) or hands-on owner/developer of real estate? How complete is your client’s information regarding the property?

4. What type of buyer is on the other side? Is the tenant of the property buying the property? Is the buyer local or out-of-state? Why is it buying the property?

C. if You are Representing the Buyer

1. What does your client want to do with this property? Occupy the property for its own use? Improve the property and quickly flip it? Own the property and continue to lease the property with minimal obligations on the part of the owner (“coupon-clipping”)? Demolish and redevelop the property for a different use?

2. What is your client’s level of sophistication and experience in real estate matters?

3. What kind of seller is on the other side? Is this an institutional seller or a single-asset holder? Why is it selling the property?

d. what is the deal Structure?

1. Is the acquisition of the property part of a larger corporate transaction? Is your client acquiring a company? Has your client considered acquiring the assets of the company rather than the company itself?

2. Is your client acquiring a portfolio of properties, or is this a purchase of a single property?

E. How Much Risk is Your Client willing to Tolerate?

1. Exposure under federal and state law for all property owners, operators, regardless of fault.

2. Seller indemnification only as good as seller’s financials.

3. If your client is selling, will your client indemnify the buyer? How long is your client willing to carry this liability on its books?



ii. wHaT Can YOU LEaRn aBOUT THE PROPERTY BEFORE THE PURCHaSE and SaLE aGREEMEnT iS SiGnEd?

a. what does the Seller already Know about the Property?

1. How long has the seller owned the property?

2. What is the operational history of the property (uses, spills, prior contamination)? Does the seller also use the property, or is the property leased to one or more tenants?

3. Have there been any prior studies or environmental assessments completed for the property? Does the seller have any studies or environmental assessments that the seller received when it purchased the property? Review these documents.

4. Review the title to the property: Are there any deed restrictions or easements and equitable servitudes recorded on title to the property?

B. what Can the Buyer Learn about the Property?

1. Internet and general searches (Google maps, website for the broker representing the seller, title company, etc.)

2. Go look at the property/visual inspection.

3. Understand the operational history of the property; the buyer may consider entering into a confidentiality agreement prior to signing the purchase and sale agreement in order to get operational history and other seller information sooner rather than later.

4. Do some research on the neighboring properties and operations on those properties.

C. whether You are Representing the Seller or the Buyer

Check out the Oregon Department of Environmental Quality’s (DEQ’s) Environmental Cleanup Site Information Database (ECSI), http://www.deq.state.or.us/lq/ecsi/ecsi.htm (see Appendix A).

1. Tracks sites in Oregon with known or potential contamination from hazardous substances.

2. Documents sites where DEQ has determined that no further action is required.

3. Data in ECSI is “working information” used by DEQ’s Environmental Cleanup Section.

d. is Your Client Local?

Your knowledge of the property and its history will be even more important if you are representing a seller or a buyer who is not locally based.

iii. dUE diLiGEnCE

a. Confirm How due diligence will Be Handled

Does your client have the infrastructure necessary to handle due diligence in-house? What services will be outsourced? Watch timelines for long lead time needs (environmental, in particular).

B. Phase i Environmental assessment

1. What is a Phase I and what does it cover? What doesn’t a Phase I cover?

2. Confirm if the Phase I you are obtaining meets the “All Appropriate Inquiries” (AAI)/ASTM standards. What are these standards, and how do these standards affect your client?

3. Make sure the Phase I on which your client is relying is current (180 days).

C. Phase ii Environmental assessment

1. What is a Phase II, and what does it cover? Understand what sampling and analysis will occur as part of a Phase II.

http://www.deq.state.or.us/lq/ecsi/ecsi.htm



2. Make sure you allow for sufficient time to complete the Phase II (30 to 45 days): This process entails preparing a sampling plan, retention of contractors, collection of samples, laboratory analysis turnaround time, and reporting.

3. If a Phase II is required, a buyer should consider cost-sharing provisions with the seller, particularly where the parties know prior to commencement of due diligence that additional testing and sampling will be required.

4. Parties should confirm assignment of responsibility for investigation-derived waste (RCRA issues).

d. Complete Other Environmental-Related due diligence

1. Review preliminary report and underlying documents recorded against the property and the survey for the property.

2. Confirm other environmental compliance issues applicable to the property; are there stormwater permit or management issues? Are there institutional controls to which the property is subject (see also III.D.3., below, and V.E., further below)? Is the property in compliance with permits and other environmental requirements?

3. Environmental liens: What are they and how do you discover if the property is subject to them?

4. Pre-existing institutional controls.

a. What are “institutional controls”?

b. Institutional controls are not always required to be recorded against the property (e.g., monitoring requirements), but certain institutional controls will be recorded (e.g., deed restrictions and easements and equitable servitudes).

5. Confirm whether any low-impact development requirements apply to the property or may apply to the property in the future.

iV. EnViROnMEnTaL iSSUES in nEGOTiaTinG THE PURCHaSE and SaLE aGREEMEnT: wHaT SHOULd YOU COnSidER?

a. Timing of Completion

Depending upon the property type and your knowledge of the property, consider the timing for completion of environmental due diligence, potential additional testing, and other factors regarding the environmental condition of the property.

1. Will a new or updated Phase I environmental assessment be required?

2. Do you know up front that additional testing and sampling will be required? Remember that a Phase II environmental assessment will take (at a minimum) between 30 and 45 days to complete.

B. Confidentiality Requirements

Is the seller requiring that due diligence information and documentation be kept confidential by the buyer? Confidentiality requirements could affect the buyer’s ability to discuss the condition of the property and potential environmental contamination or remediation with DEQ and/or other governmental agencies.



C. Buyer Protections in the Purchase and Sale agreement

1. Seller representations and warranties.

a. Depending upon the known condition of the property, make sure representations and warranties are drafted clearly so the buyer understands the information the seller is representing and warranting.

b. Consider what knowledge standard for seller should be used: Strict liability? Best knowledge? Actual knowledge? Whether seller has received written notice in contravention of the representation and warranty?

c. How long will the representations and warranties survive?

2. Post-closing indemnification by seller: Post-closing obligations of any sort are very difficult to negotiate with a seller. Sellers are looking to close the book on their obligations and liability when they sell a property.

d. Seller Protections in the Purchase and Sale agreement

1. Seller disclaimers for Condition of Property

a. No representations and warranties, express or implied, by seller (“as is”) other than what is specifically stated in purchase and sale agreement.

b. Buyer takes property in “as is” condition except for/subject to seller’s express representations and warranties stated in the purchase and sale agreement.

c. Buyer: If any agreements are made during due diligence as to specific items regarding condition of property, make sure those agreements supersede all seller disclaimers, waivers, and indemnities.

2. Buyer waiver of Claims (and indemnification) Regarding Condition of Property

a. Waiver by buyer: For purposes of seller’s protection against post-closing liability and obligations, this is a must. Watch local law on waivers (e.g., California statute requiring waiver of statutory protections in order to waive unknown claims).

b. How broad will the waiver be? All environmental conditions regarding the property? Violation of environmental laws only?

c. Indemnification against post-closing liabilities: This is seller-aggressive but may be worth attempting.

d. Remember that neither the waiver nor the indemnification remove seller’s liability with respect to a governmental or regulatory agency (e.g., owner/operator strict liability under CERCLA) or any third party(ies)).

V. RESULTS OF dUE diLiGEnCE: nEGOTiaTinG CLOSinG COnTinGEnCiES and POST-CLOSinG OBLiGaTiOnS

a. is the Seller willing to Take an adjustment to the Purchase Price?

Buyers should note potential lender considerations regarding the appraised value of the property versus costs of remediation. The seller should ensure that the buyer has released the seller and waived claims against the seller for the environmental contamination (but see IV.D.2.d., above).

B. does the Buyer need to negotiate a Prospective Purchaser agreement (PPa) Prior to Closing the Purchase of the Property?

(See DEQ PPA Fact Sheet, attached as Appendix B.)

1. PPA requires eight to twelve weeks (minimum) to finalize with DEQ.



2. PPA must provide “substantial public benefit.”

3. PPA must be executed prior to closing.

C. does the Buyer need to Obtain a no Further action (nFa) Letter Prior to Closing the Purchase of the Property?

1. NFA letter is difficult to obtain prior to the closing. Negotiation and finalization of NFA letter is largely dependent upon DEQ’s timing for its review of environmental investigations and sampling results, as well as DEQ’s expectations for the remediation of the property.

2. The process of obtaining an NFA is largely outside of the control of the buyer, making estimation of timing difficult.

d. if Remediation is Required, when will Remediation Be Completed?

Pre- or post-closing? The terms of a PPA or NFA will dictate this timing in many cases.

E. will There Be Ongoing Monitoring or Other institutional Controls Required?

The buyer needs to have a full understanding of any post-closing ongoing monitoring requirements and/or limitations on the development, redevelopment, and/or use of the property, as such monitoring and limitations could impact the current and future value of the property as well as the buyer’s use of the property and the buyer’s ability to sell the property in the future.

F. Should the Buyer Consider Environmental insurance?

Expensive, but may be worthwhile to investigate, depending upon the scope and level of contamination. Additional items to consider: which party(ies) pay for the insurance coverage? Is obtaining the environmental insurance policy a condition to closing?



aPPEndiX a—ECSi wEBSiTE

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DEQ Home > Land Quality > Environmental Cleanup > ECSI > Site Summary Full Report

Environmental Cleanup Site Information (ECSI) DatabaseSite Summary Full Report - Details for Site ID 398, ARKEMA, Inc.

This report shows data entered as of September 24, 2012 at 4:20:37 PM

This report contains site details, organized into the following sections: 1) Site Photos (appears only ifthe site has photos); 2) General Site Information; 3) Site Characteristics; 4) SubstanceContamination Information; 5) Investigative, Remedial and Administrative Actions; and 6) SiteEnvironmental Controls (i.e., institutional or engineering controls; appears only if DEQ has appliedone or more such controls to the site). A key to certain acronyms and terms used in the reportappears at the bottom of the page.

Go to DEQ's Facility Profiler to see a site map as well is information on what other DEQ programsmay be active at this site.

General Site InformationSite ID: 398 Site Name: ARKEMA, Inc. CERCLIS No: 009031840Address: 6400 NW Front Ave. Portland 97210 County: Multnomah Region: NorthwestOther locationinformation:Investigation Status: Listed on CRL or Inventory Brownfield Site: No NPL Site: No Orphan Site:

NoStudy Area:No

Property: Twnshp/Range/Sect: 1N , 1W , 13 Tax Lots: 36 Latitude:

45.5713 deg. Longitude:-122.7447 deg.

Site Size: 74.8 acres

Other Site Names: Elf Atochem North America Pennwalt Chemical Corp. Portland Harbor Sediment Study ATOFINA Chemicals, Inc.

Site CharacteristicsGeneral SiteDescription:Site History: Manufacturing operations began at the site in 1941 by Pennsylvania Salt

Manufacturing, and ceased in 2001. The facility produced various chemicalsincluding sodium chlorate, potassium chlorate, chlorine, sodium hydroxide,DDT, sodium orthosilicate, magnesium chloride hexahydrate, ammonia,

DEQ Home | Divisions | Regions | Commission

Oregon DEQ: Full Details Environmental Cleanup Site Information (ECSI... http://www.deq.state.or.us/lq/ECSI/ecsidetailfull.asp?seqnbr=398

1 of 4 9/24/2012 4:21 PM



hydrogen, ammonium and sodium perchlorate (rocket fuel) and hydrochloricacid.

ContaminationInformation:

(5/19/93 KPD/SAS) The facility primarily produced chlorine, but alsoproduced hydrochloric acid, hydrogen, sodium chlorate, and sodiumhydroxide. Asbestos (used as a diaphragm in electrolytic cells) washistorically buried in a pit on-site. The buried asbestos was removed in 1992with DEQ Air Quality Program oversight. Waste diaphragm asbestos wassubsequently conveyed to a filter press and the filter cake placed into drumsfor off-site disposal. "Brine purification residue" (a mixture of calciumcarbonate and magnesium hydroxide) was initially managed in on-site ponds.Brine pond residue was subsequently removed and disposed a off-site landfill.Brine residue was more recently dewatered in a filter press and the dry solidslandfilled at a DEQ permitted landfill. Four Willamette River outfalls(regulated under a common NPDES permit) are present and currentlydischarge site stormwater. Six chemical spills were reported to have occurredat the site in 1987, the first year reporting was required. Excavation activitiesin 1992 encountered residues determined to be associated with themanufacture of DDT by Pennwalt in the late 1940s and early 1950s. DDTresidue was removed by Atochem in a trench disposal area from thenorthwestern portion of the plant site in 1994. Investigation of the formerDDT-manufacturing area (current acid plant area) by Atochem in 1994showed high concentrations of DDT in soil and monochlorobenzene ingroundwater. (11/21/01 MJM/VCP). Remedial investigation work detectedhexavalent chromium, perchlorate, chloroform and chloride in sitegroundwater associated with former facility operations.

Manner and Time ofRelease:

Historical site operations and spills, documented in 1987.

HazardousSubstances/WasteTypes:

Chlorine, hydrochloric acid, ammonia, sodium hydroxide, asbestos, sodiummetabisulfite, sodium bichromate, sulfuric acid, monochlorobenzene, andDDT.

Pathways: The site is located in a heavily industrialized part of NW Portland. TheWillamette River is adjacent to the site on the north and east. The RemedialInvestigation, completed in 2006, identified surface soil impacts from DDTand other facility related contaminants. Groundwater in the Acid Plant area isimpacted with DDT, chlorobenzene, perchlorate and VOCs (e.g., chloroform).Groundwater in the Chlorate Plant area is impacted by hexavalent chromiumand perchlorate. Chloride levels are high in groundwater site-wide, but aremost elevated in the Chlorate Plant area. Current complete exposurepathways are human and ecological exposure to site soils, groundwater andstormwater migration to the Willamette River and potential riverbankerrosion.

Environmental/HealthThreats:Status of Investigativeor Remedial Action:

(10/29/97 MJM/VCP) Elf Atochem entered the DEQ Voluntary CleanupProgram (2/96) and requested DEQ oversight for the investigation & cleanupof the former DDT manufacturing area (former Acid Plant area). Elf Atochemand DEQ entered Voluntary RI/FS Agreement to investigate former DDTmanufacturing releases and to complete a RI of the facility. Fall 2000,ATOFINA removed approximately 3,000 cubic yards of soil with some of thehighest levels of DDT . ATOFINA also paved or placed temporary covers overareas of the plant to control surface soils containing DDT from beingtransported by stormwater to the Willamette River. In December 2000,ATOCHEM constructed and started operation of a vapor-extraction system to


2 of 4 9/24/2012 4:21 PM



remove chlorobenzene from vadose zone soils in the location of the formerchlorobenzene recovery unit. Plant operations ceased in 2001; phaseddemoloition of the plant structures occurred through 2005. A number of pilotand full-scale interim removal measures have been implimented since 2000.These include attempts to treat chlorobenzene and DDT with sodiumpersulfate, in-situ reduction of hexavalent chromium to trivalent chromiumusing calcium polysulfide and treatment of chlorobenzene by air sparging andsoil vapor recovery.

Construction of a new stormwater and groundwater collection and treatmentsystems will occur from April 2012 - Januray 2013.

Data Sources: EPA Preliminary Assessment (12/10/84). Laboratory Data. CorrespondenceFROM owner and/or operator. Doane Lake Study Area files (ECSI #36).Voluntary Cleanup Program project file and Remedial Investigation Report.

Substance Contamination InformationSubstance Media Contaminated Concentration Level Date RecordedAMMONIA Soil Unknown CHLOROBENZENE Groundwater 370 mg/L 11/3/1994CHROMIUM Groundwater 26.7 mg/L 5/3/2001DDT,p,p'- Soil 150,000 mg/kg 4/20/1994SODIUM BICHROMATE Surface Water Unknown SODIUM CHLORATE Surface Water Unknown

Investigative, Remedial and Administrative ActionsAction Start Date Compl.

DateResp. Staff Lead

PgmSite added to CERCLIS 09/01/1979 EPA PA1/SI1 10/24/1984 12/10/1984No Further Remedial Action Planned under Federalprogram

12/10/1984 12/10/1984

Site added to database 10/06/1988 MarilynDaniel

SAS

Responsible party notified re 11/88 Inventorylisting

11/30/1988 SAS

SITE EVALUATION 05/12/1993 05/12/1993 Kevin Dana SASPreliminary Assessment Equivalent recommended(PAE)

05/12/1993 05/12/1993 Kevin Dana SAS

PRELIMINARY ASSESSMENT EQUIVALENT 05/13/1993 05/13/1993 Kevin Dana SASListing Review completed 05/14/1993 05/14/1993 Kevin Dana SASInsufficient information to list 05/17/1993 Kevin Dana SASState Expanded Preliminary Assessmentrecommended (XPA)

05/18/1993 05/18/1993 Kevin Dana SAS

VCS Waiting List 06/27/1995 02/12/1996 VCSLetter Agreement 02/01/1996 02/01/1996 Matt McClincy VCSNEGOTIATIONS 02/12/1996 06/11/1996 Matt McClincy VCSREMEDIAL INVESTIGATION 06/11/1996 06/05/2006 Matt McClincy VCSListing Review completed 06/11/1996 06/11/1996 Matt McClincy VCSProposal for Confirmed Release List recommended 06/11/1996 06/11/1996 Matt McClincy VCSProposal for Inventory recommended 06/11/1996 06/11/1996 Matt McClincy VCSFacility proposed for Inventory 12/30/1996 12/30/1996 Matt McClincy VCSFacility proposed for Confirmed Release List 12/30/1996 12/30/1996 Matt McClincy VCS


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Facility placed on Inventory 04/07/1997 04/07/1997 Kim VanPatten

VCS

Facility placed on Confirmed Release List 04/07/1997 04/07/1997 Kim VanPatten

VCS

Letter Agreement 08/26/1998 08/26/1998 Matt McClincy VCSREMOVAL 09/19/2000 11/01/2000 Matt McClincy VCSREMOVAL (Primary Action) 11/01/2001 Matt McClincy VCSConsent Order 10/30/2008 Matt McClincy

Key to Certain Acronyms and Terms in this Report:

CERCLIS No.: The U.S. EPA's Hazardous Waste Site identification number, shown only if EPAhas been involved at the site.

Region: DEQ divides the state into three regions, Eastern, Northwest, and Western; theregional office shown is responsible for site investigation/cleanup.

NPL Site: Is this site on EPA's National Priority List (i.e., a federal Superfund site)? (Y/N).

Orphan Site: Has DEQ's Orphan Program been active at this site? (Y/N). The Orphan Programuses state funds to clean up high-priority sites where owners and operators responsible for thecontamination are absent, or are unable or unwilling to use their own resources for cleanup.

Study Area: Is this site a Study Area? (Y/N). Study Areas are groupings of individual ECSIsites that may be contributing to a larger, area-wide problem. ECSI assigns unique Site IDnumbers to both individual sites and to Study Areas.

Pathways: A description of human or environmental resources that site contamination couldaffect.

Lead Pgm: This column refers to the Cleanup Program affiliation of the DEQ employeeresponsible for the action shown. SAS or SAP = Site Assessment; VCS or VCP = VoluntaryCleanup; ICP = Independent Cleanup; SRS or SRP = Site Response (enforcement cleanup);ORP = Orphan Program.

You may be able to obtain more information about this site by contacting Matt McClincy at theNorthwest regional office or via email at [email protected]. If this does not work, youmay contact Gil Wistar at (503) 229-5512, or via email at [email protected] or contact theNorthwest regional office.

[print version]

For more information about ECSI call Gil Wistar at 503-229-5512 or email.

For more information about DEQ's Land Quality programs, visit the DEQ contact page.

Oregon Department of Environmental QualityHeadquarters: 811 SW Sixth Ave., Portland, OR 97204-1390Phone: 503-229-5696 or toll free in Oregon 1-800-452-4011

Oregon Telecommunications Relay Service: 1-800-735-2900 FAX: 503-229-6124

The Oregon Department of Environmental Quality is a regulatory agency authorized to protect Oregon's environment bythe State of Oregon and the Environmental Protection Agency.

DEQ Web site privacy noticeProjects and Programs Publications and Forms Laws and Regulations Public Notices Permits and Licenses

Databases/GISAbout DEQ | Contact DEQ | Sitemap | Feedback | DEQ Search


4 of 4 9/24/2012 4:21 PM



Protecting Oregon's Environment About DEQ | Contact DEQ | Sitemap | Feedback | DEQ Search

Oregon Department of Environmental Quality

Projects and Programs Publications and Forms Laws and Regulations Public Notices Permits and Licenses Databases/GIS

Land Quality

Environmental Cleanup

DEQ Home > Land Quality > Environmental Cleanup > ECSI > Search Form

Search Form for Environmental Cleanup Site Information Database

[Search tips and instructions]

Site ID: Site Name:

Site Address:

County: City: Zip Code:

Latitude (42.0 to 46.5 degrees) Minimum: Maximum:

Longitude (116.5 to 124.5 degrees) Minimum: Maximum:

Township: Range: Section:

Site Actions or Milestones:

Contaminant [CAS No.]:

Contaminant Alias:

Return only Orphan Sites Return only Current or Former Brownfield Sites

Create CSV File*

*Create a comma separated values (CSV) file of the recordset generated by your query.

[print version]

For more information about ECSI call Gil Wistar at 503-229-5512 or email.

For more information about DEQ's Land Quality programs, visit the DEQ contact page.

Oregon Department of Environmental QualityHeadquarters: 811 SW Sixth Ave., Portland, OR 97204-1390Phone: 503-229-5696 or toll free in Oregon 1-800-452-4011

Oregon Telecommunications Relay Service: 1-800-735-2900 FAX: 503-229-6124

The Oregon Department of Environmental Quality is a regulatory agency authorized to protect Oregon's environment bythe State of Oregon and the Environmental Protection Agency.

DEQ Web site privacy noticeProjects and Programs Publications and Forms Laws and Regulations Public Notices Permits and Licenses

Databases/GISAbout DEQ | Contact DEQ | Sitemap | Feedback | DEQ Search

DEQ Home | Divisions | Regions | Commission

Oregon DEQ: Search Environmental Cleanup Site Information (ECSI) Dat... http://www.deq.state.or.us/lq/ecsi/ecsiquery.asp?listtype=lis&listtitle=En...

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Fact Sheet

Key Information About Prospective Purchaser Agreements in Oregon The Oregon Department of Environmental Quality uses Prospective Purchaser Agreements to encourage cleanup and productive reuse of properties with hazardous substance contamination. Investment in properties with existing contamination can be uncertain due to the strict liability scheme under state and federal laws. PPAs benefit buyers by limiting their liability, and benefit the state and local jurisdiction by providing the benefits associated with environmental cleanup and returning properties to productive use.

Land Quality Division Cleanup Program 811 SW 6th Ave Portland, OR 97204 Phone: (503) 229-5512 (800) 452-4011 Fax: (503) 229-6977 Contact: Gil Wistar www.oregon.gov/DEQ

Who is a prospective purchaser? A prospective purchaser can be an individual, business, government body, or any other entity with the interest and ability to purchase or lease contaminated property, where the prospective purchaser has neither caused nor aggravated contamination.

How would a PPA benefit me? If you’re thinking about buying property that you know or suspect to be contaminated with hazardous substances, you may be interested in a PPA. Liability protections spelled out in these agreements clarify and limit your responsibility to the state for the existing contamination. PPAs often make obtaining financing for the property purchase easier. Because it “runs with the land,” a PPA can also protect subsequent owners and lessees who adhere to the agreement’s terms.

I just bought a contaminated property and didn’t cause the contamination. Can I still enter into a PPA?No. PPAs must be negotiated and finalized before the property is purchased.

If I’m buying contaminated property, do I get an automatic PPA from DEQ?No. Every property presents a unique set of circumstances. Furthermore, not all properties are appropriate for PPAs. As a starting point, PPA eligibility requirements in the law are:

Last updated: 12/1/11 • There is contamination at the property and

the law requires it to be cleaned up. • The prospective purchaser cannot be

responsible for existing site contamination. • The prospective purchaser’s proposed

property use will not worsen contamination or interfere with necessary cleanup.

• A “substantial public benefit” will result from the agreement.

What is a substantial public benefit?Oregon law provides a framework for DEQ’s evaluation of PPAs by describing what constitutes a “substantial public benefit.” Examples are: • Generation of substantial funding or other

resources for environmental cleanup at the property.

• Commitment to perform substantialenvironmental cleanup at the property.

• Productive reuse of an abandoned or vacant industrial or commercial facility.

• Development of the property by a governmental entity or non-profit to address an important public purpose.

These are examples of common substantial public benefits that DEQ has negotiated in the past. However, DEQ evaluates each agreement individually, and there’s a wide range of potential substantial public benefits. DEQ encourages prospective purchasers to be creative.

How do I apply for a PPA? Is there an application fee?• Start by contacting DEQ’s Prospective

Purchaser Program coordinator at 503-229-5512 (toll-free in Oregon at 1-800-452-4011, ext. 5512) to obtain a program packet and schedule an initial meeting.

• At the initial meeting, DEQ will ask questions to determine whether a PPA is appropriate for the property.

• If you and DEQ decide to move forward, you must submit an application and $2,500 deposit. The deposit allows DEQ to start working on the PPA; it does not ensure that a final agreement will be reached.

• Begin negotiations, share technical information about property contamination, and strive to reach an agreement that meets

By: Gil Wistar

DEQ-11-LQ-062

aPPEndiX B—dEQ PROSPECTiVE PURCHaSER aGREEMEnT FaCT SHEET



both your needs and the state’s needs. If, as part of the PPA, you agree to conduct cleanup actions at the property, you will do so through DEQ’s cleanup programs.

• When the PPA is completed, or negotiations cease, any balance remaining from the deposit is refunded.

How long does it take to get a PPA? Average time to complete a PPA is eight to 12 weeks. The length of time depends on: 1) how much DEQ knows about contamination at the property; 2) whether DEQ needs to modify the standard PPA language to accommodate unique circumstances; and 3) the number of other PPAs that DEQ staff is currently working on.

What happens after the PPA is finalized? You must properly record the PPA and related documents in the appropriate county office, and must meet all conditions specified in the PPA. Failure to do either of these may void the agreement and the liability protections it provides.

Alternative formats DEQ can make alternative formats of this document available (such as Braille and large type). Contact DEQ's Office of Communications and Outreach, Portland, at 503-229-5696, or call toll-free in Oregon at 1-800-452-4011, ext, 5696. Hearing-impaired persons may call 711.



aPPEndiX C—dEQ LiaBiLiTY ManaGEMEnT TOOLS FaCT SHEET

Fact Sheet

Liability Management Tools for Buyers of Contaminated Property in OregonKnown or potential contamination may add cost and uncertainty to real estate transactions. Therefore, it is natural for buyers of contaminated properties to be concerned about their potential liability for the costs associated with investigating and cleaning up that contamination. For those acquiring such properties, this fact sheet briefly describes potential liability under Oregon’s environmental cleanup law and under the federal cleanup law, CERCLA (Comprehensive Environmental Response, Compensation and Liability Act), and some methods to manage that liability.

Land Quality Division Cleanup Program 811 SW 6th Avenue Portland, OR 97204 Phone: (503) 229-6258 (800) 452-4011 Fax: (503) 229-6977 Contact: Annette Dietz www.oregon.gov/DEQ

NOTE: This fact sheet is not intended and should not be construed as legal advice. Prospective purchasers should consult with an attorney before buying potentially contaminated property.

Buyer liability under Oregon law Under Oregon Revised Statute 465.255, a buyer of contaminated property may become liable for the cost of cleaning up existing contamination, if the buyer knew or should have known about the contamination at the time of purchase. When a pre-acquisition environmental assessment reveals contamination, the purchaser may become liable for that contamination - even though it occurred before the purchaser became the owner. Similarly, a person buying property without first conducting an environmental assessment may become liable for existing contamination that is discovered later.

Addressing state liability concerns ORS 465.255 includes some statutory defenses that are particularly relevant to buyers. For example, under the “innocent purchaser” defense, a person who buys property that is already contaminated would not be liable if the person did not know and reasonably should not have known of the contamination at the time of purchase. To maintain this defense, the person must have conducted “all appropriate inquiry” before

purchasing the property. Although Oregon has not adopted an AAI rule, an assessment consistent with the federal AAI rule (discussed below) would generally constitute satisfactory inquiry. Other forms of inquiry may also be sufficient. In any case, if the pre-acquisition assessment identifies contamination or conditions requiring further inquiry, this defense would not be available.

Persons who inherit contaminated property and entities that take contaminated property by condemnation or tax foreclosure may also have defenses to liability under Oregon law. Oregon law also provides a “security interest holder” defense to liability, which may protect lenders and others who hold mortgages or trust deeds on contaminated property simply to secure payment.

Other liability management tools Other state tools available to prospective buyers to manage potential liability include Prospective Purchaser Agreements (PPAs), and No Further Action (NFA) decisions.

The Oregon Legislature created the Prospective Purchaser program to encourage redevelopment of contaminated properties. DEQ may enter into a PPA with a prospective buyer that limits the purchaser’s liability for environmental cleanup at the property if the agreement will result in a “substantial public benefit” (e.g., substantial funding towards cleanup, cleanup actions, or productive reuse of vacant property). PPAs can often help buyers and sellers decide who will pay for and complete cleanup of the property. To provide liability protection, a PPA must be completed before the purchaser closes on the property. More information about PPAs is at http://www.deq.state.or.us/lq/cu/ppa.htm.

In many cases, concerns about liability can be addressed by the seller cleaning up the property before closing on the sale. Sellers often work though DEQ’s Voluntary Cleanup Program to investigate and clean up

Last Updated: 12/01/11 By: Annette Dietz

DEQ 11-LQ-058



contamination before a transaction closes. When cleanup is complete, DEQ will issue a No Further Action letter. This action does not release a current owner or subsequent purchaser from liability but does indicate that, based on the information then available to DEQ, the property has been cleaned up to DEQ’s satisfaction. An NFA may include conditions such as long-term monitoring requirements or land-use restrictions. In either case, for many purchasers, an NFA is a practical approach to addressing contamination.

In addition, DEQ’s Contaminated Aquifer Policy applies to certain properties that have been contaminated solely by releases at other properties. For more information about the Contaminated Aquifer Policy, see http://www.deq.state.or.us/lq/pubs/docs/cu/ContaminatedAquiferPolicy.pdf.

Note that even if a person qualifies for a defense to liability, a PPA, or relief under DEQ’s Contaminated Aquifer Policy, it does not mean that DEQ or someone else will clean up the property.

Buyer liability under federal law Under CERCLA, the owner of contaminated property is liable for cleanup costs, unless that owner qualifies for one or more statutory defenses.

CERCLA provides an “innocent purchaser” defense similar to that in Oregon law, for purchasers who “did not know and had no reason to know” of property contamination at time of purchase. To maintain this defense, the buyer must perform an all appropriate inquiry in compliance with U.S. Environmental Protection Agency rules (40 CFR Part 312). A detailed property assessment is required to meet the AAI standard.

CERCLA also provides a “Bona Fide Prospective Purchaser” (BFPP) defense to liability for certain buyers of contaminated property - even when buyers know of the contamination. Purchasers must perform AAI in compliance with the EPA rule and satisfy various “continuing obligations” to maintain the defense.

Unlike a PPA with DEQ, the federal BFPP defense does not require a written agreement

with EPA. This lack of an agreement, and uncertainty about several provisions in the new BFPP law, has caused concern among some buyers about their potential federal liability. EPA’s BFPP Policy recognizes that, in limited instances, the public interest is served by EPA entering into PPAs or some other form of agreement with purchasers of contaminated property.

Similar to Oregon law, security interest holders, persons who inherit contaminated property, and entities taking contaminated property through condemnation may have a defense to liability under CERCLA.

Managing liability with private agreementsParties to a real estate transaction can also allocate liability for contamination as between the buyer and seller through indemnification, hold-harmless, or similar agreements. While these can help buyers address uncertainty and are a common feature of many transactions, they do not relieve buyers of any underlying liability.

Summary• A prospective purchaser of property that

may be contaminated should make sure the property is investigated before the transaction closes.

• For many purchasers of contaminated property, having an agreement with the seller for cleanup, or ensuring that a DEQ NFA is in place are practical approaches to managing concerns about contamination and potential liability.

• To manage liability under state law, DEQ offers Prospective Purchaser Agreements.

Special rules not addressed in this fact sheet may apply to properties subject to the federal Resource Conservation and Recovery Act (RCRA) or to properties with underground storage tanks.

Alternative formats Alternative formats of this document (such as Braille or large type) can be made available. Contact DEQ’s Office of Communications and Outreach, Portland, for more information at 503-229-5696, or call toll-free in Oregon, at 1-800-452-4011, ext. 5696. Hearing-impaired persons may call 711.

Chapter 4

Third-Party Legal Opinions1

DinA e. AlexAnDer

Radler White Parks & Alexander LLPPortland, Oregon

1 The information contained in these materials should not be relied upon as comprehensive. These materials are not intended by Radler White Parks & Alexander LLP or the presenter as legal advice but are merely presented for discussion and illustrative purposes.

Contents

I. Basics/Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1A. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1B. What Is Third-Party Opinion Practice? . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1C. Why Do We Do It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1D. What Risk Is Associated with Giving a Legal Opinion? . . . . . . . . . . . . . . . . . . 4–1

II. Structure of an Opinion Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1

III. Specific Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2A. Entity-Related Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2B. Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2C. Trust Deed/UCC Financing Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3D. No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3E. No Pending Lawsuits or Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3

IV. Standard of Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3A. OSB Form Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3B. Opinion Back-Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3C. Reference Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3

AppendixesA. Sample Opinion Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–5B. Sample Opinion Back-Up Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–19

Chapter 4—Third-Party Legal Opinions




i. BaSiCS/inTROdUCTiOn

a. Context

Opinions rendered in real estate finance transactions.

B. what is Third-Party Opinion Practice?

The delivery of a legal opinion to a lender by counsel for a borrower in a real estate loan transaction.

1. Limited advice and information given to a nonclient.

2. Provides the lender with professional judgment of borrower’s counsel on legal issues concerning the borrower and the loan transaction.

C. why do we do it?

1. If one stops to consider the giving of third-party legal opinions, one may wonder why the lender does not obtain any legal opinion it desires or needs from its own counsel, who is typically drafting the loan documents for the transaction. Should not counsel for the lender be preparing enforceable documents on behalf of his or her client? Would not a failure to do so constitute malpractice?

2. Lenders realized that borrower’s counsel was in a better position to provide certain information about the borrower and thus demanded opinions from borrower’s counsel. This is a simple exercise in risk allocation.

3. Fundamentally, third-party opinions are given today because, in many commercial real estate loan transactions, the lender requires an opinion letter to close the loan. This is true even though the value of a third-party opinion is debatable.

d. what Risk is associated with Giving a Legal Opinion?

1. Legal. Malpractice insurance is on the line.

2. Practical. Reputation is on the line.

ii. STRUCTURE OF an OPiniOn LETTER

A. Parties represented by the opinion giver.

B. Documents reviewed by the opinion giver. These are listed in the beginning of most opinion letters and include all of the loan documents and entity documents, including formation documents, certificates of existence, and, perhaps, resolutions and incumbency certificates.

C. Information relied upon by the opinion giver. Some examples include:

1. No change in the status of the borrower;

2. Genuineness of signatures;

3. Borrower’s certificate.

a. What is it?

b. What should it cover?

c. What should it arguably not cover?

D. Assumptions—examples include:

1. Legal capacity of all parties to the loan documents;

2. Enforceability of the loan documents against the lender;

3. Borrower’s ownership of the property to be encumbered by the trust deed;

4. No mutual mistake or fraud;



5. For others, see pages A-4 to A-6 of Appendix A (Sample Opinion).

prACtiCe tip: What do II.A. through II.D. have in common? They are ways in which borrower’s counsel limits the opinion.

E. Legal opinions—general considerations.

1. In general, legal opinions should be limited to specific determinable matters that counsel can render after the exercise of reasonable professional judgment.

2. Applicable law.

3. Relevance.

prACtiCe tip: Do not render an opinion on a matter that is not reasonably related to the transaction.

4. Competence.

prACtiCe tip: Do not render an opinion outside the competence of lawyers. For example, lawyers should not render opinions on economic forecasts, property valuation, or financial statements. Rather, include assumptions in the opinion to address these issues or rely on a certificate as to the facts.

5. Addresses. Who can rely on the opinion?

a. Lender and successive holders of the loan.

b. Lender’s counsel.

F. Conditions and limitations—examples.

1. Limitations on enforceability such as bankruptcy.

2. No implication of the availability of equitable remedies.

3. List of matters on which no opinion is rendered.

4. Opinion not a guaranty or warranty.

5. Use of “knowledge” or “our actual knowledge.”

6. See pages A-8 to A-11 of Appendix A for others.

note: In the attached sample opinion, there are approximately 10 pages of assumptions, limitations, and conditions and fewer than two pages of actual legal opinions.

iii. SPECiFiC LEGaL OPiniOnS

prACtiCe tip: For every legal opinion given, the opinion giver should understand why the opinion is necessary and on what grounds the opinion can be given.

a. Entity-Related Opinions

1. Valid existence of borrower.

prACtiCe tip: An opinion giver should not give a “good standing” opinion in Oregon. Why?

2. Foreign qualification of borrower.

3. Authority of borrower to enter into the loan and to perform its obligations thereunder.

B. Enforceability

The loan documents constitute valid and binding obligations of the borrower and are enforceable against the borrower in accordance with their terms.



C. Trust deed/UCC Financing Statement

1. In form satisfactory for recording or filing, as applicable.

2. When recorded or filed, will constitute a perfected security interest in and a perfected lien upon the property.

prACtiCe tip: An opinion giver should not render an opinion on the priority of a perfected security interest or lien.

d. no Conflicts

Execution of the loan documents will not:

1. Conflict with or violate any judgment binding on borrower;

2. Result in the breach of any agreement to which borrower is bound.

E. no Pending Lawsuits or Claims

There are no lawsuits against the borrower or the property wherein an unfavorable decision would adversely impact the enforceability of the loan documents.

prACtiCe tip: An opinion giver should not ask another lawyer to render an opinion that the opinion giver would not be willing to give. Many practitioners consider this the Golden Rule of opinion practice.

prACtiCe tip: Only give opinions that are required by the lender. Do not offer up other opinions if they are not requested. Ask for the lender’s standard form of opinion to see what opinions are required. Then draft these opinions using the language set forth in the Oregon State Bar’s model opinion.

iV. STandaRd OF PRaCTiCE

prACtiCe tip: The standard of opinion practice varies from jurisdiction to jurisdiction. An opinion giver should not assume that an opinion given in Oregon will suffice, for example, in California or Washington.

a. OSB Form Opinion

Represents the standard in Oregon.

B. Opinion Back-Up

See Appendix B.

1. How do we determine if a specific legal opinion can be given?

2. What information does an opinion giver need to confirm or possess before giving a specific legal opinion?

3. Opinion practice requires an understanding of facts and law.

a. What facts support a specific opinion and must be confirmed?

b. What legal underpinnings are critical to an opinion? For example:

i. What are the statutory requirements in Oregon for a deed of trust?

ii. What is required in Oregon to create a valid security agreement?

C. Reference Materials

1. “Lawyers’ Opinions in Oregon Real Estate Transactions,” Documentation of Real Estate Transactions (OSB Legal Pubs 2008).



2. 2004 Oregon Model Opinion. The recommended opinion form for use in Oregon secured real estate transactions.

3. Real Estate Opinion Letter Guidelines, January 15, 2001 (American College of Real Estate Lawyers’ Opinion Committee and the American Bar Association Section of Real Property, Probate and Trust Law Committee on Legal Opinions in Real Estate Transactions).



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________________, 20__

________________________________________________________________________

Re: $____________ loan (the “Loan”) from ________________________ (“Lender”) to ____________________ (“Borrower”)

Ladies and Gentlemen:

INTRODUCTION

We have acted as Oregon counsel to Borrower [and _______________ (“Guarantor”)] in connection with the Loan.

[Alternate clause: We are not Borrower’s [or Guarantor’s] general counsel, we have not previously represented Borrower [or Guarantor], and we have made no investigation of Borrower’s [or Guarantor’s] legal affairs except as expressly set forth in this letter.]

[Alternate clause: Although we represent Borrower [or Guarantor] from time to time in connection with specific transactions, we are not general counsel to Borrower [or Guarantor], and we did not participate in the formation or organization of Borrower.]

In this capacity, Borrower [and Guarantor] [has] [have] requested that we deliver to you our opinion as to certain matters relating to the Loan. All capitalized terms used and not defined herein have the same meanings herein as set forth in the Deed of Trust, as defined below.

DOCUMENTS REVIEWED

In rendering our opinion, we have examined originals, copies identified to our satisfaction as true copies of the originals, or copies certified to us as being execution copies of the following documents[, provided to us under cover of a letter dated ______________ from _____________,] all of which are dated as of __________________ unless specifically noted otherwise:

1. Promissory Note made by Borrower to the order of Lender, in the original principal sum of $_______________ (the “Note”).

aPPEndiX a—SaMPLE OPiniOn LETTER



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2. Loan Agreement executed by Borrower and Lender;

3. Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing executed by Borrower, as grantor, to ____________________________, as trustee, for the benefit of Lender, as beneficiary (the “Deed of Trust”).

4. Assignment of Leases and Rents executed by Borrower, as assignor, in favor of Lender, as assignee (the “Assignment of Leases”).

5. Environmental Indemnity Agreement dated as of the date hereof, executed by Borrower, as indemnitor, for the benefit of Lender, as indemnitee (the “Environmental Indemnity Agreement”).

6. [Guaranty, dated as of the date hereof, executed by Guarantor for the benefit of Lender (the “Guaranty”)].

[Note: List other documents reviewed and that we are opining on.]

7. UCC-1 Financing Statement naming Borrower as debtor and Lender as secured party (the “Financing Statement”).

The documents referred to in paragraphs 1 through __ above are collectively called the “Loan Documents.” [Note: Loan Documents do not include Financing Statement.] The property encumbered by the Deed of Trust is referred to hereinafter as the “Property.” All property described in any of the Loan Documents in respect of which provision is made by the Loan Documents for a lien or security interest is referred to herein as the “Collateral.”

In addition to the Loan Documents [and the Guaranty], we have also been furnished with and have examined and relied on the following documents (collectively, the “Entity Documents”): (i) [Certificate of Limited Partnership of Borrower filed with the Oregon Secretary of State on _______________], (ii) Certificate of Existence issued by the Oregon Secretary of State with respect to Borrower dated _______________, (iii) [Articles of Organization of the Guarantor filed with the Oregon Secretary of State on _________________, and (iv) Certificate of Existence issued by the Oregon Secretary of State with respect to the Guarantor on _______________.]

RELIANCE WITHOUT INVESTIGATION

We disclaim any responsibility for any changes that may have occurred with respect to the status of Borrower or Guarantor from and after dates of the Entity Documents.



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We also assume that the Entity Documents and the public records upon which they are based are accurate and complete.

As counsel to Borrower [and Guarantor], we have made such investigation of law and have examined such records, documents, and agreements concerning Borrower [and Guarantor] as we deem necessary in order to render these opinions. In connection with such examination, we have assumed that all signatures on documents we have not seen executed, and all certifications by notaries public and other public officials are genuine.

Except to the extent the information constitutes a statement, directly or in practical effect, of any legal conclusion at issue, we have relied without investigation or analysis upon the information contained in representations by Borrower [or Guarantor] in the Loan Documents and in the Borrower’s [and Guarantor’s] Certificate attached as Exhibit A to this opinion letter and public officials. We have made no independent investigation with regard to such matters or with regard to the warranties and representations made by Borrower [or Guarantor] in the Loan Documents or of any related matters. Except as specifically identified herein, we have not been retained or engaged to perform, and we have not performed, any independent review or investigation of (1) any agreement or instrument to which Borrower [or Guarantor] may be a party or by which Borrower [or Guarantor] or any property owned by Borrower [or Guarantor] may be bound, or (2) any order of any governmental or public body or authority to which Borrower [or Guarantor] may be subject.

In delivering this opinion, we have not examined the books and records of the parties to the Loan Documents or made any other investigation with respect to the power and authority of the persons executing such documents, other than of Borrower [and Guarantor]. Instead, we are assuming, with your permission, that all of the Loan Documents have been duly authorized, executed, and delivered by all parties thereto, other than Borrower [and Guarantor], and that, except for Borrower [and Guarantor], each party to the Loan Documents has satisfied all necessary legal requirements applicable to such party to enter into the Loan Documents and the transaction contemplated by the Loan Documents.

With your permission, we are relying on the Borrower’s [and Guarantor’s] Certificate with respect to certain opinions set forth herein. We have not examined Borrower’s internal files and we made no special inquiry of Borrower other than obtaining the Borrower’s [and Guarantor’s] Certificate.

ASSUMPTIONS

In reaching the opinions set forth below, we have assumed the following:



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(a) the legal capacity of all natural person to enter into and perform their respective obligations under the Loan Documents;

(b) that the obligations of Lender under the Loan Documents are legal, valid, and binding obligations of Lender, enforceable in accordance with their respective terms;

(c) the authenticity and completeness of all documents submitted to us for review, that each such document that is a copy conforms to an authentic original, and that all signatures on each such document are genuine, and all public records reviewed are accurate and complete;

(d) [that Borrower (or Guarantor) is duly organized and validly existing as a _______ under the laws of the State of ______, and has taken all action required to authorize Borrower (or Guarantor) to enter into and execute the Loan Documents and perform all obligations of Borrower (or Guarantor) under the Loan Documents;]

(e) that Lender and its successors and assigns will: (i) act in good faith and in a commercially reasonable manner in the exercise of any rights or enforcement of any remedies under the Loan Documents; (ii) not engage in any conduct in the exercise of such rights or enforcement of such remedies that would constitute other than fair dealing; and (iii) comply with all requirements of applicable procedural and substantive law in exercising any rights or enforcing any remedies under the Loan Documents;

(f) that the exercise of any rights or enforcement of any remedies under the Loan Documents would not be unconscionable, result in a breach of the peace or otherwise be contrary to public policy;

(g) the vesting of fee title to the Property in Borrower at the time the Loan Documents are executed and recorded or filed and that Borrower has good and sufficient rights in and title to the Collateral within the meaning of Section 79.0203(2)(b) of the Oregon Uniform Commercial Code;

(h) The accuracy and sufficiency of the description(s) of the Collateral to provide notice to third parties of the liens and security interests created by the Loan Documents and the Financing Statement and to create an effective contractual obligation under the laws of the State of Oregon;

(i) that no party has notice of any defense against enforcement of the Loan Documents;



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(j) that there has not been any mutual mistake of fact or misunderstanding, fraud, duress or undue influence with respect to the making of the Loan or the execution of the Loan Documents;

(k) that Oregon law (without regard to Oregon law regarding conflicts of law) will apply to the interpretation, validity, and enforceability of the Loan Documents;

(l) that all statutes, judicial and administrative decisions, and rules and regulations of governmental agencies, constituting the law of the State of Oregon are generally available (i.e., in terms of access and distribution following publication or other release) to lawyers practicing in the State of Oregon, and are in a format that makes legal research reasonably feasible;

(m) that the constitutionality or validity of a relevant statute, rule, regulation or agency action is not in issue unless a reported decision in the State of Oregon has specifically addressed but not resolved, or has established, its unconstitutionality or invalidity;

(n) that Borrower [and Guarantor] will obtain all permits and governmental approvals required in the future, and take all actions similarly required, relevant to subsequent consummation of the Loan or performance of the Loan Documents;

(o) that Lender has satisfied all necessary legal requirements applicable to it and that Lender has all necessary and legal and corporate power and authority to enter into the Loan Documents and to consummate the Loan;

(p) that the granting of a security interest in any personal property consisting of a governmental permit, license or other authorization is not restricted or prohibited by any applicable law;

(q) that the trustee named in the Deed of Trust is validly existing, has full power and authority to act as trustee, and is authorized to act as a trustee pursuant to ORS 86.790;

(r) that there are no agreements or understandings among the parties to the Loan Documents, written or oral, and there is no usage of trade or course of prior dealing among such parties that would, in either case, define, supplement or qualify the terms of the Loan Documents;

(s) the execution and delivery of the Loan Documents by all signatories thereto;



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(t) the proper filing and indexing of the Financing Statement in the Office of the Secretary of State of Oregon and the proper filing and indexing of the Deed of Trust and the Assignment of Leases in the Official Records of _____________ County, Oregon, [and the proper filing and indexing of a UCC Financing Statement in the Official Records of __________ County, Oregon,] so as to give constructive notice of the security interests described therein; and

(u) the funding of the Loan to Borrower.

In rendering this opinion we have also assumed that the Loan Documents accurately reflect the complete understanding of the parties with respect to the transactions contemplated thereby and the rights and obligations of the parties thereunder. We have also assumed that the terms and conditions of the Loan as reflected in the Loan Documents have not been amended, modified or supplemented, directly or indirectly, by any other agreement or understanding of the parties or waiver of any of the material provisions of the Loan Documents.

OPINIONS

Based upon the foregoing and subject to the conditions, limitations, qualifications, and assumptions in this letter, we are of the opinion that:

1. Borrower is a ______________________ validly existing under the laws of the State of Oregon. [Guarantor is a _______________________ validly existing under the laws of the State of Oregon.]

2. All actions or approvals by Borrower, [and its members or managers or other applicable necessary parties] to bind Borrower under the Loan Documents have been taken or obtained. Borrower has all requisite [insert applicable entity] authority to undertake and perform the obligations of Borrower under the Loan Documents. [All actions or approvals by Guarantor to bind Guarantor under the Guaranty have been taken or obtained. Guarantor has all requisite [insert applicable entity] authority to undertake and perform the obligations of Guarantor under the Guaranty.]

3. The Loan Documents [(other than the Guaranty)] constitute the valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their terms. [The Guaranty constitutes the valid and binding obligations of the Guarantor and is enforceable against the Guarantor in accordance with its terms.]

4. [Based solely on the Borrower’s Certificate, the execution and delivery by Borrower of the Loan Documents and the payment of the indebtedness evidenced by the Note] will not: (i) conflict with or violate or result in a breach of any



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of the provisions of, or constitute a default under, or result in the creation or imposition of a lien, charge or encumbrance upon any of the properties or assets of Borrower pursuant to any agreement or instrument to which Borrower is a party or by which any of Borrower’s properties are bound, or (ii) conflict with or violate any judgment, order, writ, injunction, or decree binding on Borrower.]

5. [Based solely upon the Borrower’s Certificate, there are no pending or threatened lawsuits, claims or criminal proceedings against Borrower or specifically applicable to the Property wherein an unfavorable decision, ruling or finding would adversely affect the validity or enforceability of the Loan Documents or would materially and adversely affect the ability of Borrower to comply with its obligations under the Loan Documents.]

6. [Assuming that collection of the interest and other charges provided for in the Loan Documents is undertaken strictly in accordance with the terms thereof, the Loan Documents will not violate the usury laws of the State of Oregon.]

7. [Based solely upon the Borrower’s Certificate, Borrower has not received any notice from any governmental agency that the operation, use and occupancy of the Property does not comply with the applicable requirements of federal, state and local law.]

8. [The Deed of Trust and the Assignment of Leases are each in form satisfactory for recording in the Official Records of __________ County, Oregon and the Financing Statement is in form satisfactory for filing in the Office of the Oregon Secretary of State, and upon such recordation and filing, as applicable, the Deed of Trust, the Assignment of Leases and the Financing Statement shall constitute and create a perfected security interest in and a perfected lien upon the property or rights described therein, in each case in favor of Lender, to the extent a security interest in the collateral described therein can be perfected by such recordation or filing. No other recordation or filing is required to perfect or preserve such interest or lien other than continuation statements filed with the Oregon Secretary of State.]

9. [No fees, taxes or other charges, including, without limitation, intangible, documentary, stamp, mortgage, transfer or recording taxes or similar charges, are payable to the State of Oregon or to any jurisdiction there on account of the execution, delivery or ownership of the Note, the Deed of Trust or the other Loan Documents, the creation of the indebtedness evidenced or secured thereby, the creation of the liens and security interests thereunder, or the filing, recording or registration or the Deed of Trust, Assignment of Leases or the Financing Statements, except for nominal filing or recording fees.]



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LIMITATIONS

These opinions are subject to our assumptions and to the following additional conditions, limitations and assumptions:

A. The enforceability of the Loan Documents may be limited by, and our opinion in that regard is rendered subject to:

(i) all existing and future bankruptcy, insolvency, reorganization, fraudulent transfer, civil forfeiture, moratorium and other laws relating to or limiting the rights of creditors generally;

(ii) equitable principles and the effect of the exercise of judicial discretion in accordance with general principles of equity (regardless or whether applied in a proceeding in equity or at law); and

(iii) certain remedies, waivers, and other provisions of the Loan Documents may not be enforceable, but, subject to the qualifications set forth in the foregoing subparagraphs (i) and (ii), such unenforceability will not: (a) preclude the enforcement of the obligation of Borrower to pay the principal and interest as provided in the Note if an uncured event of default occurs as a result of a material breach of a material provision contained in the Loan Documents, (b) preclude theforeclosure of the Deed of Trust if an uncured event of default occurs as a result of a material breach of a material provision contained in the Loan Documents or (c) make the Loan Documents as a whole inadequate for the practical realization of the benefits to be provided thereby.

B. An Oregon court may not strictly enforce certain provisions contained in the Loan Documents or allow acceleration of the maturity of the indebtedness if it concludes that such enforcement or acceleration would be unreasonable under the then existing circumstances.

C. The use of the term “enforceable” does not imply any opinion on the availability of equitable remedies other than the foreclosure of the liens created by the Loan Documents in accordance with Oregon law.

D. Although (i) the following list is not a complete recitation of matters as to which no opinion is expressed and (ii) this list is not intended to supersede or diminish other limitations set forth in this opinion, we wish to specifically emphasize or advise you that we express no opinion as to the enforceability of: (a) self-help, rights of setoff, or the right to possession of the real or personal property or collection of rental or other income without (I) appointment of a receiver or acquisition of the Property through foreclosure or other means, (II) complying with the procedural requirements for appointment of a receiver, and



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(III) complying with the limitations applicable to the rights and powers of a receiver atlaw or in equity; (b) provisions purporting to establish evidentiary standards; (c) provisions relating to the waiver of rights, remedies, and defenses; (d) to the extent such amounts exceed actual damages, provisions that permit collection of: (I) a late charge, (II) increased interest rate after default or maturity, or (III) a prepayment premium; (e) any reservation of the right to pursue inconsistent or cumulative remedies; (f) any “due on sale” clause to the extent enforcement is not mandated by applicable federal law and that the security for the Loan would not be impaired; (g) any “due on encumbrance” clause in any circumstance in which the security for the Loan would not be impaired; (h) the effect of any “one-action” or “anti-deficiency” provisions contained in applicable trust deed statutes, including any statutory restrictions on deficiency judgments or the maintaining of further actions after foreclosure (including, without limitation, the provisions of ORS 86.770); (i) provisions for payment or reimbursement of costs and expenses or indemnification for claims, losses, or liabilities (including, without limitation, attorney fees) in excess of statutory limits or an amount determined to be reasonable by any court or other tribunal, and any provision for attorney fees other than to the prevailing party; (j) provisions pertaining to jurisdiction, venue or choice of law; (k) provisions purporting to appoint Lender or the trustee as attorney-in-fact for Borrower, (l) limitations on liability, or indemnification for any person or entity for their own negligence or misconduct; (m) provisions for charging interest on interest; (n) provisions that purport to establish or maintain priority of a lien or security interest created by the Loan Documents or the Financing Statement; (o) provisions in the Loan Documents purporting to impose continued liability following foreclosure, such as environmental or building code indemnity provisions; (p) provisions in conflict with statutory provisions allowing Borrower to reinstate a trust deed during a non judicial proceeding; (q) provisions purporting to allow Lender to determine the method or order of sale of property in a foreclosure action; (r) any disclaimer of liability under environmental laws; and (s) severability clauses in the Loan Documents.

E. We express no opinion as to the enforceability of a security interest in personal property collateral described in the Loan Documents in which the granting of a security interest is prohibited or restricted by law or restricted by the contract pursuant to which the rights are vested, or as to whether or not personal property described in the Loan Documents has been “reasonably identified” within the meaning of Section 79.0108 of the Oregon Uniform Commercial Code.

F. [Note: To be provided if rendering an enforceability opinion regarding a Guaranty.] [We also advise you that in certain circumstances, a surety may be exonerated if the creditor materially alters the original obligation of the principal without the consent of the guarantor, elects remedies for default that impair the subrogation rights, if any, of the guarantor against the principal, or otherwise takes any action without notifying the guarantor that materially prejudices



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the guarantor. We express no opinion with respect to the effect of: (i) any modification to or amendment of the obligations of Borrower that materially increases such obligations; (ii) any election of remedies by Lender following the occurrence of an event of default under the Loan Documents; or (iii) any other action by Lender which materially prejudices any Guarantor, if, in any such instance, such modification, election, or action occurs without notice to Guarantor and without granting Guarantor any opportunity to cure any default by Borrower.]

G. Regardless of the states in which members of this firm are licensed to practice, we express no opinion as to the laws of any jurisdiction other than the laws of Oregon [and applicable federal laws] in effect on the date of this opinion. We assume no obligation to update this opinion or to advise Lender of any changes in the circumstances, laws, or events that may occur or that might change the opinions expressed above after the date of this opinion.

H. This opinion is provided to you as a legal opinion only, and not as a guaranty or warranty of the matters discussed herein. Our opinion is limited to the matters expressly stated herein, and no other opinions may be implied or inferred.

I. Without limiting any other disclaimers or limitations contained in this opinion letter, we express no opinion as to any matter whatsoever relating to:

(i) the value of the collateral;

(ii) the adequacy of the consideration for the loan transactions contemplated by the Loan Documents;

(iii) the accuracy or completeness of any financial, accounting, or statistical information furnished to Lender by Borrower [or Guarantor];

(iv) the accuracy or completeness of any representations made by Borrower [or Guarantor];

(v) the financial status of Borrower [or Guarantor]; or

(vi) the ability of Borrower [or Guarantor] to meet its [their respective] obligations under the Loan Documents;

(vii) title to the Collateral or on the priority of the liens or security interests being created by the Loan Documents or the Financing Statement, or the attachment, perfection, or priority of any liens thereon or security therein; [Note: Unless specific opinion on these items is rendered (see opinion paragraph 8).]



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(viii) compliance with securities, pension and employee benefit laws and regulations (e.g. ERISA), zoning, land use, building, health and safety, or environmental rules, regulations, laws, ordinances, or directives;

(ix) compliance with fiduciary duty requirements, antitrust and unfair competition laws and regulations, tax laws and regulations; or

(x) whether Lender is doing business in the state of Oregon.

J. [Whenever the phrase “knowledge”, “our actual knowledge” or any variation thereof is used in this opinion, the subject modified by such phrase is limited to matters within the present actual knowledge of ________________ and ______________, the lawyer(s) in this firm actively engaged in the representation of Borrower, shall mean only the conscious awareness of facts or other information by such lawyer(s), and shall not include any knowledge that may be imputed to such individual(s) by constructive notice or other means or imply that any inquiry has been undertaken by such individual(s) with respect to any of such matters except to the extent that facts and circumstances presented to such individual(s) would compel a prudent lawyer to make further inquiry when presented with the same facts andcircumstances.]

K. This opinion is rendered at the request of Borrower as a requirement for closing. This opinion does not establish any attorney-client relationship between this firm and any addressee. Nothing contained in this opinion shall be deemed to constitute a waiver of the attorney-client privilege between this firm and Borrower [or Guarantor].

This opinion has been rendered to you in connection with the transaction described herein solely for your information and is not to be quoted in whole or in part or otherwise referred to, used, delivered to, or relied upon by any person or entity other than you, your legal counsel, and the successive holders of the Loan.

Very truly yours,

[INSERT NAME OF FIRM]



A-12

EXHIBIT A (to sample opinion letter)

BORROWER’S CERTIFICATE

Re: $___________ (Loan from _________________ (“Lender”)to ___________________ (“Borrower”))

The undersigned ______________ being the _______________ [person from whom the Certificate is obtained, e.g., officers of a corporation, members of an LLC or partners of a partnership] of Borrower makes this Certificate in connection with the Loan by Lender evidenced by:

[List the relevant Loan Documents – same list as the Opinion Letter.]

All of the foregoing, together with such other instruments and certificates and all other documents executed or delivered by or on behalf of Borrower and pertaining to the Loan, are collectively the “Loan Documents.”

This Certificate is made in connection with the submission by ______ ______________________ LLP, counsel for Borrower (“Counsel”), of a legal opinion in accordance with the requirements of the Loan Documents. The undersigned hereby acknowledges that, in making this Certificate, Counsel is relying on the truthfulness and accuracy of the statements contained herein and that Counsel would not be able to render its legal opinion without this information. Borrower intends that Counsel rely on this Certificate.

The undersigned hereby represents, warrants, and certifies to Counsel as follows:

A. There has been no amendment, modification, revocation or supplements to any of the following: (i) Certificate of Existence issued by the Oregon Secretary of State with respect to Borrower dated ________________, (ii) Certificate of ________________ issued by the ______________ Secretary of State with respect to Borrower dated ___________. No action has been filed or threatened to dissolve Borrower. [No member has sought to withdraw from the limited liability company and the undersigned are all of the members of the limited liability company.]

B. Borrower has the legal capacity to own the property encumbered by the Deed of Trust (the “Property”) and to carry on its business as now being conducted, and to the best of the knowledge of the undersigned, Borrower is in compliance with all applicable laws, regulations, ordinances, and orders of public authority as applicable.

C. The execution and delivery by Borrower of the Loan Documents does not conflict with or result in the violation of any of Borrower’s organizational documents as set forth in paragraph A above, nor does the execution and delivery by



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Borrower of the Loan Documents conflict with or result in the violation of any law, rule, or regulation, or any order, writ, judgment, decree, indenture, instrument, or agreement to which Borrower is a party.

D. The terms and conditions of the Loan as reflected in the Loan Documents have not been amended, modified, or supplemented, directly or indirectly, by any other agreement or understanding of the parties or waiver of any of the material provisions of the Loan Documents.

E. Borrower and Guarantor each covenant that they will act in good faith and in a commercially reasonable manner in the exercise of any rights or enforcement of any remedies under the Loan Documents and covenant that they will not engage in any conduct in the exercise of such rights or enforcement of such remedies that would constitute other than fair dealing.

F. No authorization, approval, or other action by and notice to or filing with any governmental authority or regulatory body is required for the execution, delivery, and performance by Borrower of the Loan Documents.

G. There are no threatened or outstanding liens, taxes, judgments, actions, or proceedings concerning Borrower or the Property pending before any court or governmental authority, bureau, or agency.

H. The representations and warranties of Borrower in the Loan Documents and any other documents submitted to Lender to induce Lender to make the Loan are correct on their date of submission and as of the date of this Certificate, before and after giving effect to the closing of the Loan, as though made on and as of the date of the closing of the Loan.

I. No event has occurred or is continuing, or would result from the Closing of the Loan, which constitutes an event of default, or would constitute an event of default but for the requirement that notice be given or time elapse, or both, under the Loan Documents, or under any other contract, agreement, indenture, or instrument to which Borrower is a party or by which Borrower is bound.

J. No proceedings by or against Borrower have been commenced in bankruptcy or for reorganization, liquidation, or the readjustment of debts under the Bankruptcy Code or any other law, whether state or federal, nor has Borrower made an assignment for the benefit of creditors, admitted in writing any inability to pay debts generally as they become due, or filed or had filed against it any actions seeking an order appointing a trustee or receiver of all or a substantial part of the property of Borrower.



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K. By executing this Certificate, the undersigned acknowledges that Borrower has requested that Counsel deliver to Lender the opinion required by the Loan Documents. The undersigned individually and on behalf of Borrower further acknowledges that by consenting to the delivery of the opinion, the undersigned and Borrower may be waiving their attorney-client privilege in whole or in part in connection with the matters set forth in this Certificate and the opinion.

L. Borrower has delivered the Loan Documents (i) directly to Lender, or (ii) to Counsel with instructions to Counsel to deliver such documents to Lender or escrow, or (iii) directly to escrow.

M. There are not further facts, estimates, or circumstances that would materially change any of the foregoing certifications.

IN WITNESS WHEREOF, I have executed this Certificate on this __________ day of __________________, 20_.

________________________________________



B-1

(AN EXAMPLE FROM AN OPINION RENDERED IN CALIFORNIA)

CLIENT: ___________________, a Delaware limited partnership (“Borrower”)

TRANSACTION: A Loan in the amount of $____________ to finance ______________________________________.

OPINION TO: [insert lender name]

DATE OF LASTOPINION/CORPORATEREVIEW MEMORANDUM: [insert date and brief description of last opinion

given]

PREPARED BY: __________________________

RESPONSIBLEPARTNER: __________________________

OPINIONAPPROVED BY: __________________________

FILE TITLE: _____________________/Opinion Backup(_____-___)

(Client file where the fullback up materials are filed.)

Once opinion is approved and issued, send copies of first page of checklist and the complete opinion letter to the Business Opinion Committee, c/o ____________ .

aPPEndiX B—SaMPLE OPiniOn BaCK-UP CHECKLiST



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PART I. DUE FORMATION, STANDING AND POWER.

OPINION GIVEN:

1. Borrower is a limited partnership duly formed and validly existing and in good standing under the laws of the State of Delaware and is qualified to conduct business in the State of California. Borrower has full limited partnership power and authority under such laws and under Borrower’s agreement of limited partnership or the certificate of limited partnership by which Borrower was formed, to execute and deliver the Loan Documents to which Borrower is a party and to observe and perform the provisions thereof and to own its properties and assets.

2. General Partner is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Delaware and is qualified to conduct business in the State of California. General Partner has full limited liability company power and authority under such laws and under General Partner’s operating agreement or the certificate of formation by which General Partner was formed, to execute and deliver the Loan Documents to which Borrower is a party on behalf of Borrower.

3. Guarantor is a limited liability company duly organized and validly existing and in good standing under the laws of the State of California. Guarantor has full limited liability company power and authority under such laws and under Guarantor’s operating agreement or the certificate of limited liability company by which Guarantor was formed, to execute and deliver the Loan Documents to which Guarantor is a party and to observe and perform the provisions thereof.

A. Due Formation and Organization/Incorporation; Foreign Qualifications.

1. Borrower was formed in the State of Delaware on ____________.

a. Checked that the Certificate of Formation was filed in compliance with Section 18-201 of the Delaware Limited Liability Company Act.

Checked □

b. Checked that the Application for Registration was filed in compliance with Section 17451 of the California Corporations Code.

Checked □

2. _____________________, a Delaware limited liability company (“CTC GENPAR”) was formed in the State of Delaware on__________________, 20__.



B-3

a. Checked that the Certificate of Formation was filed in compliance with Section 18-201 of the Delaware Limited Liability Company Act.

Checked □

b. Checked that the Application for Registration was filed in compliance with Section 17451 of the California Corporations Code.

Checked □

3. ____________________, a California limited liability company (“__________” or “Guarantor”) was formed in the State of California on December 21, 1994.

a. Checked that the Articles of Organization were filed in compliance with Section 17051 of the California Corporations Code.

Checked □

B. Validly Existing.

1. Reviewed copy of Borrower’s Certificate of Formation certified by Secretary of State of Delaware on ____________.

Done □

a. Reviewed the Certificate of Status certified by Secretary of State of Delaware on ______________.

Done □

(i) Obtained verbal good standings from the Secretary of State of Delaware on _______________ through status report delivered by private support service.

Received □ (___________)

b. Reviewed copy of Borrower’s Certificate of Registration certified by Secretary of State of California on ____________.

Done □



B-4

(i) Reviewed the Certificate of Status certified by Secretary of State of California on _________________.

Done □

(ii) Obtained verbal good standing from the Secretary of State of California on _______________ through status report delivered by private support service.

Received □ (___________)

c. Checked that all organizational documents are in order as of ________________.

Checked □

d. Checked that no certificates relating to winding up, dissolution, merger or consolidation have been filed.

Done □

e. Relied on Manager’s Certificate of CTCP on behalf of itself and in its capacity as the Manager of CTCA dated as of _________, ____ (“Manager’s Certificate”) executed by CTCP, in its capacity as the Manager of CTCA, in CTCA’s capacity as the sole member of CTC GENPAR (and as a limited partner of Borrower), in CTC GENPAR’s capacity as the general partner of Borrower re:

(i) No organizational document of Borrower has been filed with the Secretary of State of Delaware since _____________.

Certificate Checked □

(ii) To CTC GENPAR’s knowledge, in its capacity as the sole member of Borrower, no proceeding for the merger, consolidation, sale of assets and business, liquidation or dissolution of Borrower has been commenced or is threatened or is currently being contemplated by CTC GENPAR or the members of Borrower.


2. Reviewed copy of CTC GENPAR’s Certificate of Formation certified by Secretary of State of Delaware on ______________.



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Done □

a. Reviewed the Certificate of Status certified by Secretary of State of Delaware on ________________.

Done □

(i) Obtained verbal good standing from the Secretary of State of Delaware on ___________________ through status report delivered by private support service.

Received □ (___________)

b. Checked that all organizational documents are in order as of _____________________.

Checked □

c. Checked that no certificates relating to winding up, dissolution, merger or consolidation have been filed.

Done □

3. Reviewed copy of __________’s Articles of Organization certified by Secretary of State of California on _____________.

Done □

a. Reviewed the Certificate of Status certified by Secretary of State of California ______________.

Done □

(i) Obtained verbal good standing from the Secretary of State of California on _________________ through status report delivered by private support service.

Received □ (___________)

b. Checked that all organizational documents are in order as of ____________________.

Checked □

c. Checked that no certificates relating to winding up, dissolution, merger or consolidation have been filed.

Done □



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d. Relied on Managing Member’s Certificate of __________ dated as of ______________________ (“Managing Member’s Certificate”) executed by MEI, in its capacity as Managing Member of __________ re:

(i) No organizational document of __________ has been filed with the Secretary of State of California since _________ _____________________.


(ii) No proceeding for the merger, consolidation, sale of assets and business, liquidation or dissolution of __________ has been commenced or is threatened or is currently being contemplated by its Managing Member or the members of __________.


C. Good Standing.

1. Obtained Certificate of Status from the Secretary of State of Delaware and California. Borrower is in Good Standing in Delaware as of _____________ and in California as of _________________.

Received □

a. Obtained verbal Good Standing from the Secretary of State of Delaware and California on ________________ through status report delivered by private support service.

Received □ (___________)

2. Obtained Certificate of Status from the Secretary of State of Delaware and California. CTC GENPAR is in good standing in Delaware as of ___________________ and in California as of _________________.

Received □

a. Obtained verbal Good Standing from the Secretary of State of Delaware and California on _________________ through status report delivered by private support service.

Received □ (___________)



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3. Obtained Certificate of Status from the Secretary of State of California. __________ is in good standing in California as of _________________.

Received □

a. Obtained verbal good standing from the Secretary of State of California on ___________________ through status report delivered by private support service.

Received □ (___________)

D. Limited Liability Company Power.

1. Delaware Limited Liability Company Act and Borrower’s Partnership Agreement permit Borrower to execute and deliver the Loan Documents and to perform its obligations thereunder.

Checked □ (___________)

a. Reviewed Borrower’s Certificate of Formation.

Done □

b. Reviewed Section 18-201 of the Delaware Limited Liability Act.

Done □

c. There are no limitations or restrictions imposed on Borrower in Borrower’s Partnership Agreement which would prohibit Borrower from executing and delivering the Loan Documents or from owning and operating its properties, including the “Property” covered by the Deed of Trust or carrying on its business as presently conducted.

Confirmed □

2. Delaware Limited Liability Company Act and CTC GENPAR’s Operating Agreement permit CTC GENPAR to act as a limited partner of Borrower and to execute and deliver the Loan Documents on behalf of Borrower.

Checked □

a. Reviewed CTC GENPAR’s Certificate of Formation.

Done □ (___________)



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b. Reviewed Sections 18-201 of the Delaware Limited Liability Act.

Done □

c. There are no limitations or restrictions imposed on CTC GENPAR in CTC GENPAR’s Operating Agreement which would prohibit CTC GENPAR from executing and delivering the Loan Documents on behalf of Borrower, or to act as the Manager of Borrower.

Confirmed □

3. California Corporations Code and CTCA’s Operating Agreement permit CTCA to execute and deliver the Loan Documents.

Checked □

a. Reviewed CTCA’s Articles of Organization.

Done □

b. Reviewed Section 17150 of the California Corporations Code.

Done □

c. There are no limitations or restrictions imposed on CTCA in CTCA’s Operating Agreement which would prohibit CTCA from executing and delivering the Loan Documents on behalf of CTC GENPAR.

Confirmed □

4. California Corporations Code and CTCP’s Operating Agreement permit CTCP to act as the Manager of CTCA and to execute and deliver the Loan Documents on behalf of CTCA and Borrower.

Checked □

a. Reviewed CTCP’s Articles of Organization.

Done □


Done □



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c. Reviewed Operating Agreement of CTCP.

Done □

5. California Corporations Code and __________’s Operating Agreement permit __________ to act as Managing Member of CTCP and to execute and deliver the Loan Documents on behalf of CTCP and Borrower.

Checked □

a. Reviewed __________’s Articles of Organization.

Done □


Done □

c. Reviewed Operating Agreement of __________.

Done □

6. California Corporations Code and MEI’s bylaws permit MEI to act as Managing Member of __________ and to execute and deliver the Loan Documents on behalf of __________.

Checked □

a. Reviewed MEI’s Articles of Incorporation.

Done □


Done □

c. Reviewed MEI’s bylaws.

Done □

PART II. CONFLICTS

OPINION GIVEN:

The execution and delivery by Borrower of the Loan Documents to which Borrower is a party does not violate: (a) any provision of Borrower’s Organizational Documents; (b) any governmental statute, rule or



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regulation applicable to Borrower in commercial transactions of the nature contemplated by the Loan Documents; or (c) any order, judgment, or decree of any court or other governmental agency which is known to us and which is binding on Borrower or any of its property, the violation of which would materially and adversely affect Borrower, its assets, financial condition or operations.

The execution and delivery by Guarantor of the Loan Documents to which Guarantor is a party does not violate: (a) any provision of Guarantor’s Organizational Documents; (b) any governmental statute, rule or regulation applicable to Guarantor in commercial transactions of the nature contemplated by the Loan Documents; or (c) any order, judgment, or decree of any court or other governmental agency which is known to us and which is binding on Guarantor or any of its property, the violation of which would materially and adversely affect Guarantor, its assets, financial condition or operations

A. Operating Agreements: Articles of Organization.

1. Review of Borrower’s Partnership Agreement and Certificate of Limited Partnership reveals that there are no provisions that would be violated by transactions of Borrower contemplated by the Loan Documents or the performance by Borrower of its obligations thereunder.

Checked □

2. Review of __________’s Operating Agreement and Articles of Organization reveals that there are no provisions that would be violated by transactions of __________ contemplated by the Loan Documents.

Checked □

B. Governmental Statute, Rule, Etc.

1. Confirmed that Borrower’s and __________’s execution and delivery of the Loan Documents to which each is a party and the borrowing by Borrower pursuant thereto will not violate any California or governmental statute, rule, or regulation applicable to Borrower or __________.

General review done □ (insert atty name)

Additional reliance on no violation of governmental statute, rule, etc.:



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a. As certified by CTCP, in its capacity as Manager of CTCA, in its capacity as the Manager of CTC GENPAR, in its capacity as Manager of Borrower, in Paragraph ____ of the Manager’s Certificate.


b. As certified by __________, in its capacity as the Manager of CTCP, in its capacity as Manager of CTCA, in its capacity as the Manager of CTC GENPAR, in its capacity as Manager of Borrower in its capacity as Manager of Borrower, in Paragraph ____ of the Managing Member’s Certificate.


C. Orders, Writs, Judgments, Etc.

1. Confirmed that there are no orders, writs, etc:

a. Inquired of pertinent personnel of Borrower and Guarantors.

Done □

b. Surveyed applicable attorneys.

Done □

2. Additional reliance on no orders, writs, etc.:

a. As certified by CTCP, in its capacity as Manager of CTCA, in its capacity as the Manager of CTC GENPAR, in its capacity as Manager of Borrower, in Paragraph ______ of the Manager’s Certificate.


b. As certified by __________, in its capacity as the Manager of CTCP, in its capacity as Manager of CTCA, in its capacity as the Manager of CTC GENPAR, in its capacity as Manager of Borrower, in Paragraph ______ of the Managing Member’s Certificate.

Certificate Checked□



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PART III. DUE AUTHORIZATION, EXECUTION AND DELIVERY, AND ENFORCEABILITY

OPINION GIVEN:

Each of the Loan Documents (i) to which Borrower is a party has been duly executed and delivered by Borrower and each (other than the Financing Statements and the Borrower’s Certificates) constitutes a valid and binding agreement of Borrower enforceable against Borrower in accordance with its terms, (ii) to which Guarantor is a party has been duly executed and delivered by Guarantor and each constitutes a valid and binding agreement of Guarantor enforceable against Guarantor in accordance with its terms, (iii) to which __________ is a party have been duly executed and delivered by __________ and each (other than the __________ Certificate) constitutes a valid and binding agreement of __________ enforceable against __________ in accordance with its respective terms and (iv) to which __________ is a party have been duly executed and delivered by __________ and each (except the MEI Certificate and the __________ Certificate) constitutes a valid and binding agreement of __________ enforceable against __________ in accordance with its respective terms

A. Authorization.

1. Reviewed the Action By Unanimous Written Consent of the Members of CTCA (on behalf of itself and as the Manager of Borrower) dated as of ___________________ (“CTCA Consent”). The CTCA Consent authorizes this transaction and approves the Loan Documents.

Consent Checked □

2. Reviewed the Action By Unanimous Written Consent of the Members of ______________ on behalf of itself and in its capacity as Manager of CTCP dated as of ____________________ (“__________ Consent”). The __________’s Consent authorizes this transaction and approves the Loan Documents.

Consent Checked □

B. Due Execution and Delivery.

1. __________ (“__________”), as the President of MEI, in its capacity as the Managing Member of __________, and in __________’s capacity as the Manager of CTCP, and in its capacity as the Manager of CTCA, in its capacity as the sole member of CTC GENPAR, in CTC GENPAR’s capacity as the general partner of Borrower, will execute all copies of the Loan Documents.



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a. __________ was authorized to execute the Loan Documents as stated in the CTCP Consent.

Consent Checked □

b. __________ and MEI were authorized to execute the Loan Documents as stated in the __________ Consent.

Consent Checked □

c. __________ was authorized to execute the Loan Documents as stated in the __________ Consent.

Consent Checked □

2. Obtained Certificate of Authenticity dated ________________ executed by __________ certifying as to his execution of the Loan Documents to be delivered at the Closing, in his capacity as the President of MEI, in its capacity as the Managing Member of __________, in its capacity as Manager of CTCP, and in its capacity as the Manager of CTCA, in its capacity as the sole member of CTC GENPAR, in CTC GENPAR’s capacity as the general partner of Borrower.

Received □

3. Checked all loan documents for signature.

Checked □

4. Received copy of cover letter by which Loan Documents were delivered to escrow, or to us with instructions to deliver the same to Lender.

Received □

C. Enforceability.

We have reviewed the Loan Documents and any other documents referenced in the text of the Opinion and concluded that except for those exceptions and limitations stated in the Opinion, the Loan Documents and each such other document are valid, binding, and enforceable according to their terms.

General Review Completed □ (insert attorney name)



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PART IV. SUFFICIENCY OR RECORDATION OF DEED OF TRUST

OPINION GIVEN:

The Deed of Trust is in form sufficient to create a lien in favor of Lender on any interest of the Borrower in the real property collateral described in the Deed of Trust to secure the obligations recited in the Deed of Trust to be secured thereby, and is in proper form for recording in the Official Records of Santa Clara County, California, and upon such recording, will provide constructive notice of the lien of the Lender thereunder to subsequent purchasers and mortgagees of such real property collateral.

The Assignment of Leases and Rents is in form sufficient to create a lien in favor of Lender on any interest of the Borrower in the leases and rents described in the Assignment of Leases and Rents to secure the obligations recited in the Assignment of Leases and Rents to be secured thereby, and is in proper form for recording in the Official Records of Santa Clara County, California, and upon such recording, will provide constructive notice of the lien of the Lender thereunder to subsequent purchasers and mortgagees of such leases and rents.

A. Confirmed that the Deed of Trust creates a valid security interest in the personal property collateral. Checked the Deed of Trust to confirm that it contains a description of the personal real property.

Done □ (___________)

B. Reviewed CUCC Sections 9-201 and 9-203.

Done □ (___________)

Part V. SUFFICIENCY OF FORM OF FINANCING STATEMENT

OPINION GIVEN:

With regard to the personal property collateral identified and described in the Deed of Trust in which the Borrower purports to grant a security interest to Lender, the Deed of Trust is sufficient to create a security interest under the CUCC in such personal property collateral.

The Financing Statement to be filed with the filing office of the UCC Division of the Secretary of State of the State of California is in form sufficient for filing with such filing office. Upon the due filing of such Financing Statement with the filing office of the UCC Division of the Stateof California, the security interest of the Lender in the personal property collateral identified and described in both the Deed of Trust and the Financing Statement will be perfected to the extent that a security



B-15

interest in such personal property collateral can be perfected by the filing of a UCC-1 financing statement in such filing office.

A. Checked CUCC Article 9, Secured Transactions, to see that filing in the designated office as listed in the Opinion will perfect the security interests insofar as the portion of the collateral which consists of personal property:

• UCC 9-103: Security Interest Perfection Governance.• UCC 9-105: Definitions.• UCC 9-109: Classification of Goods.• UCC 9-110: Sufficiency of Description.• UCC 9-203: Enforceability of Security Interest; Proceeds,

Formal Requirements.• UCC 9-302: When Filing Is Required to Perfect Security

Interest; Security Interests to Which Filing Provisions of This Article Do Not Apply.

• UCC 9-303: When Security Interest is Perfected; Continuity of Perfection.

• UCC 9-306: Proceeds.• UCC 9-401: Place of Filing; Erroneous Filing; Removal of

Collateral.• UCC 9-402: Formal Requisites of Financing Statement;

Amendments.

Done □ (___________)

B. Checked financing statements to see that they comply with the proper form:

• Statement contains the name and mailing address of the debtor and the secured party.

• Statement indicates types or describes the items of personal property collateral covered.

Done □ (___________)

Chapter 5

Periodic Review: an idea whose Time Has Passed?

Jeffrey G. ConDit

Miller Nash LLPPortland, Oregon

Contents

I. Introduction and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1

II. The “Standard” Periodic Review Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1A. The Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1B. Why Hasn’t it Worked? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1C. The Alternative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1

III. Periodic Review Process for Urban Growth Boundary/Urban Reserve Adoption/Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–2A. Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–2B. The Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–2

IV. Judicial Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–4A. Standard Periodic Review Orders, UGB Orders, and Urban Reserves Outside

of Metro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–4B. LCDC Orders Regarding Designation of Urban and Rural Reserves by Metro . . . . . 5–5

V. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–5

Chapter 5—Periodic Review: An Idea Whose Time Has Passed?




i. inTROdUCTiOn and HiSTORY

SB 100, which required cities and counties to adopt comprehensive plans and land use regulations consistent with statewide planning goals, was enacted in 1973. By the early 1980s, most cities and counties had obtained acknowledgment of their plans and land use regulation from the Land Conservation and Development Commission (“LCDC”). The periodic review process was first enacted in 1981 in order to require local governments to review their acknowledged plans and regulations on a periodic basis in order to determine whether updates were necessary to address changes in circumstances or new regulations, or in cases where the local plans as enacted are otherwise not achieving the statewide planning goals. Or Laws 1981, chapter 748, section 9. As originally enacted, periodic review applied to all local governments and had to be conducted every five years. In 1999, after 18 years of failure, the standard periodic review process was substantially amended to limit its scope. See ORS 197.628 to 197.650; specifically ORS 197.628(3). Cities of less than 10,000 in population outside of Metro or a metropolitan planning organization were exempted, and periodic review was limited to once every ten years. Cities under 2,500 were completely exempted, regardless of location. The enactment of ORS 197.626 in 1999, however, gave periodic review a new lease on life in the context of urban growth boundary amendments: The statute required cities adopting urban growth boundary (“UGB”) amendments over 50 acres to submit them to LCDC “in the manner provided for periodic review.” Prior to this change, UGB amendments were enacted via post-acknowledgement plan amendments and subject to review by LUBA. In my opinion, periodic review hasn’t worked very much better in this context.

ii. THE “STandaRd” PERiOdiC REViEw PROCESS

a. The Procedure

Standard periodic review is conducted in two phases. The first phase involves evaluating the existing comprehensive plan and regulations and, if necessary, developing a “work program” to make necessary amendments to them. ORS 197.633(1). Phase two is the implementation of the work program by the completion of “work tasks.” ORS 197.633(1). The processes are more fully delineated in LCDC rules. See OAR Chapter 660, division 25. The Department of Land Conservation and Development’s (“DLCD”) director must approve proposed work programs and tasks. Decisions on the latter can be appealed or referred to DLCD. ORS 197.633(4). LCDC final orders on work tasks can be appealed to the Oregon Court of Appeals. ORS 197.633(5); ORS 197.650. It is the stated goal that the periodic review process be completed within three years of work program approval. ORS 197.633(7). DLCD is authorized to grant one extension for submitting a work program or completing a work task. ORS 197.636(1). LCDC is authorized to impose sanctions for tardy performance. ORS 197.636(2).

B. why Hasn’t it worked?

LCDC has never been given sufficient funding to provide the kind of support and conduct the expeditious review necessary to make timely and effective periodic review decisions or to enforce periodic review. In addition, there is so much mid-course tinkering with land use law by the legislature, LCDC, and the courts that by the time a local government has addressed the prior work tasks and submitted corrections, things have changed to the extent that a local government gets sent back or has to delay its submittals in order to go back and address the changes. As a result, periodic review became perpetual review; few local governments made it through in the timeline envisioned in ORS 197.633(7). The city of McMinnville, for example, received its periodic review notice on August 31, 1988. It is expecting its final order from LCDC terminating periodic review in the coming months.

C. The alternative

It is far faster and easier (or at least faster) for a local government to legislatively address new statutes, goals, or case law by enacting a post-acknowledgment plan amendment (“PAPA”) pursuant



to ORS 197.646. This statute requires a local government to bring its comprehensive plan and land use regulations into compliance with new statutes, goals, and rules, or the new statutes, goals, and rules apply directly to the local government’s decisions. Further, failure to bring local regulations into compliance can result in an enforcement action under ORS 197.319 to 197.335. The 1991 enactment of this much simpler solution to the problem of assuring that local plans and codes are kept up to date arguably rendered periodic review obsolete. The standard periodic review process has been dying on the vine ever since.

iii. PERiOdiC REViEw PROCESS FOR URBan GROwTH BOUndaRY/URBan RESERVE adOPTiOn/aMEndMEnTS

a. applicability

When (1) a metropolitan service district adds more than 1,000 acres to its UGB, (2) a city with a population of 2,500 or more expands its UGB by more than 50 acres, (3) a designation of an urban reserve by a metropolitan service district or city with a population of more than 2,500, (3) an amendment to an urban reserve by a metropolitan service district, or (5) an amendment to an urban reserve of more than 50 acres by a city of more than 2,500 in population, the affected government must submit such decision to LCDC for review “in the manner provided for review of a work task under ORS 197.633.” ORS 197.626.

B. The Process

OAR 660-025-0175 provides that such amendments must be adopted pursuant to the post-acknowledgement plan amendment process in ORS 197.610 and OAR 660-018-0020 and submitted for review pursuant to the requirements for a completed periodic work task under OAR 660-025-0130 and OAR 660-025-0140. OAR 660-025-0175(3), (4). The Department and Commission review the submittal pursuant to the requirements for review of a work task submittal under OAR 660-025-0085 and OAR 660-025-0140 to 660-025-0160. OAR 660-025-0175(5).

1. Filing and notice. When a local government completes a work task, it must provide notice to the Department of Land Conservation and Development (“DLCD” or the “department”) and to persons who participated at the local level orally or in writing. OAR 660-025-0140(1). The filing must include the decision and the entire record of the proceedings before the local government (unless the record exceeds 2,000 pages, in which case in can be shortened, OAR 660-025-030(3)).

2. Objections. Among other things, this notice must contain the requirements for filing a valid objection under OAR 660-025-0140(2). This section provides:

(2) Persons who participated at the local level orally or in writing during the local process leading to the final decision may object to the local government’s work task submittal. To be valid, objections must:

(a) Be in writing and filed with the department’s Salem office no later than 21 days from the date the notice was mailed by the local government;

(b) Clearly identify an alleged deficiency in the work task sufficiently to identify the relevant section of the final decision and the statute, goal, or administrative rule the task submittal is alleged to have violated;

(c) Suggest specific revisions that would resolve the objection; and

(d) Demonstrate that the objecting party participated at the local level orally or in writing during the local process.

OAR 660-025-0140(3) states that “[o]bjections that do not meet the requirements of section (2) of this rule will not be considered by the director or commission.”



3. director’s Report. If no valid objections are submitted, the director of the DLCD (the “director”) may simply approve the work task or may conduct his or her own review of whether the work task complies with the goals and applicable statutes and rules. OAR 660-025-0140(4).1 If valid objections are filed or DLCD conducts its own review, the department must issue a report focused on the issues raised in valid objections and issues of compliance identified by the department. OAR 660-025-0140(6).2 The director may issue an order approving the work task, remanding the work task, or forwarding the work task to LCDC or approve portions of the work task that do not affect the portions remanded or referred. OAR 660-025-0150(1). The director must send a copy of the order to the local government, objectors, and persons who requested notice. OAR 660-025-0150(2). There are three traps for the unwary/process issues to be mindful of.

a. no Right to Respond to Objectors. The local government and persons who may support the local government have no ability to respond to objections prior to issuance of the director’s report.

b. no Standing Unless You File an Objection. An interested party may not participate in the proceedings unless the party files an objection. This leads to the filing of precautionary objections in order to get a standing to participate. (LCDC amended OAR 660-025-050(6)(b) in 2011 to ameliorate this somewhat: A party who appeared locally may appeal a full or partial remand decision by the director.)

c. an Objector is Limited to the issues in its Objection. Although there is no rule on point, LCDC takes the position that an objector may only raise or discuss the issues in its objections on appeal. This is different from LUBA where any issue is fair game on appeal as long as it is raised by some party below. Many objectors incorporated other objections by reference to get around this problem.

4. appeal to LCdC. The director’s decision may be appealed to the Commission. OAR 660-025-0150. A director’s decision approving or partially approving a work task may only be appealed by a person who submitted a valid objection. A director’s decision remanding or partially remanding the work task may be appealed by the local government, an objector, or by another person who participated orally or in writing before the local government. Appeals are subject to the following requirements:

(d) A person, other than the local government that submitted the work task or the affected local government, appealing the director’s decision must:

(A) Show that the person participated at the local level orally or in writing during the local process;

(B) Clearly identify a deficiency in the work task sufficiently to identify the relevant section of the submitted task and the statute, goal, or administrative rule the local government is alleged to have violated; and

(C) Suggest a specific modification to the work task necessary to resolve the alleged deficiency.

OAR 660-025-150(6).

1 OAR 660-025-0140(4) provides: “If no valid objections are received within the 21-day objection period, the director may approve the work task. Regardless of whether valid objections are received, the director may make a determination of whether the work task final decision complies with the statewide planning goals and applicable statutes and administrative rules.”

2 OAR 660-025-0140(6) provides: “If valid objections are received or the department conducts its own review, the department must issue a report. The report shall focus on the issues raised in valid objections and issues of compliance identified by the department. The report shall identify specific work tasks to resolve valid objections or department concerns. A valid objection shall either be sustained or rejected by the department or commission based on the statewide planning goals and applicable statutes and administrative rules.”



5. Procedures on appeal. If a director’s order is appealed or referred to the Commission, the director may (but is not required to) prepare and submit a report on the appeal or referral. OAR 660-025-160(3). The report must be sent to the local government, all objectors, and all persons who filed an appeal to the Commission at least 21 days prior to the Commission hearing. OAR 660-025-160(4). Persons who receive the report may file written objections to the report within ten days of mailing. OAR 660-025-160(4).

6. Hearing. The Commission hears an appeal or referral on the record. The record consists of “the submittal, timely objections, the director’s report, timely exceptions to the director’s report, the director’s response to exceptions and revised report, if any, and the appeal if one was filed.” OAR 660-025-160(6). LCDC hearings on complex UGB amendments can easily take more than a day.

7. The decision

Following its hearing, the commission must issue an order that does one or more of the following:

(a) Approves the work task or a portion of the task;

(b) Remands the work task or a portion of the task to the local government, including a date for resubmittal;

(c) Requires specific plan or land use regulation revisions to be completed by a specific date. Where specific revisions are required, the order shall specify that no further review is necessary. These changes are final when adopted by the local government. The failure to adopt the required revisions by the date established in the order shall constitute failure to complete a work task by the specified deadline requiring the director to initiate a hearing before the commission according to the procedures in OAR 660-025-0170(3);

(d) Amends the work program to add a task authorized under OAR 660-025-0170(1)(b); or

(e) Modifies the schedule for the approved work program in order to accommodate additional work on a remanded work task.

OAR 660-025-0160(6).

8. Timing. LCDC’s decision is generally issued after the hearing. (Sometimes long after the hearing; LCDC’s order of approval of Metro’s designation of Urban and Rural Reserves took almost one year from the date of preliminary decision to the date of issuance.)

iV. JUdiCiaL REViEw

a. Standard Periodic Review Orders, UGB Orders, and Urban Reserves Outside of Metro

ORS 197.650 confers jurisdiction on the Court of Appeals. Any person who participated in the proceedings leading up to the final order may appeal. Appeals of periodic review orders other than a decision by Metro to designate urban and/or rural reserves are governed by ORS 197.651(3) to (7), (9), (10), and (12).

1. Filing an appeal. An appellant must file a petition for review within 21 days of the date LCDC delivers or mails the order. Copies must be served by certified mail on all persons who submitted oral or written testimony in the proceedings under appeal. These requirements are jurisdictional. ORS 197.651(3), (4).

2. The Record. The Agency must submit the record within 21 days of the filing of the petition. ORS 197.651(6). The briefing schedule is set by rules of the court. ORS 197.651(7). The briefing schedule follows the standard schedule for review of agency actions, generally 49 days for the opening brief, 49 days for the response brief, 21 days for reply, and 21 days for response to cross-appeal, running from the date the record is filed. ORAP 5.80, Brief Time Chart 2.



3. Scope of Review. ORS 197.652(9) and (10) set forth the scope of review for LCDC orders, which is essentially the same as the scope of review of contested case orders under the APA: unlawfulness in substance or procedure, unconstitutional, not supported by substantial evidence in the whole record.

B. LCdC Orders Regarding designation of Urban and Rural Reserves by Metro

Designation of urban and rural reserves by Metro and the counties under ORS 195.145(a) and (b) and ORS 195.141 follows the same procedures as above, except that it is on expedited review. ORS 197.651(8) requires the court to hear oral argument within 49 days of the date of delivery of the record (with some limited exceptions). ORS 197.651(11) directs the court to issue a final order “with the greatest possible expediency.” The chief consequence is that the court has expedited the briefing schedule: 21 days for the opening brief and 21 days for the response brief, with no reply brief allowed. ORAP 5.80, Brief Time Chart 1. The chief trap for the unwary is that the briefing schedule runs from the date that the petition for review is filed, meaning that the opening brief and the agency record are due on the same day.

V. COnCLUSiOn

Use of the periodic review process, in general, and for UGB amendments, in particular, is time-consuming, cumbersome, and not very responsive to the complex legal, factual, and policy issues raised.

Chapter 6

negotiating Conditions of approvalGreGory s. hAthAwAy

Hathaway Koback Connors LLPPortland, Oregon

ZAChAry p. mittGe

Hutchinson Cox Coons Orr & Sherlock PCEugene, Oregon

Contents

I. Introduction—Negotiating Conditions of Approval . . . . . . . . . . . . . . . . . . . . . . . . 6–1

II. The Fundamentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–1A. The Findings/Conditions Two-Step . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–1B. Authority to Impose Conditions; Legitimate Purposes . . . . . . . . . . . . . . . . . . 6–2C. There’s Feasibility, and Then There’s Feasibility . . . . . . . . . . . . . . . . . . . . . . 6–2D. When, Where, and How to Propose a Condition of Approval . . . . . . . . . . . . . . 6–3E. Timing and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–3

III. How Are Conditions of Approval Created?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–3A. Negotiation Between Staff and an Applicant . . . . . . . . . . . . . . . . . . . . . . . . 6–3B. Negotiation Between an Applicant and Parties to a Land Use Proceeding . . . . . . . 6–4

IV. Issues That Are Off Limits for Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–7A. Unlawful Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–8B. Unconstitutional Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–8C. Unwise Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–8

V. Tips for How to Negotiate Conditions of Approval . . . . . . . . . . . . . . . . . . . . . . . . 6–8

Appendix—Presentation Slides . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–11

Chapter 6—Negotiating Conditions of Approval




i. inTROdUCTiOn—nEGOTiaTinG COndiTiOnS OF aPPROVaL

This presentation will focus on the conditions of approval that are imposed on an applicant seeking land use approval through the local land use process.

Conditions of approval are imposed to mitigate impacts of a proposal and ensure that a local jurisdiction’s regulatory requirements are met. Effective applicants will make their best efforts to supply evidence and argument demonstrating compliance with each of the relevant approval criteria in a land use application and will often provide a narrative statement or draft findings that can be easily used by a decision-maker in drafting findings of approval. However, due to timing and other factors, an applicant may not be able to demonstrate compliance with all criteria at the time an application is filed and may propose conditions of approval to address certain factors. Generally, a local jurisdiction has the authority to impose conditions of approval so long as they are tied to legitimate planning purposes, they are commensurate with the impacts associated with the proposal, and there is evidence that satisfaction of the conditions is feasible. However, conditions of approval may constitute an unlawful exaction by the local jurisdiction if they fail to conform to constitutional limits on takings of real property.

Typically, the focus in the land use process is whether the applicant has met its burden of proof in satisfying the applicable approval criteria. However, once the applicant has demonstrated satisfaction of the applicable standards, the focus shifts to the type of conditions of approval that will ensure project impacts are mitigated and the local jurisdiction’s technical standards are met.

Local governmental staff usually submits a staff report to the local decision-maker prior to the hearing. Pursuant to ORS 197.163, the staff report is required to be submitted seven days prior to the initial hearing. The staff report will typically provide a recommendation to the decision maker and advise if the applicable legal standards have been met. If the recommendation is for approval, staff will also recommend certain conditions be imposed as part of the approval of the application.

ii. THE FUndaMEnTaLS

Before jumping into a discussion of negotiating conditions of approval, it is important to understand where conditions fit into a land use decision-making process. The fundamentals inform much of the discussion about when it is appropriate to use conditions of approval, how these conditions are used, and what they should contain. We include a brief overview of these fundamentals below, as well as some relevant case law and statutory provisions.

a. The Findings/Conditions Two-Step

Conditions are not a substitute for the required findings of compliance with the criteria, nor are they evidence to support a decision. Thomas v. Wasco Co., 30 Or LUBA 302 (1996); Miller v. City of Joseph, 31 Or LUBA 472 (1996). Instead, a local government must make a finding based on the evidence in the record that it is feasible to meet the criteria before imposing conditions of approval and then impose the conditions necessary to support the decision.

For example, if a criterion requires that “all developments shall provide safe pedestrian access,” a local government can impose a condition requiring the provision of a crosswalk or sidewalks if it makes adequate findings that it is feasible to provide safe pedestrian access by providing these improvements.

A local government needs to provide both the supporting findings and expressly impose the conditions in its decision. Thomas v. Wasco Co., supra, 30 Or LUBA 311 (“conditions do not excuse the county from first establishing that the relevant criteria can be satisfied”); Wal-Mart Stores Inc. v. City of Gresham, 54 Or LUBA 16, 48–9 (2007) (finding of feasibility alone is inadequate in the absence of a condition of approval); Nygaard v. City of Warrenton, 55 Or LUBA 648, 655 (2008) (accord).



B. authority to impose Conditions; Legitimate Purposes

In order to impose a condition of approval, a local government needs to have authority under its comprehensive plan or land use regulations to approve an application with conditions and be able to establish that the conditions support a legitimate planning purpose based on the record. Davis v. City of Bandon, 28 Or LUBA 38, 48 (1994).

Local governments usually can impose conditions of approval on permits, but it is advisable to look at local application review procedures and verify any limits on this authority. See ORS 215.416(4) (“The approval may include such conditions as are authorized by statute or county legislation.”); ORS 227.175(4) (“The approval may include such conditions as are authorized by ORS 227.175 or any city legislation.”).

A condition supports or furthers a “legitimate planning purpose” if it “furthers a planning policy or goal” based on evidence in the record. Benjamin Franklin Dev. v. Clackamas County, 14 Or LUBA 758, 761 (1986). Local government findings will generally provide a clear link between criteria, the evidence, and conditions of approval, but these connections are sometimes more evident to the decision-maker than they are from a review of its findings. Where the issue of need is raised on appeal, LUBA looks to the record to determine if it would “lead a reasonable person to conclude that evidence supports a need for the condition.” Vestibular Disorder Consult. v. City of Portland, 19 Or LUBA 94, 102 (1990). While this is admittedly a “relatively low” threshold for evidentiary challenges, LUBA has overturned conditions that lacked evidentiary support in the record or failed to clearly explain the connection between the evidence and the condition imposed. Botham v. Union County, 34 Or LUBA 648 (1998) (overturning “winter range” condition that did not rely on evidence in the record to fix dates specified in the condition). See also King v. Washington County, 60 Or LUBA 253, 260–61 (2009) (remanding condition requiring sight-obscuring fence, where a sight-obscuring fence already existed in the same location).

C. There’s Feasibility, and Then There’s Feasibility

Conditions of approval also must be demonstrated to be “feasible.” The Oregon Court of Appeals explained the concept of feasibility in the case of Meyer v. City of Portland, 67 Or App 274, 280 n. 5, 678 P2d 741 (1984), rev den 297 Or 82, 679 P2d 1367 (1984):

Petitioners argue that “feasibility” cannot be the applicable standard because nearly any conceivable project may be feasible if enough money is committed to it. It is apparent, however, that by “feasibility” LUBA means more that feasibility from a technical engineering perspective. It means that substantial evidence supports findings that solutions to certain problems (for example, landslide potential) posed by a project are possible, likely and reasonably certain to succeed.

A demonstration of feasibility is required for any condition of approval and can become a central issue in cases involving proposed conditions of approval that are based on conflicting expert testimony.

Further complicating matters is the fact that feasibility has different meanings in the context of a condition that defers a determination of compliance with a criterion and also in the context of a condition requiring an applicant to secure permits or approvals from state agencies.

In the event that an applicant is not able to demonstrate that a proposal complies with a criterion, a local government can choose to either deny the application, impose a condition (if the record supports the same), or, if the application involves a multi-stage approval process, sometimes condition the application on demonstrating compliance with the criterion at the second phase of the proceedings. Gould v. Deschutes County, 216 Or App 150, 161, 171 P3d 1017 (2007). Deferrals most commonly occur in situations like subdivisions or planned unit developments (PUDs), where there is an initial tentative plat approval followed by a later final plat approval. As these second phases do not include an opportunity for notice and comment, local governments are required to infuse these later



processes with the same participatory rights as the prior proceeding. Id. Since the participants will be afforded the opportunity to revisit the criterion in the subsequent proceeding, the only showing of “feasibility” required to impose a deferral condition is the much lower threshold of “a mere possibility of compliance in the future proceeding.” Gould v. Deschutes County, 227 Or App 601, 607, 206 P2d 1106 (2009). But see Meadow Neighborhood Assoc. v. Washington Co., 55 Or LUBA 472, 480–81 (2007) (deferral may be improper where the initial decision makes the subsequent review moot).

A similar standard applies where a local government finds that a criterion will be satisfied by a state agency permit and imposes conditions requiring that an applicant obtain state agency permits. In this case, “feasible” means that there is “substantial evidence in the record that the applicant is not precluded from obtaining such state agency permits as a matter of law.” Bouman v. Jackson Co., 23 Or LUBA 628, 646–47 (1992). However, this should not be confused with deferring a finding of compliance to a state agency. A local government cannot lawfully defer or delegate its own obligation to make a finding of consistency with local criteria to a state agency. Harcourt v. Marion County, 33 Or LUBA 400, 406 (1997).

d. when, where, and How to Propose a Condition of approval

Local governments are not required to develop their own conditions of approval. Rather, the obligation to develop conditions of approval rests with the applicant. Caster v. City of Silverton, 54 Or LUBA 441, 454 (2007). Many conditions of approval are initially developed in consultation with local government staff in pre-application conferences or more informal discussions between the applicant’s representatives and members of a local government’s planning or public works staff. These conditions of approval are often incorporated into the application itself as recommended conditions, although the same may also be incorporated in the staff report released seven days before the initial evidentiary hearing. See ORS 197.763(4)(b).

In addition, conditions of approval can be propounded during the evidentiary phase of the proceedings, by the applicant during its final rebuttal under ORS 197.763(6)(e) in response to new issues raised at the hearing, or in post-hearing submissions. Oien v. City of Beaverton, 46 Or LUBA 109, 127–28 (2003). Conditions are not considered evidence, and opponents are not entitled to have the record reopened to rebut the same. Marine Street LLC v. City of Astoria, 37 Or LUBA 587, 597–98 (2000)

E. Timing and Modification

A final plat approval that does not conform to conditions imposed by a tentative plat decision may nevertheless be approved if the tentative approval did not require compliance by the time of final plat approval or by a particular deadline. Bauer v. City of Portland, 38 Or LUBA 715, 723–24 (2000).

Conditions may be modified if they were not initially included to ensure compliance with an approval criterion, and the removal of the condition will not result in the development violating an applicable legal standard. Woodard v. Yamhill Co., 56 Or LUBA 141, 151 (2008). However, if a condition is imposed to ensure compliance with applicable criteria, a local government may not modify the same without explaining why the same is no longer needed. Oh v. City of Gold Beach, 60 Or LUBA 356, 362–63 (2010).

iii. HOw aRE COndiTiOnS OF aPPROVaL CREaTEd?

a. negotiation Between Staff and an applicant

Staff will usually and initially advise an applicant of the necessary conditions of approval during the pre-application conference between the applicant and local government staff. The pre-application conference is the opportunity for staff to advise an applicant of (1) the applicable legal standards that are required to be met to support approval of the application; (2) the key issues to be addressed; and (3) the type of conditions that will be imposed if the application is approved. This meeting provides the



opportunity for the applicant and staff to commence the negotiation of the type of conditions that will be recommended should the application be approved.

This negotiation will include the give and take between staff and the applicant to determine if there is a meeting of the minds as to the appropriate conditions of approval. This negotiation will continue once the application is filed and reviewed by staff and prior to the issuance of the staff report. Most local staffs in Oregon will provide draft recommended conditions of approval to an applicant prior to the issuance of the staff report. This provides an applicant the final opportunity to ensure the conditions are lawful and achievable before the staff report is issued.

In most cases, an applicant and staff are able to reach agreement on the recommended conditions of approval. However, if agreement cannot be reached, an applicant will have an opportunity at the public hearing to argue before the decision-maker why a condition is not proper.

The process described above also applies to applications that are initially approved by staff with the right of appeal by an applicant or parties to the proceeding. In Oregon, this process is usually referred to as a Type 2 approval. If staff and an applicant are able to agree on conditions of approval, the Type 2 decision will include these conditions. If staff and an applicant disagree on the conditions, an applicant can either decide to accept the conditions or appeal the decision to the next local decision-maker.

B. negotiation Between an applicant and Parties to a Land Use Proceeding

In addition to negotiation between staff and an applicant as described above, an applicant and other parties to a land use proceeding also have an opportunity to negotiate conditions of approval. This opportunity can occur while an applicant is negotiating conditions of approval with staff. However, many times an applicant will simply not have the ability to identify interested parties or attempt to resolve these issues outside the local hearing process. Some jurisdictions have made attempts to involve applicants and impacted neighborhoods or community organizations by requiring neighborhood meetings in advance of the public hearing process. It is often the case, however, that a potential opponent will learn of a development proposal through the public notice process, and will only have the opportunity to address issues of concern with the applicant during this public hearing process.

The only way this opportunity can realistic occur is if parties to the land use proceeding are willing to meet and discuss what conditions are necessary to mitigate project impacts. Opponents are all too often absent from the process of negotiating conditions of approval. Experienced practitioners with years or even decades of experience representing individuals and groups in opposition to development proposals can often count on one hand the times that they have been actively involved in negotiating conditions of approval. Much more often, opponents are focused on having the application denied by the decision-maker. This is unfortunate because it can be a missed opportunity for applicants, as well as opponents.

The practical approach of developing conditions of approval to address impacts on a surrounding neighborhood or community can provide efficiency in the land use process and save the local government, applicant and parties to the proceeding time and money.

1. For applicants, a Condition of approval Successfully negotiated with Likely Opponents is an investment in Certainty. One of the largest unknowns for any applicant is whether a development proposal will be subject to a determined opposition by the surrounding neighborhood. Dissatisfied community members (particularly neighbors) are far more likely to pursue a legal challenge at the local level, or at LUBA. An applicant facing such a legal challenge can expect to bear the direct costs of responding, as well as the carrying costs of the property—interest on loan amounts, taxes, and insurance—during the pendency of any appeal. The possibility of an unfavorable decision on appeal



will also often deter an applicant from commencing costly improvements until final resolution of an appeal, potentially resulting in a lost construction season, delayed revenues, and tension between an applicant and its lenders or investors.

What’s more, even if an applicant is successful in securing an approval in these circumstances, it may do so at the expense of the goodwill of the community. This is an issue of particular concern for projects that require multiple land use approvals before development can commence, as determined opponents will often continue to challenge development at each phase of the land use proceedings. It is also a concern for uses (particularly commercial uses) that will be relying on some of the same community members for its future customer base. After all is said and done, a use that is approved will have to thrive within the community where it obtained its permit approvals.

A negotiated condition of approval can address many of these problems and provide an applicant with tangible benefits, including:

a. Diminished direct costs associated with legal challenges;

b. Diminished carrying costs for real property during the pendency of appeals;

c. Reduced risk of an adverse decision on appeal;

d. Increased certainty with regard to the timeline for development or construction; and

e. An improved relationship with the community.

While not all negotiations will be fruitful, a successful negotiation may encourage community members to actively support an application that they have had input on and that meets their reasonable concerns. These kinds of partnerships can be invaluable to an applicant and to the future success of the use.

2. For Opponents, a Condition of approval is an Opportunity to address Quality of Life issues and to Provide Certainty. Opponents of a land use proposal are often dealing with two interrelated problems. The first is a sense that they are being excluded from the process that is impacting their community. The second is the list of concrete impacts that the development will have on quality of life. Negotiations concerning conditions of approval have the potential to address both of these concerns.

With regard to the first point, land use processes tend to involve the applicant much earlier than the community as a whole. In many instances, the applicant will be working with local government staff in a pre-application conference or conferences and informal discussions in order to make its own informal evaluation of the viability of a proposal well before it submits its application. It will often continue to work with various departments addressing completeness issues in the application for weeks or months before notice is provided to surrounding property owners.

For many opponents, however, the land use timeline is very compressed. It is not uncommon for neighbors of a proposed development to learn of it by a mailed notice a few weeks before the initial (and sometimes only) evidentiary hearing. The surprise of learning that a land use change is occurring in their community or neighborhood, combined with complex and unfamiliar planning concepts and application materials that can sometimes run into the hundreds of pages, can often lead to a sense of disenfranchisement and outrage at the proposal. A favorable staff report may also be perceived as the local government “taking sides” on the application and of the community being railroaded without a hearing. Candid negotiations concerning potential solutions can help to assuage these concerns and allow opponents to become more involved with a development that may directly impact them. This sense of being heard and not just being presented with a fait accompli can be valuable to opponents.

With regard to the second point, opponents usually have some very concrete concerns that may be effectively addressed by crafting conditions of approval. Except for very controversial issues or



developments, it is frequently the case that appeals attempting to block development are in actuality intended to block unfavorable impacts associated with the development. Neighbors and community members may have concerns such as their ability to travel safely to and from work, the safety of their children, health concerns associated with dust or pollution from development, impacts to natural areas or habitat values, or other quality of life issues. These issues are critically important to the affected groups or individuals. To the extent that condition or conditions of approval can address these issues, they are likely to be particularly valuable to an opponent.

3. There are Significant Obstacles to Overcome for an applicant and Opponents to negotiate Conditions of approval. Unfortunately, there are some obstacles that make negotiating conditions of approval difficult even in the best of circumstances.

a. Timing is Everything. The first is time. Many land use processes are subject to the 120-day clock, requiring that all local land use processes (including appeals) be complete, and a final decision rendered within 120 days of the date an application is deemed complete, or risk a mandamus action. ORS 215.427; ORS 227.178. Local governments are generally very cognizant of this time limit and will move forward as rapidly as possible to ensure that an initial decision is rendered within sufficient time to address any local appeals.

These exacting timetables can deter potential negotiations as parties that are preparing for evidentiary hearings or submissions or operating under local appeal deadlines may simply not have time to simultaneously be engaged in negotiations. In these circumstances, opponents are much more likely to take a hardline approach and attempt to eliminate the impacts of the application by defeating it.

Applicants do have the ability to slow this process by waiving strict compliance with the 120-day rule and may be do so by specified extensions of time. However, as noted, applicants frequently have carrying costs, construction schedules, and revenue projections that may make such extensions impractical. In addition, an applicant must carefully consider whether, in any particular case, a proposed extension to allow negotiations with an individual or group is motivated by a good faith desire to negotiate in good faith or merely a tactic to allow opponents more time to craft an effective response, or to increase carrying costs for the applicant.

b. Money Matters. A second obstacle to negotiating conditions is money. The direct expense of a local hearing or appeal, or an appeal to LUBA, can generally be estimated with reasonable accuracy by either of the parties. However, the costs of negotiation conditions of approval are often unknown and can be highly variable. It may simply not make financial sense for parties with limited resources to pursue negotiations under these circumstances.

In addition, the changes to an application or proposed improvement that are necessary to address potential impacts may not be financially feasible for an applicant. Reductions or alterations in an application to provide buffering or preserve area amenities may mean a reduced return of investment that an applicant is not willing to consider. Likewise, proposed improvements can be prohibitively expensive. Creative problem-solving may sometimes address these issues, but not always.

c. who is at the Table? A third potential obstacle is identifying the participants to the negotiations. This can be a particular problem for projects that raise a lot of attention and opposition. In these circumstances, an applicant may be able to avoid an appeal by accommodating the reasonable concerns of an individual or group. However, neither the applicant nor the opponents can guarantee that an appeal will not be filed. In fact, issues raised by a party may sometimes be relied on by others to pursue an appeal, even where the individual opponent has settled. See ORS 197.835(3) (“Issues shall be limited to those raised by any participant before the local hearings body . . .” (emphasis added)). Every case will involve a preliminary determination by the applicant as to whether the resolution



of a particular issue or with a particular individual or group, makes the costs of such an approach worthwhile.

d. Perceptions. A fourth, potentially significant, obstacle to negotiations is the parties’ perceptions of the opposing party. For an applicant, opponents are often considered, at best, ignorant intermeddlers who are intruding into an application where they have no business. For opponents, the perception of the applicant as an interloper intent on destroying the community or neighborhood for their own financial gain is often advanced, even for developers that live and work in the community. These perceptions are often exacerbated as the process continues, and it is often difficult to get the emotional volume turned down sufficiently to get the parties to consider sitting in the same room with one another. However, as an advocate seeking the best possible resolution for his or her client, an attorney should always be able to take a step back from the dispute and to objectively consider whether a negotiated resolution is appropriate and feasible.

e. Expectations. A fifth obstacle is the expectations of the parties. For opponents, this can be the expectation that “of course” the applicant “cannot get away with it” in their community. This expectation of ultimate success may result in an unwillingness to bargain at all or an expectation that an applicant will have to make substantial changes to an application or provide significant improvements before it will be allowed to construct the project at all. Conversely, many applicants have the expectation that the ownership of the property entitles them to their preferred development regardless of impacts or community attitudes and that any changes to the application are innately unreasonable. Where these attitudes are present, it can be extremely difficult to allow for a successful negotiation.

f. Process Limitations. Finally, the process itself can provide an obstacle to successful negotiation of conditions as any agreement reached by the parties must also be accepted by the local government and adopted into its decision. If the parties are able to agree on conditions of approval prior to the public hearing, staff can and usually will include them as recommended conditions of approval in the staff report. The trickier situation is when the parties are only able to reach an agreement on a condition of approval where an evidentiary record is already closed and additional evidence is necessary to support a proposed finding and condition. In this case, the parties will likely be able to petition to reopen the record for the introduction of the new evidence and conditions. However, reopening the record for the consideration of evidence will entitle other parties to rebut such evidence.

Moreover, while staff will usually agree to present negotiated conditions of approval, the local government decision-maker is not a rubber stamp. Most local decision-makers will likely make their best efforts to accommodate reasonable conditions of approval to avoid appeals to the decision. However, their primary goal is to adopt a defensible decision that is consistent with applicable law. Local governments have legitimate interests in enforcing local policy and preserving public investments in improvements and infrastructure. Where conditions are in conflict with local policy or simply unpalatable to the decision-maker, they may be rejected despite the agreement of the parties. The parties are strongly encouraged to discuss negotiations openly with local government staff, regardless of the phase of the proceeding. While staff cannot guarantee a particular decision by an independent decision-maker, staff can provide an invaluable perspective on areas to avoid.

iV. iSSUES THaT aRE OFF LiMiTS FOR nEGOTiaTiOn

The foregoing is not to suggest that all difficulties can, or should, be resolved by imposing conditions of approval. Many land use decisions involve situations where compromise is not the solution. However, a lawyer on either side should at least be willing to consider and counsel with clients concerning a meaningful condition that may resolve a contentious issue. Oregon legal counsel in general, and land use counsel in particular, are collegial and will be willing to discuss upfront whether a resolution is possible under the circumstances.



If negotiation is possible, however, there are some conditions that parties should avoid.

a. Unlawful Conditions

If the potential solution is contrary to the local code or comprehensive plan or other provision of applicable law, it should not be considered. The local code should be carefully consulted when developing conditions. While it may be tempting to reach a creative interpretation—particularly where the parties are close to reaching an agreement—the parties should be advised to keep in mind the fact that whatever conditions are agreed to will have pass muster with the local government decision-maker to be included in the decision. Specific conditions that should be avoided are:

1. Conditions that are not tied to a relevant criterion; and

2. Conditions that defer evaluation of criteria to a subsequent phase in the proceedings without providing an equivalent right of public participation.

B. Unconstitutional Conditions

No condition should be considered that requires the exaction of property that bears little or no benefit to the discretionary permit under Nollan or when the benefit required is not roughly proportional to the nature and extent of the applications impact under Dolan. To the extent that any exaction of property is considered, the parties should craft particularized findings supported by evidence in the record demonstrating that the exactions are roughly proportional to the direct impacts of the development. See McClure v. City of Springfield, 39 Or LUBA 329 (2001), aff’d 175 Or App 425, 28 P3d 1222 (2001), rev den 334 Or 327 (2002).

C. Unwise Conditions

Unwise conditions include conditions that are vague or ambiguous, conditions that are open-ended and do not provide a deadline that is either process-based (before final subdivision approval) or a fixed date (within two years of approval), and those conditions that are simply impractical.

While conditions are not required to be clear and objective, it is worthwhile for the parties to spell out the requirements of any stipulated conditions as clearly as possible. This benefits both parties by avoiding disputes later on between the parties or between the applicant and local government as to whether all necessary steps have been taken to conform to the requirement. The same is true with regard to timelines for compliance with conditions. Spelling out the date for compliance at the outset will avoid uncertainty for all parties about when the conditions must be met.

Finally, while an applicant might be expected not to agree to a condition that is prohibitively expensive or technically impractical, there is sometimes a temptation to get an agreement now and deal with future compliance issues as they arise. This temptation should be resisted. It can be a helpful exercise for the parties to imagine that compliance was required tomorrow and think carefully about whether the condition would still be feasible. If the condition is not feasible, consider why and see if there is a reasonable way to avoid these problems.

V. TiPS FOR HOw TO nEGOTiaTE COndiTiOnS OF aPPROVaL

Here are some of the tips we’ve learned over the years in negotiating conditions of approval based on the opportunities described above.

1. Make sure you’ve identified all of the impacts associated with the proposed project to determine what conditions of approval are reasonable. An example is the mitigation of traffic impacts associated with the project and an evaluation of how those impacts can be mitigated. You cannot negotiate conditions of approval if you haven’t properly determined the impacts. You cannot determine if a local jurisdiction’s condition is an unlawful exaction unless you understand the magnitude of project impacts.



2. Make sure the conditions of approval are lawful and feasible. As explained in this outline, proposed conditions of approval must be feasible, and evidence in the record demonstrates the conditions are actually achievable. If not, the conditions are not lawful and cannot be imposed to remedy project impacts.

3. Make sure you can satisfy the conditions of approval. If the mitigation is too expensive (but lawful), the project may have to be downsized to minimize the impact and make it affordable for the project. Make sure the applicant has control over satisfaction of the condition of approval. If not, the condition is likely not lawful and cannot be imposed by the local jurisdiction.

4. Make sure you’ve attempted to reach out to parties to the proceeding that are affected by the proposed project to determine their concerns regarding impacts caused by the project. Do this early on in the proceedings, including attending neighborhood association meetings where you’ll have the opportunity to present the project and receive input from the community.

5. Make sure the proposed conditions of approval are unambiguous so there is no question how an applicant can satisfy the condition. We’ve seen many situations where “after the fact” the condition is ambiguous and staff has a different opinion than the applicant in satisfying it.

6. Make sure the proposed conditions of approval do not simply grant authority to the local government to make a future technical decision without input from the applicant. This type of proposed condition needs to be negotiated with staff prior to the decision to make sure any future actions by staff are clearly defined.

7. Make sure that you’re dealing with the right people. Land use processes tend to be fairly informal and encourage any interested party to speak out. However, when you’re talking about negotiating conditions, you want to make sure that you have the right people in the room. For applicants, this likely means making sure that a point of contact with a community organization or nonprofit entity has been duly designated or appointed to act on behalf of the organization and that individuals involve spouses, trustees, etc., who may have a direct impact on any resolution. For opponents, this is usually an easier exercise as the point of contact is generally the applicant’s attorney or, in some cases, land use planner or architect. However, you will generally want to confirm with each that he or she has authority to bind the principal in any discussions.

8. Focus the discussion where it needs to be focused: on concerns and solutions. Land use decision-making can be a confusing mass of personality conflicts, perceptions, and details. However, to be productive, discussions should be candid assessments of problems and potential solutions. The parties should limit as much as possible attempts to bring in legal positions that are better left to the hearings process or to engage in unproductive attempts to insult or accuse the opposing party and concentrate instead on whether there is a basis for a resolution.

9. Use assistance when it is appropriate and available. Many jurisdictions have community mediation services that may be helpful in getting the parties to explore their concerns and potential solutions. In addition, LUBA’s rules allow for an alternative dispute resolution process that is used more infrequently that it should be. Again, this is potentially an avenue for the parties to reach an agreement that is protective of their interests.

10. Think of the bottom line. This applies equally to applicants and opponents. For an applicant, an opportunity to discuss problems with a neighborhood can be hurried passed in the rush to obtain an approval, only to see more time and expense go out the door on an appeal. However, even if no appeal is filed, an applicant may still have bypassed valuable information (flooding issues, traffic impacts, etc.) that may have long-term consequences. The same is, to some degree, true for applicants, bypassing an opportunity to discuss a potential solution may not only result in increased costs on appeal but a meaningful opportunity to direct growth in the area.



Metes and Bounds of Real Estate and Land Use LawMetes and Bounds of Real Estate and Land Use LawNegotiating Conditions of Approval

October 12, 2012Negotiating Conditions of Approval

October 12, 2012

OutlineOutline

I. What Are Conditions of Approval?II. The FundamentalsIII. How Are Conditions of Approval

Created?IV. Issues That Are Off-Limits for

NegotiationV. Top Ten Tips for Negotiating

Conditions of Approval

I. What Are Conditions of Approval?II. The FundamentalsIII. How Are Conditions of Approval

Created?IV. Issues That Are Off-Limits for

NegotiationV. Top Ten Tips for Negotiating

Conditions of Approval



I. What Are Conditions of Approval?I. What Are Conditions of Approval?

Conditions imposed on a land use approval to ensure compliance withcriteria where compliance is not demonstrated in the application.

Applicants have the Burden of Proof as to all applicable criteria.

However:It is impractical to satisfy some criteria before obtaining land use approval,

andThe hearings process may identify additional issues that are not fully

addressed in the application.

Conditions of approval allow organization of the approval to ensurecompliance beyond the application phase, and flexibility to addressnew issues that are raised in the hearings process.

Conditions imposed on a land use approval to ensure compliance withcriteria where compliance is not demonstrated in the application.

Applicants have the Burden of Proof as to all applicable criteria.

However:It is impractical to satisfy some criteria before obtaining land use approval,

andThe hearings process may identify additional issues that are not fully

addressed in the application.

Conditions of approval allow organization of the approval to ensurecompliance beyond the application phase, and flexibility to addressnew issues that are raised in the hearings process.

Organization Organization

It is often impractical to demonstratecompliance in an application.

Some criteria may relate to futuredevelopment.

Others criteria are general in natureand may require one or moreconditions to implement.

Conditions allow a decision-makerto ensure that criteria are met aspart of a future approval process.

It is often impractical to demonstratecompliance in an application.

Some criteria may relate to futuredevelopment.

Others criteria are general in natureand may require one or moreconditions to implement.

Conditions allow a decision-makerto ensure that criteria are met aspart of a future approval process.



FlexibilityFlexibility

The Land Use Hearings Processoften raises unanticipated issues.

Testimony may identify unknownon-site or off-site conditions orconcerns.

The decision-maker may also takeissue with how an applicationaddresses relevant criteria.

Conditions may be used to allow thedecision-maker the flexibility toapprove an application whileresponding to these new issues.

The Land Use Hearings Processoften raises unanticipated issues.

Testimony may identify unknownon-site or off-site conditions orconcerns.

The decision-maker may also takeissue with how an applicationaddresses relevant criteria.

Conditions may be used to allow thedecision-maker the flexibility toapprove an application whileresponding to these new issues.

II. FundamentalsII. Fundamentals

1. Findings/Conditions Two-Step2. Local Government Authority to Impose3. The Three Kinds of Feasibility4. Who, When and How to Impose

Conditions5. Timing and Modification of Conditions

1. Findings/Conditions Two-Step2. Local Government Authority to Impose3. The Three Kinds of Feasibility4. Who, When and How to Impose

Conditions5. Timing and Modification of Conditions



Findings/Conditions Two-StepFindings/Conditions Two-Step

Conditions Are Not A Substitute for Findings

Findings are used to establish that an application conforms to criteria.

Conditions can be used wherefindings are made that it is feasibleto meet the applicable with thecondition.

Without the required findings,however, a condition is essentiallyonly an instruction and isinadequate to sustain a decision.

Conditions Are Not A Substitute for Findings

Findings are used to establish that an application conforms to criteria.

Conditions can be used wherefindings are made that it is feasibleto meet the applicable with thecondition.

Without the required findings,however, a condition is essentiallyonly an instruction and isinadequate to sustain a decision.

Findings Are Not A Substitute For Conditions

The reverse is true as well.

A local government cannot rely on afinding that an application can beapproved by imposing a condition -and then not impose the condition.

Findings Are Not A Substitute For Conditions

The reverse is true as well.

A local government cannot rely on afinding that an application can beapproved by imposing a condition -and then not impose the condition.

Authority to Impose ConditionsAuthority to Impose Conditions

Authority under the Comprehensive Plan or Land Use RegulationsMost local governments are allowed bytheir legislation to impose conditions onpermits. See also ORS215.416(4)(County) & ORS 227.175(4)

However, it is prudent to closely reviewlocal legislation for any limits. Botham v.Union Co., 34 Or LUBA 648, 654(1998)(remanding lot of record dwellingwhere code provision may haveprovided exclusive list of conditions).

Authority under the Comprehensive Plan or Land Use RegulationsMost local governments are allowed bytheir legislation to impose conditions onpermits. See also ORS215.416(4)(County) & ORS 227.175(4)

However, it is prudent to closely reviewlocal legislation for any limits. Botham v.Union Co., 34 Or LUBA 648, 654(1998)(remanding lot of record dwellingwhere code provision may haveprovided exclusive list of conditions).

Legitimate Planning Purpose

A local government must also be able todemonstrate, based on the record, that acondition supports or furthers somelegitimate planning purpose

Applicable criteria provide a legitimateplanning purpose.

The evidentiary burden is fairly low.

No proof of need for the condition isnecessary, as long as the findings andrecord would lead a reasonable person toconclude that the evidence supports aneed for the condition.

Legitimate Planning Purpose

A local government must also be able todemonstrate, based on the record, that acondition supports or furthers somelegitimate planning purpose

Applicable criteria provide a legitimateplanning purpose.

The evidentiary burden is fairly low.

No proof of need for the condition isnecessary, as long as the findings andrecord would lead a reasonable person toconclude that the evidence supports aneed for the condition.



Feasible, FEAS-ible, and Feas-IBLEFeasible, FEAS-ible, and Feas-IBLE

There are three species of feasibility which are important for understanding conditions:

1. A condition of approval used to meet a criteria must befeasible - possible, likely and reasonably certain tosucceed.

2. A condition of approval used to defer a finding ofcompliance to a later hearing must be feasible - merepossibility of compliance in the future proceeding.

3. A condition an approval requiring a state agency permitmust be feasible - not precluded…as a matter of law.

There are three species of feasibility which are important for understanding conditions:

1. A condition of approval used to meet a criteria must befeasible - possible, likely and reasonably certain tosucceed.

2. A condition of approval used to defer a finding ofcompliance to a later hearing must be feasible - merepossibility of compliance in the future proceeding.

3. A condition an approval requiring a state agency permitmust be feasible - not precluded…as a matter of law.

Who, When and How to Propose ConditionsWho, When and How to Propose Conditions

Local governments can, but are not required to, proposeconditions to support approval.

Conditions can be proposed throughout the land use process,and are often developed during pre-application conferences orthrough completeness review.

Conditions can be proposed in the application, or in staffreports.

Conditions are not evidence, and can be introduced during anapplicant’s final rebuttal.

Local governments can, but are not required to, proposeconditions to support approval.

Conditions can be proposed throughout the land use process,and are often developed during pre-application conferences orthrough completeness review.

Conditions can be proposed in the application, or in staffreports.

Conditions are not evidence, and can be introduced during anapplicant’s final rebuttal.



Timing/ModificationTiming/Modification

In a two-stage approval process, conditions on atentative approval need not be completed by the timeof final approval unless specified in the condition.

Conditions that did not ensure compliance with acriterion can be removed, if removal does not resultin the development violating a legal standard.

Conditions that were imposed to ensure compliancewith a criterion cannot be modified unless a localgovernment can demonstrate why they are no longerneeded.

In a two-stage approval process, conditions on atentative approval need not be completed by the timeof final approval unless specified in the condition.

Conditions that did not ensure compliance with acriterion can be removed, if removal does not resultin the development violating a legal standard.

Conditions that were imposed to ensure compliancewith a criterion cannot be modified unless a localgovernment can demonstrate why they are no longerneeded.

III. How Are Conditions of Approval Created?III. How Are Conditions of Approval Created?1. Conditions

Negotiated with Staff

2. Conditions Negotiated with Third-Parties

1. Conditions Negotiated with Staff

2. Conditions Negotiated with Third-Parties



Negotiation Conditions With StaffNegotiation Conditions With Staff1. Necessary conditions of approval usually come up during the initial

pre-application conference, when criteria and key issues arediscussed.

2. In most cases, the applicant and staff are able to reach an agreementon conditions in the pre-application or completeness phase.

3. Staff will generally include negotiated conditions of approval as partof the staff report, and incorporate conditions into a Type II land usedecision (made without a hearing).

4. The applicant retains the ability to challenge imposed conditions inappeals before the local government and LUBA.

1. Necessary conditions of approval usually come up during the initialpre-application conference, when criteria and key issues arediscussed.

2. In most cases, the applicant and staff are able to reach an agreementon conditions in the pre-application or completeness phase.

3. Staff will generally include negotiated conditions of approval as partof the staff report, and incorporate conditions into a Type II land usedecision (made without a hearing).

4. The applicant retains the ability to challenge imposed conditions inappeals before the local government and LUBA.

Negotiating Conditions With Other PartiesNegotiating Conditions With Other Parties

May Have Benefits for Applicants

1. Reduces direct costs from appeals.2. Reduces indirect carrying costs from appeals.3. Reduces risks of adverse decision on appeal.4. Increases certainty of timeline for development.5. Improves relationship with community.

May Have Benefits for Applicants

1. Reduces direct costs from appeals.2. Reduces indirect carrying costs from appeals.3. Reduces risks of adverse decision on appeal.4. Increases certainty of timeline for development.5. Improves relationship with community.

May Have Benefits for Opponents

1. Reduces direct costs from appeals.

2. Allows for greater involvement in the planning process.

3. Reducing impacts to the surrounding neighborhood.

May Have Benefits for Opponents

1. Reduces direct costs from appeals.

2. Allows for greater involvement in the planning process.

3. Reducing impacts to the surrounding neighborhood.



Why doesn t it happen more often then?Why doesn t it happen more often then?

There are several significant obstacles to successful negotiations:

1. Parties2. Perceptions3. Expectations4. Time 5. Money6. The Land Use Process

There are several significant obstacles to successful negotiations:

1. Parties2. Perceptions3. Expectations4. Time 5. Money6. The Land Use Process

Who is at the Table?Who is at the Table?

1. Negotiations stand a better chance of finallyresolving issues if they involve more impactedparties, or resolve a central issue.

2. No one can guarantee that an appeal will not befiled by a party that is not at the table.

3. Issues may form the basis of an appeal if they areraised by any participant.

1. Negotiations stand a better chance of finallyresolving issues if they involve more impactedparties, or resolve a central issue.

2. No one can guarantee that an appeal will not befiled by a party that is not at the table.

3. Issues may form the basis of an appeal if they areraised by any participant.



ExpectationsExpectations

Of the Applicant…

It’s My Property - I Can Develop It The Way I Want!

Why Should I Change Anything For Them?

Of the Applicant…

It’s My Property - I Can Develop It The Way I Want!

Why Should I Change Anything For Them?

Of Opponents…

They Can t Just March In Here And Do Whatever They Want!

They re Wealthy They Can Afford To Shell Out For [Insert Improvement]!

Of Opponents…

They Can t Just March In Here And Do Whatever They Want!

They re Wealthy They Can Afford To Shell Out For [Insert Improvement]!

Beware of StereotypesBeware of Stereotypes

Of the Applicant…

Robber Barons/ Interlopers Intent on Destroying the Community for Personal Gain

Of the Applicant…

Robber Barons/ Interlopers Intent on Destroying the Community for Personal Gain

Of Opponents….

NIMBY Intermeddlers Intruding into an Application Where They Don t Belong

Of Opponents….

NIMBY Intermeddlers Intruding into an Application Where They Don t Belong



Timing is EverythingTiming is Everything

1. The statutory 120-day clock means that localgovernments will try to process applications as fastas possible.

2. Other parties may not learn of an application untilthe notice of the first evidentiary hearing.

3. Extensions may be granted by the applicant, butthe applicant may be limited by carrying costs,construction schedules, revenue projections, orquestions of good faith.

1. The statutory 120-day clock means that localgovernments will try to process applications as fastas possible.

2. Other parties may not learn of an application untilthe notice of the first evidentiary hearing.

3. Extensions may be granted by the applicant, butthe applicant may be limited by carrying costs,construction schedules, revenue projections, orquestions of good faith.

Money MattersMoney Matters

1. Direct costs of negotiating conditions are often uncertain.

2. Changes to the application may result in a reduced return on investment.

1. Proposed improvements can be prohibitively expensive.

1. Direct costs of negotiating conditions are often uncertain.

2. Changes to the application may result in a reduced return on investment.

1. Proposed improvements can be prohibitively expensive.



Process LimitationsProcess Limitations

1. Limits on the introduction of evidence afterthe close of the evidentiary record.

2. Local decision-makers are reasonable butnot a rubber-stamp.

3. Negotiations should be coordinated withstaff to identify issues, and an informalgovernment perspective.

1. Limits on the introduction of evidence afterthe close of the evidentiary record.

2. Local decision-makers are reasonable butnot a rubber-stamp.

3. Negotiations should be coordinated withstaff to identify issues, and an informalgovernment perspective.

IV. Topics That Are Off Limits In Negotiations

IV. Topics That Are Off Limits In Negotiations

1. Unlawful ConditionsDon t bother to negotiate conditions that a decision-maker cannotlawfully impose.

2. Unconstitutional ConditionsBe cautious about any kind of condition that involves an exaction ofproperty.

3. Unwise ConditionsAlthough vague or ambiguous conditions are not inherentlyunlawful, they re a really a bad idea.Also, try to ensure that conditions are tied to fixed deadlinesin the process or with a fixed timeline.

1. Unlawful ConditionsDon t bother to negotiate conditions that a decision-maker cannotlawfully impose.

2. Unconstitutional ConditionsBe cautious about any kind of condition that involves an exaction ofproperty.

3. Unwise ConditionsAlthough vague or ambiguous conditions are not inherentlyunlawful, they re a really a bad idea.Also, try to ensure that conditions are tied to fixed deadlinesin the process or with a fixed timeline.



V. Top Ten Tips for Negotiating ConditionsV. Top Ten Tips for Negotiating Conditions

1. Identify All Project Impacts1. Identify All Project Impacts

Knowledge is power.

You need to know the magnitude of yourproject’s impacts before you can think ofconditions to mitigate them.

This is also critical for determiningwhether an exaction is constitutional.

Knowledge is power.

You need to know the magnitude of yourproject’s impacts before you can think ofconditions to mitigate them.

This is also critical for determiningwhether an exaction is constitutional.



2. Make Sure Conditions are Lawful and Feasible

2. Make Sure Conditions are Lawful and Feasible

Again, there is no point in negotiating acondition that a decision-maker cannotlawfully impose.

The same is true with regard to feasibility.

Generally, a condition should not be imposedunless the findings demonstrate that it ispossible, likely, and reasonably certain tosucceed.

Again, there is no point in negotiating acondition that a decision-maker cannotlawfully impose.

The same is true with regard to feasibility.

Generally, a condition should not be imposedunless the findings demonstrate that it ispossible, likely, and reasonably certain tosucceed.

3. Make Sure The Condition Can Be Satisfied.

3. Make Sure The Condition Can Be Satisfied.

There is no point in negotiating for a conditionthat is lawful, but too expensive or results intoo many significant changes to the project.

This is a waste of everyone s time.

This could also raise the possibility of anunlawful exaction if the condition is ultimatelyimposed.

There is no point in negotiating for a conditionthat is lawful, but too expensive or results intoo many significant changes to the project.

This is a waste of everyone s time.

This could also raise the possibility of anunlawful exaction if the condition is ultimatelyimposed.



4. Try to Involve Impacted Parties.

4. Try to Involve Impacted Parties.

A hearings notice or notice of a decision may not be the bestway for an applicant to introduce themselves to theneighborhood.

Applicants should try to get the community involved in newdevelopment early.

A great way to do this is by requesting an invitation to the localneighborhood group meeting.

Some local governments have gone so far as to require that apre-application meeting with surrounding neighbors becompleted prior to submission of an application.

A hearings notice or notice of a decision may not be the bestway for an applicant to introduce themselves to theneighborhood.

Applicants should try to get the community involved in newdevelopment early.

A great way to do this is by requesting an invitation to the localneighborhood group meeting.

Some local governments have gone so far as to require that apre-application meeting with surrounding neighbors becompleted prior to submission of an application.

5. Makes Sure Conditions Are Clear and Objective.

5. Makes Sure Conditions Are Clear and Objective.

Again, this is not a legal requirement,just common sense.

Conditions should be spelled out asclearly as possible such that everyoneknows what is going happen and when.

If not, conditions can take on a life oftheir own via later interpretations.

Again, this is not a legal requirement,just common sense.

Conditions should be spelled out asclearly as possible such that everyoneknows what is going happen and when.

If not, conditions can take on a life oftheir own via later interpretations.



6. Involve the Applicant in Any Technical Decisions.

6. Involve the Applicant in Any Technical Decisions.

In many land use decisions the devil is in the details.

Even where compliance with a particular approval criteria isdetermined to be feasible, technical details of compliance oftenrequire additional plans, engineering reports, etc.

The parties should be careful to ensure that all conditionsinvolve the applicant in technical decisions impacting thedevelopment.

Conditions can incorporate performance agreements to moreclearly spell out complex details.

In many land use decisions the devil is in the details.

Even where compliance with a particular approval criteria isdetermined to be feasible, technical details of compliance oftenrequire additional plans, engineering reports, etc.

The parties should be careful to ensure that all conditionsinvolve the applicant in technical decisions impacting thedevelopment.

Conditions can incorporate performance agreements to moreclearly spell out complex details.

7. Make Sure You re Dealing With the Right People.

7. Make Sure You re Dealing With the Right People.

The object of a negotiated condition is to arrive at a resolution ofthe issues with the appropriate parties.

There are legal, as well as practical, considerations in who toinvolve in these discussions.

Applicants will want proof that a representative is authorized tospeak on behalf of a group or entity.

Applicants should also try to involve spouses when dealing withimpacted individual property owners.

Opponents will want confirmation that a member, employee, orrepresentative is authorized to speak on behalf of the applicant.

The object of a negotiated condition is to arrive at a resolution ofthe issues with the appropriate parties.

There are legal, as well as practical, considerations in who toinvolve in these discussions.

Applicants will want proof that a representative is authorized tospeak on behalf of a group or entity.

Applicants should also try to involve spouses when dealing withimpacted individual property owners.

Opponents will want confirmation that a member, employee, orrepresentative is authorized to speak on behalf of the applicant.



8. Focus the Discussion on Concerns and Solutions.

8. Focus the Discussion on Concerns and Solutions.

Land use disputes can involve a haze ofperceptions, expectations, emotions, details,etc.

Discussions should be centered on a candidassessment of problems, and potentialsolutions.

They should not be used as a forum to airgrievances or to dispute legal positions thatare better left to the hearings process.

Land use disputes can involve a haze ofperceptions, expectations, emotions, details,etc.

Discussions should be centered on a candidassessment of problems, and potentialsolutions.

They should not be used as a forum to airgrievances or to dispute legal positions thatare better left to the hearings process.

9. Use Assistance When Appropriate and Available.

9. Use Assistance When Appropriate and Available.

Many communities now have communitymediation services that can be helpful ingetting the parties to see through the presentdispute and explore potential solutions.

LUBA also offers parties to an appeal theopportunity to participate in mediation throughthe Oregon Consensus Program.

Many communities now have communitymediation services that can be helpful ingetting the parties to see through the presentdispute and explore potential solutions.

LUBA also offers parties to an appeal theopportunity to participate in mediation throughthe Oregon Consensus Program.



10. Think of the Bottom Line.10. Think of the Bottom Line.

Negotiated conditions of approval involving third parties will notwork in every situation.

However, there may be something to be gained from trying.

For applicants, this could be additional information about theimpacts of a proposal, the neighborhood, or the site itself.

For other parties, this can be an opportunity to participate inshaping the growth of their community.

And, who knows, you may actually get to yes.

Negotiated conditions of approval involving third parties will notwork in every situation.

However, there may be something to be gained from trying.

For applicants, this could be additional information about theimpacts of a proposal, the neighborhood, or the site itself.

For other parties, this can be an opportunity to participate inshaping the growth of their community.

And, who knows, you may actually get to yes.

Conclusion Conclusion

Questions?Questions?

Chapter 7

Basics of CondemnationJohn m. JunKin

Garvey Schubert BarerPortland, Oregon

Contents

I. The Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

II. The Statutory Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

III. The Pre-Filing Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1A. Public Necessity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1B. Pre-Filing Entry on the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1C. Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

IV. The Pleadings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

V. The Condemner’s Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2

VI. The Just Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2A. Appraiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2B. Property’s Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2

VII. The Remainder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2Special Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3

VIII. The Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3A. Appraiser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3B. View . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3C. Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3D. Other Witnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3

IX. The Fees and Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–3

X. The Offer of Compromise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–4

Chapter 7—Basics of Condemnation




i. THE POwER

Constitutional Power (Art. I, Sec. 18, Or Const.; U.S. Const. Am V) allows the state to take private property but obligates the payment of “just compensation.”

ii. THE STaTUTORY PROCESS

ORS chapter 35 provides the process to be followed in a condemnation case.1

iii. THE PRE-FiLinG PROCESS

a. Public necessity

Condemner declares the “public necessity of the proposed use” by resolution or ordinance. ORS 35.235(2). Declaration and commencement of action “creates a disputable presumption of the necessity of the proposed use.” ORS 35.235(3). The validity of the public necessity and purpose, if raised, is to be addressed “in a summary proceeding prior to trial.” ORS 35.235(4).

B. Pre-Filing Entry on the Property

ORS 35.220 provides the condemner with a process “to enter upon, examine, survey, conduct tests upon and take samples from any real property that is subject to condemnation by the condemner.”

C. Offer

Condemner determines the amount of just compensation to offer. Generally, just compensation is determined by an appraisal. Prior to the condemner’s appraiser appraising the property, the owner must be given “not less than 15 days’ written notice . . . of the planned appraisal inspection.” ORS 35.346(4). Condemner attempts to reach an agreement with the property owner.2 At least 40 days before filing, the condemner must make written offer to owner. If the amount of just compensation due, as determined by the condemner, is more than $20,000, the offer must be accompanied by a written appraisal. Offers less than $20,000 must include “a written explanation of the bases and method by which the condemner arrived at the specific valuation of the property.” ORS 35.346(2).

iV. THE PLEadinGS

The complaint must allege the “true value of the property sought and the damage, if any, resulting from the appropriation.” ORS 35.255. The defendant is the person in whose name the record title appears—and may include “any lessees or other person in possession and all other persons having or claiming an interest in the property.” ORS 35.245(2).3 The answer should also allege the true value of the property and the damage, if any, resulting from the taking. ORS 35.295. The date of valuation is the earlier of the date the condemner took possession of the property or the filing of the complaint. Once the complaint is filed, the condemner may amend the amount of just compensation down “only upon motion of the condemner and a finding by clear and convincing evidence that the appraisal upon which the original offer is based was the result of a mistake of material fact that was not known and could not reasonably have been known at the time of the original appraisal or was based on a mistake of law.” ORS 35.346(2).

1 With the exception that the procedures in ORS chapter 368 shall be followed for county road rights of way.2 Attempting to first reach an agreement with the owner is not required before filing if the owner “is at the time

concealed within the state or, after reasonable effort by condemner, cannot be found within the state.” ORS 35.235(5).3 The condemner will want to make sure that interests of all parties in the property are taken; however, for

purposes of valuation, having multiple parties claiming an interest in the property has no impact. If there is more than one party claiming an interest in the property, the court, subsequent to the trial on just compensation, would apportion the compensation between the parties. State Hwy Con. v. Burk, 200 Or 211, 243, 265 P2d 783 (1954).



V. THE COndEMnER’S POSSESSiOn

The condemner may take immediate possession upon depositing in the court the condemner’s alleged amount of just compensation. ORS 35.265. ORS 35.352 also provides process for the condemner to serve notice of intent to take immediate possession and the opportunity for a court to hear any objections.

Vi. THE JUST COMPEnSaTiOn

The fair market value of the property and damage, if any, to the remainder property. The fair market value is the amount a buyer, willing but not compelled to buy, would pay a seller, willing but not compelled to sell. Just compensation is determined as though the property belongs to one person.

a. appraiser

An appraisal can only be made by a licensee of the Oregon Appraisal Certification and Licensure Board (ACLB) and must be in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP). ORS chapter 674.4

B. Property’s Value

The property is to be valued at its “highest and best use”—that is, the use that is the most profitable likely use at the time of the appraisal, which may not be the same as the current use. The property should be considered as whether it is part of a “larger parcel.” A “larger parcel” requires there to be continuity of use and ownership with contiguous properties. If the highest and best use is different from the current use, it cannot be too remote and speculative if it is to be considered. State Hwy Comm. v. Compton, 265 Or 339, 507 P2d 13 (1973). The appraiser may use one of several approaches to determining fair market value: comparable sales, cost, or income. The comparable sales approach is the commonly used approach, i.e., the appraiser finds sales of property he/she concludes are comparable to the subject property and concludes a value for the subject. Where the condemnation is of only a portion of the property, the appraiser will likely use a “before and after” approach to determine the damage, if any, to the remaining property. That is, the appraiser will determine the value of the property before the taking and immediately after the taking, albeit using the same day, which is typically the date of filing the complaint.

Vii. THE REMaindER

In addition to the fair market value of the property being taken, the owner is entitled to just compensation for damages, if any, to the remainder—also known as severance damages. State Hwy Comm. v. Hooper, 259 Or 555, 488 P2d 421 (1971).5 This is arguably the most subjective part of an appraisal. The basis for a conclusion of severance damages cannot be based on mere speculation. If the appraiser determines there is damage to the remainder, he/she must determine if the damages can be “cured,” and if so the property owner is entitled to the lesser of the damages to the remainder or the cost to cure.6

4 The only person, other than an appraiser, who may testify as to the property’s value in a condemnation is the property’s owner.

5 The severance damages are the diminution in the fair market value to the remaining property resulting from the taking. The property owner is not entitled to business losses resulting from the taking. State Hwy Comm. v. Vella, 213 Or 386, 323 P2d 941 (1958).

6 It is not uncommon for a partial taking to affect the access to the remaining property. That impact to access may or may not be allowed in considering any damage to the remainder. Although some condemner attorneys may believe the issue of impact to access in condemnations is a “nonissue,” that is not necessarily the case. However, this topic requires more attention than this “basic” condemnation law presentation can provide.



Special Benefits

Any “general benefit” the property may receive as a result of the project causing the taking is not admissible, e.g., a benefit that other properties in the area are receiving, such as improved traffic control. However, if the property is receiving a “special benefit,” e.g., a benefit that is unique to the property, then the appraiser can determine the “amount” of that benefit, but it can be used only as an offset to any severance damages.

Viii. THE TRiaL

Neither side has the burden of proof on the just compensation. The owner, although the defendant, may elect to go first and must file notice of such election not less than seven days prior to the trial date. If the owner elects to go first, then the owner shall open and close the argument to the jury. ORS 35.305.

a. appraiser

Contrary to Oregon’s “ambush by expert” approach in state court, in condemnations the parties’ appraisers are known, as the parties are required to exchange appraisals prior to trial. The condemner’s appraisal is provided with the offer. If the owner does not accept the offer and has his/her own appraisal, that appraisal must be provided to the condemner not less than 60 days before trial. ORS 35.346(4). Failure to timely provide the appraisal prohibits the use of the appraisal at trial. ORS 35.346(5)(a). Further, each party is required to provide the other party with “a copy of every appraisal obtained by the party as part of the condemnation action.” ORS 35.346(5)(b). For example, if the condemner obtains a new or updated appraisal prior to trial, it is required to provide a copy of that appraisal to the defendant. If the appraisal “relies on a written report, opinion or estimate of a person who is not an appraiser, a copy of the written report, opinion or estimate must be provided with the appraisal.” “If any appraisal provided . . . relies on an unwritten report, opinion or estimate of a person who is not an appraiser, the party providing the appraisal must also provide the name and address of the person who provided the unwritten report, opinion or estimate.” ORS 35.346(8).

B. View

Before a jury is formed, either party may move for a view of the property. ORS 35.315. The view is done prior to presenting any evidence and typically after the parties’ opening statements.

C. Evidence

Although the appraiser’s opinion is admissible, the appraisal itself is not admissible into evidence. However, it is common for portions of the appraisal to be submitted as exhibits, e.g., the comparables utilized by the appraiser as part of his/her comparable sales approach to value.

d. Other witnesses

Although only the appraiser (and the property owner) may testify as to value of the property, other experts are commonly called upon in condemnation trials. For example, if there is an issue of damage to the remainder that might be “cured” by modifying the remaining property, an architect might be called to testify as to the costs of the “cure.” Further, a local real estate broker, although not allowed to provide an opinion on the amount of just compensation, may be called to testify as to local real estate market conditions as of the time of the taking.

iX. THE FEES and COSTS

If the property owner obtains a verdict that “exceeds the highest written offer in settlement submitted by the condemner before the filing of the action . . . ,” the defendant shall be awarded costs and disbursements “including reasonable attorney fees and reasonable expenses as defined in ORS



35.335(2).”7 The condemner may recover its costs and disbursements if the defendant does not obtain a verdict in excess of the condemner’s offer, but in no case may the condemner recover its attorney and expert fees. ORS 35.346(9).

X. THE OFFER OF COMPROMiSE

In 2009, provisions for an offer of compromise were added to ORS chapter 35. Under the offer of compromise provision, after the filing of the complaint the condemner may make settlement offer(s) to the defendant. The offer may be in a lump sum amount to be inclusive of fees and costs or may be made as an offer of just compensation plus reasonable attorney fees and costs to be determined by the court. The defendant has three days to accept or reject the offer.8 If rejected, the condemner is not responsible for fees and costs incurred by the defendant after the offer if the verdict does not exceed the offer of compromise. The condemner may make multiple offers of compromise but no later than ten days before trial. ORS 35.300.

7 “Expenses mean costs of appraisals and fees for experts incurred in preparing and conducting the defense to the action.” ORS 35.335(2).

8 If not accepted within the three days, the offer is withdrawn. ORS 35.300(4).

Chapter 8

LUBa Practice and ProceduretoD A. bAsshAm

Land Use Board of AppealsSalem, Oregon

Jeffrey b. litwAK

Columbia River Gorge CommissionWhite Salmon, Washington

Contents

I. Initiating Review at LUBA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1

II. Appealing More than One Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1

III. Appealing the Correct Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2

IV. Extending the Deadline for Petition for Review . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2

V. Record Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–3

VI. Electronic Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–4

VII. Intervention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–4

VIII. Petition for Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–5

IX. Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–6

X. Technical Errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–6

XI. LUBA Arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–7

XII. Standards of Review; Remand or Reversal of Land Use Decisions. . . . . . . . . . . . . . . . 8–9

XIII. Clarity and Grammar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–10

XIV. A Couple of Easy Traps to Avoid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–11

Chapter 8—LUBA Practice and Procedure




These materials discuss common issues arising in LUBA matters—from initiating review at LUBA, to motions, to oral argument—and issues with local government hearings and decisions from LUBA’s perspective. These opinions and orders are just a sampling. What we hope these materials convey is that new and seasoned lawyers alike can glean practice tips from reading beyond the mere holding of an opinion or order.

LUBA’s headnotes, found on the LUBA website, are also an important tool. LUBA board members write the opinion headnotes themselves, so closely reading the headnotes can give you some insight into what the board members have thought were the important lessons in the opinions.

Below are excerpts from LUBA opinions and orders, quick summaries of issues where there is no particular excerpt, and comment on the excerpts and summaries.

i. iniTiaTinG REViEw aT LUBa

a. Larner v. City of Portland, 41 Or LUBa 471 (2002)

Petitioners mailed the notice of intent to appeal to LUBA on January 10, 2002. However, petitioners did not mail that notice of intent to appeal by certified or registered mail; they mailed it by first class mail. Accordingly, under OAR 661-010-0015(1)(b) it was filed on January 11, 2002, the date it was actually received by LUBA. Because petitioners’ notice of intent to appeal was filed 22 days after the challenged decision became final, this appeal must be dismissed under OAR 661-010-0015(1)(a) and (b).

Filing the notice of intent to appeal correctly is a jurisdictional requirement; you must follow the rules correctly. Courier services, such as UPS and Fed Ex, are not certified or registered mail. Doob v. Josephine County, 43 Or LUBA 473 (2003). Similarly, “a notice of intent to appeal that is placed in an envelope that is addressed to and mailed certified mail to an address that is not LUBA’s is not “filed” with LUBA for purposes of OAR 661-010-0015(1)(b), and therefore cannot be relied upon for the date of filing.” Ford v. Jackson County, 50 Or LUBA 359 (2005).

B. Moreland v. City of Depoe Bay, 48 Or LUBa 136 (2004)

Petitioner served the petition for review on respondent and intervenors’ attorney by parcel post on Wednesday, August 18, 2004. Intervenors explain that parcel post is slower than first-class mail, and that in fact intervenors’ attorney did not receive the petition for review until Monday, August 23, 2004.

Intervenors are correct that service by parcel post is a violation of our rules. While service under the slower delivery schedules for parcel post certainly could prejudice the substantial rights of a party before LUBA in certain circumstances, here intervenors again make no attempt to demonstrate that any resulting delay in receiving the petition for review prejudiced their substantial rights. For example, intervenors do not argue that the several days’ delay that could be attributed to service by parcel post in the present case interfered with their ability to prepare the response brief, and we do not see that it did.

Service in violation of LUBA’s rules is not jurisdictional. Where a rule violation is not jurisdictional, you must show that a rule violation prejudiced your substantial rights; this would have seemed like an easy case to show prejudice.

ii. aPPEaLinG MORE THan OnE dECiSiOn

Woodard v. City of Cottage Grove, 56 Or LUBa 806 (2008)

[T]he timely filing of the notice of intent to appeal invoked our jurisdiction to review the three ordinances identified in the notice. However, petitioner violated OAR 661-010-0015(1) in submitting a single notice that identifies more than one decision, accompanied only by a single filing fee and deposit for costs. Intervenors do not assert that petitioners’



violation prejudices their substantial rights in any regard. Accordingly, that violation is a technical violation of our rules. [OAR 661-010-0005]. To comply with our rules, within 14 days of the date of this order petitioners must either elect to appeal only one decision, or submit a separate notice and separate filing fee and deposit for each additional decision.

Land use decisions embodied in separate ordinances or a combination of ordinances and permits are almost always separate land use decisions, which must be separately appealed to LUBA, even if the local government sends out only a single notice of decision. If a petitioner improperly files a single notice of intent to appeal that challenges more than one decision, LUBA will retain jurisdiction over all appeals if the petitioner elects to file separate notices/fees/deposits; however, under OAR 661-010-0015(1)(d), failure to submit within the date specified by the board either a written election to appeal only one decision or a separate notice/fee/deposit will result in dismissal.

iii. aPPEaLinG THE CORRECT dECiSiOn

a Comrie v. City of Pendleton, 45 Or LUBa 758 (2003)

The notice of intent to appeal identified the challenged decision as a planning commission decision, instead of the only appealable decision, the final city council decision rejecting, for lack of standing, petitioner’s local appeal of the planning commission decision.

Arguably, petitioner’s choice of which decision to appeal, under his mistaken theory of finality, should doom his appeal. However, we also recognize that petitioner was influenced in that mistaken choice by the city’s rejection of his local appeal, based on the city’s earlier error in failing to recognize that petitioner had appeared at the planning commission meeting and in failing to provide petitioner notice of the planning commission decision. Dismissing this appeal for what is little more than a pleading error would reward the city’s compound procedural errors.

B. Resources Northwest Inc. v. Clatsop County, ___ Or LUBa ___ (May 29, 2012)

Petitioners’ notice of intent to appeal probably should have (1) identified the decision on appeal as the December 16, 2011 hearings officer’s decision [instead of the board of commissioners’ January 25, 2012 decision not to review petitioners’ appeal], and (2) explained that the hearings officer’s decision became the county’s final decision when the board of commissioners [decided not to accept] petitioner’s appeal on January 25, 2012. However, the county clearly understood that petitioners were not challenging the board of commissioners decision not to hear the appeal, because deciding whether to accept or deny the appeal is entirely within the board of commissioners’ discretion, and there would be no legal basis for petitioners to challenge the board of commissioners’ exercise of discretion under LWDUO 2.230(4) not to consider petitioners’ appeal. The county submitted a complete record, including the record of the proceedings before the hearings officer. Any technical error petitioners may have committed in identifying the decision on appeal is likely a function of the ORS 197.825(2)(a) exhaustion of remedies requirement, which can easily result in confusion about the precise identity of the decision on appeal. That technical pleading error on petitioners’ part, if it was error, prejudiced no party’s substantial rights and provides no basis to dismiss this appeal or strike the petition for review. See Hilliard v. Lane County Commrs, 51 Or App 587, 595, 626 P2d 905 (1981) (LUBA may not invoke “technical requirements of pleading having no statutory basis”).

iV. EXTEndinG THE dEadLinE FOR PETiTiOn FOR REViEw

Poe v. City of Warrenton, 64 Or LUBa ___ (October 11, 2011)

[P]etitioners obtained the verbal agreement of all parties, or their attorneys, to grant written consent to the extension, and requested under OAR 661-010-0067(2) an order



from LUBA extending the deadline for filing the petition for review for seven days, consistent with the verbal agreement of all parties. Petitioners reasonably relied on those verbal agreements from the parties’ attorneys to delay filing the petition for review until after the original deadline. However, intervenor’s attorney ultimately refused to sign the extension despite his earlier agreement to do so. Importantly, that refusal occurred at a juncture when petitioners no longer had time and opportunity to retype the petition for review and file it on time to meet the original deadline. The “written consent of all parties” requirement at OAR 661-010-0067(2) is generally strictly enforced, given the supporting role it plays in conjunction with the strict deadline for filing the petition for review at OAR 661-010-0030(1). However, LUBA will not enforce a violation of OAR 661-010-0067(2) where the violation was induced by a party’s agreement to sign the extension request. OAR 661-010-0005.

V. RECORd OBJECTiOnS

a. Sommer v. City of Cave Junction, 55 Or LUBa 665 (2007)

[E]leven days prior to the deadline for filing record objections, petitioner faxed a letter to the city’s attorney stating his general disagreement with the record and requesting a brief meeting. Even though the record objections were not specific as required by OAR 661-010-0026(2), that initial communication with the city’s attorney, viewed in isolation, may have been sufficient to satisfy [OAR 661-010-0026(2)’s] requirement that petitioner “attempt to resolve” record objections before filing precautionary record objections.

However, petitioner’s subsequent actions are inconsistent with the policy that underlies the rule and in fact frustrated that policy. As noted above, rather than actually attempting to resolve his record objections by communicating with the city’s attorney to clarify his specific objections, petitioner instead sent the electronic mail message quoted above in which he attempted to secure a promise from the city that the city would not participate in the appeal in exchange for petitioner’s assurance that he would not object to the record. After the city advised petitioner that it would not be participating in the appeal, petitioner nevertheless filed record objections, without ever responding to the city’s request that petitioner more specifically identify his record objections.

Not only must parties attempt to resolve record objections with local government counsel prior to filing the objection with LUBA, there is an ongoing obligation on all parties to continue attempts to resolve record issues even after objections are filed.

B. Kane v. City of Beaverton, 55 Or LUBa 669 (2007)

The City’s table of contents list[ed] several thousand pages of miscellaneous material submitted by petitioner Kane together as single items. For example, petitioner argues, item 20 is described as “Appellant Submittal: Materials from Appellant Henry Kane, dated 5/21 - 5/23/07.” Item 20 includes over a thousand pages of documents from an earlier related appeal. . . .

The city does not respond to this objection. We agree with petitioner, in the abstract, that a record table of contents that, for example, lists thousands of pages of miscellaneous material spread over eight volumes as single item does not comply with the OAR 661-010-0025(4)(a)(B) requirement that the table of contents list “each item contained therein, and the page of the record where the item begins.” On the other hand, petitioner apparently made little effort, in presenting this undigested mass of material on the city, to organize the material in any way that would assist the city in preparing the table of contents.

https://1.next.westlaw.com/Link/Document/FullText?findType=L&pubNum=1013613&cite=ORADC661-010-0025&originatingDoc=Iec0d6bee8e2c11dca51ecfdfa1ed2cd3&refType=LQ&originationContext=document&transitionType=DocumentItem&contextData=(sc.UserEnteredCitation)

https://1.next.westlaw.com/Link/Document/FullText?findType=L&pubNum=1013613&cite=ORADC661-010-0025&originatingDoc=Iec0d6bee8e2c11dca51ecfdfa1ed2cd3&refType=LQ&originationContext=document&transitionType=DocumentItem&contextData=(sc.UserEnteredCitation)



Petitioner is presumably familiar with the material he submitted to the city. Therefore, we order the following:

1. Within seven days of the date of this order petitioner Kane may submit to the city a proposed revised table of contents that more specifically lists the various documents that currently comprise items 20 and 50, and Record 1535 to 1615.

2. If petitioner Kane submits such a revised table of contents, the city shall submit the revised table of contents to LUBA within 14 days of the date of this order. The city may make any revisions it deems necessary to any table of contents proposed by petitioner.

3. If petitioner Kane does not submit to the city a revised table of contents within the time specified above, this objection will be denied.

This was a pro se case, and LUBA understands that pro se folks may not have the same professional standards as attorneys. Here, LUBA shows that it is willing to fashion an appropriate remedy where a strict reading of the rule would be overly burdensome on a party due to the action of another party.

Vi. ELECTROniC dOCUMEnTS

a. Brodersen v. City of Ashland, 62 Or LUBa 496 (2010)

The practice of staff directing decision makers and hearing participants to copies of electronic documents through a website link placed on the local government’s website is particularly fraught with potential for confusion regarding what is in the record, however convenient that practice may be. . . . [However,] the city has adequately established that the record in LUBA No. 2007-162 was in fact “placed before” the planning commission during the commission hearings, when staff physically brought the record before the planning commission and gave the commissioners a packet including a link to the city’s website where, staff indicated, a copy of that record could be viewed.

B. Gunderson v. City of Portland, 62 Or LUBa 505 (2010)

The mere act of city staff making documents available on the city’s website for public perusal is not sufficient to place the documents before the final decision maker. But see Graser-Lindsey v. City of Oregon City, 58 Or LUBA 703 (2009) (where staff present the decision maker with paper copies of some but not all exhibits, and the planning commission decision indicates that the record includes the remaining exhibits, which the city council and public can view on the city’s website, the remaining exhibits are included in the record.

C. Citizens Against LNG, Inc. v. Coos County, 62 Or LUBa 550 (2010)

The act of placing a link on the local government’s website to a video recording of a hearing not made by the local government, and that is located on a different website not under the local government’s control, does not make the video recording part of the local record.

Where a party mistakenly believes that a document is already in the record, or is misinformed that a document is in the record when it is not, such misunderstanding might constitute procedural error if the local government provided misinformation about the content of the record, but it does not provide a basis to conclude that the record includes a document that was not actually submitted into the record.

Vii. inTERVEnTiOn

Central Oregon Landwatch v. Jefferson County, 62 Or LUBa 530 (2010)

To preserve the legislative intent in ORS 197.830(7)’s requirement, motions to intervene filed more than 21 days after the appeal is filed must be denied, LUBA has generally declined to grant amicus status to interested parties who simply missed the statutory deadline to intervene in the appeal.



A significant exception created by LUBA to facilitate its review function is where the respondent informs LUBA that it does not intend to file a response brief, and absent amicus participation no brief responding to the petition for review would be filed at all, and LUBA would have to resolve the appeal based solely on the petition for review.

Fail not to miss the deadline for intervening; an amicus brief may not save you.

Viii. PETiTiOn FOR REViEw

a. Allen v. Grant County, 41 Or LUBa 21 (2001)

Petitioner claimed he did not receive LUBA’s order notifying petitioner of the deadline for filing the petition for review but never timely requested relief from the deadline and instead simply filed the petition for review 21 days after the deadline passed. LUBA held that even if the lack of actual or imputed knowledge of that deadline might excuse failure to file the petition on or before the deadline, petitioner had an obligation to act promptly and request appropriate relief once he learned of the deadline, to avoid prejudice to other parties’ substantial rights. By staying silent for 21 days after the deadline ran and then filing the petition for review, the petitioner prejudiced the parties’ substantial rights, and LUBA rejected the petition for review, dismissing the appeal.

B. Lee v. City of Oregon City, 34 Or LUBa 691 (1998)

Because the challenged decision is a denial, the city need only adopt a single adequate basis for denying petitioner’s request for a comprehensive plan and zoning map amendment. Gionet v. City of Tualatin, 30 Or LUBA 96, 98 (1995); Duck Delivery Produce v. Deschutes County, 28 Or LUBA 614, 616 (1995). If petitioner fails to assign error to each of the adopted bases for denial of the application, the challenged decision must be affirmed. Garre v. Clackamas County, 18 Or LUBA 877, aff’d 102 Or App 123, 792 P2d 117 (1990). The city contends petitioner fails to assign error to all of the city’s adopted bases for denial.

It is difficult to determine whether petitioner has assigned error to all the city’s bases for denial. Our rules require that petitions for review set forth separate assignments of error. OAR 661-010-0030(4)(d). Although our rules concerning the requirements for assignments of error are not as detailed as those contained at ORAP 5.45, the assignments of error included in a petition for review at LUBA must be stated with sufficient precision for this Board to identify which portions of the disputed land use decision are being challenged and why.

Crafting assignment of errors can be challenging for complex land use decisions, but they are important; take the time to understand what you would like LUBA to do and how your arguments would get there. Simply showing several places where a local government may have erred may not lead to the relief you request. As well, clarity counts. Here, the petitioner might have considered a different organization to its brief, or a table of contents showing where it addressed each basis for denial.

C. VanSpeybroeck v. Tillamook County, 56 Or LUBa 184 (2008)

The petitioner failed to challenge in the petition for review a potentially dispositive alternative finding in the decision and, when this was pointed out, attempted to challenge that alternative finding in a reply brief. LUBA held that the reply brief cannot assert a new assignment of error or a new challenge to the decision, although the reply brief may respond to the issue of whether the identified finding is a dispositive alternative finding and whether petitioner’s failure to challenge that finding is fatal on that issue.

Don’t fail to assign error in the petition for review to any alternative dispositions or bases in the decision.



d. Barnes v. City of Hillsboro, 61 Or LUBa 375 (2010)

LUBA’s rules requires that argument in support of or in opposition to an assignment of error be set forth in the body of the brief and do not provide for attachment of additional argument in an appendix to a brief, in part to preserve the 50-page brief limit. However, where the brief is 38 pages long and the attached argument is 10 pages, and there is no contention that considering 48 pages of argument in a brief that is otherwise consistent with LUBA’s rules prejudices any party’s substantial rights, LUBA will not strike the attachment.

Respect the 50-page brief limit; be concise, and don’t skimp on spacing, margins, font size, or try to include inappropriate material in the appendices or footnotes to avoid page restrictions.

E. Carver v. City of Salem, 42 Or LUBa 305 (2002)

LUBA’s rules now require that if the record includes a map that helps illustrate the material facts, the petitioner must include it in the petition for review. However, LUBA will strike maps attached to the parties’ briefs that are modified to illustrate a disputed point.

Board members frequently read the briefs while commuting to work or in other nonoptimal conditions. Do everything possible to make understanding the brief easier. In addition to including a useful map, always attach a complete copy of the challenged decision to the petition for review. Although not required, it never hurts to attach a complete copy of the challenged decision to the response brief.

iX. REPRESEnTaTiOn

a. Waluga Neighborhood Ass’n v. City of Lake Oswego, 59 Or LUBa 380 (2009)

When a notice of intent to appeal (NITA) is filed on behalf of a “corporation or other organization” by a person who is not an active member of the Oregon State Bar and LUBA allows seven days for an attorney to file an amended NITA, failure to file an amended NITA within that time requires dismissal of the appeal. Sending a letter stating that an attorney will represent the corporation or organization is not a sufficient substitute for filing an amended NITA.

If you represent an entity, you need to caution that entity that it can’t appear at LUBA without a lawyer.

B. Wetherell v. Douglas County, 54 Or LUBa 782 (2007)

An appearance before the local government by an agent or representative of the applicants is not, in itself, an appearance by that agent or representative on his or her own behalf, for purposes of intervening under ORS 197.830(7)(b)(B).

Nonattorney land use or other consultants frequently represent parties during the proceedings below, but they cannot represent any party before LUBA. A typical dodge is for the consultant to “appear” on his or her own behalf below and thus gain standing to intervene or appeal as a party to the LUBA appeal, where the consultant can file pleadings nominally on his or her own behalf.

X. TECHniCaL ERRORS

a. Just v. Linn County, 60 Or LUBa 74 (2009)

Petitioner challenged comprehensive plan and zoning map change. The county adopted the change in two ordinances, Nos. 2009-205 and 2009-206. Ordinance 205 adopted the findings that supported the map amendments and ordered the planning staff to prepare the actual amendments. Ordinance 206 actually adopted the amendments. Petitioner accurately described the decision being appealed but cited only Ordinance 205. The county moved to dismiss, claiming that the petitioner did not appeal any final decision. LUBA noted the motion was based on a “hyper-technical” reading of the notice of intent to appeal and denied the motion, stating, “. . . we see no need to require such a pointless



formality, only to correct what is at most a harmless error that caused no prejudice and confused no one.”

Don’t waste time pointing out technical errors where there is no prejudice. There are only a few situations in which LUBA will dismiss an appeal for violation of its rule.

B. Althauser v. Clackamas County, 55 Or LUBa 656 (2008)

Where LUBA issues an order directing petitioner to file a supplemental certificate of service to establish that the notice of intent to appeal was served on the local government’s legal counsel, and petitioner fails to do so within the deadline specified in the order, petitioner’s appeal will be dismissed.

Comment: When LUBA issues an order, you need to comply with it.

Xi. LUBa aRGUMEnTS

a. Neighbors Against Apple Valley Expansion v. Washington County, 59 Or LUBa 153 (2009)

Intervenors move to strike portions of petitioners’ oral argument, in which intervenors allege petitioners raised a “new issue” not presented in the petition for review. OAR 661-010-0040(1) (the Board shall not consider issues raised for the first time at oral argument). The three-page motion is accompanied by six pages of additional written argument that intervenors wish to submit in response to the alleged new issue, in case LUBA chooses to consider it, along with appendices. Petitioners submitted a six-page response arguing that their oral argument presented no issue not raised in the petition for review, and further objecting to LUBA’s consideration of intervenors’ additional written argument.

Disputes regarding whether new issues were raised at oral argument are often difficult and time-consuming to brief and resolve, and can threaten to delay resolution of an appeal beyond the statutory deadline. Rather than submit a formal motion to strike and responses to the motion, the better practice in our view is for the party who believes a new issue was raised at oral argument to either briefly object at oral argument or submit a concise written objection. The purpose of that concise objection is not to convince the Board that a new issue was raised, but simply to alert the Board that the party believes a new issue was raised, so that in preparing the Board’s final opinion and order the Board will focus its attention on the issues presented in the briefs and oral argument that discuss those issues.

Intervenors’ motion to strike accomplishes the limited task of alerting the Board to their objection, and further it appears that resolving the parties’ dispute regarding whether a new issue was raised at oral argument would delay issuance of this opinion. Accordingly, the motion to strike is denied, and we do not consider either intervenors’ additional written argument or any responses thereto.

LUBA’s approach here ensures that LUBA spends its limited time resolving the actual assignments of error rather than resolving arguments about procedure. See also Hecker v. Lane County, 52 OR LUBA 91 (2006) (“To the extent oral argument includes evidence not in the record, we disregard such new evidence. However, any introduction of new evidence in this case does not provide a basis to strike oral argument of the offending party entirely, or to dismiss the appeal.”

B. Emmons v. Lane County, 48 Or LUBa 457 (2005)

At oral argument, intervenor’s attorney submitted two documents. One was an enlargement of a copy of a zoning map that is in the record, with highlighting added to show the zoning of nearby properties. The other is a table summarizing the county’s findings supporting its conclusions and the corresponding pages of the appendix to the



petition for review where those findings can be located. Petitioners’ attorney objected orally to the submission of those documents and was allowed time to file a written motion with any objections, but did not do so.

Our rules permit limited use of demonstrative exhibits. The reason we limit the use of demonstrative exhibits is to prevent a party from achieving an advantage through use of elaborate presentation documents that are neither included in the party’s brief nor the record. Both of the documents submitted by intervenor go beyond what OAR 661-010-0040(5) allows. While the disputed highlighted map is from the record, the highlighting was not added to the map during oral argument. Therefore, the highlighted map technically does not comply with the requirements of OAR 661-010-0040(5). However, the deviation from OAR 661-010-0040(5) is trivial, and we see no prejudice to petitioners in that trivial deviation from the rule’s requirements. We will consider the highlighted map.

The tabular listing of findings that the intervenor relies on is more problematic. It lists findings that the intervenor is relying on in response to each of petitioners’ assignments and subassignments of error. Either that listing identifies the same findings that intervenor identifies in his brief, in which case the listing is unnecessary, or the listing expands on the findings that are identified in his brief, in which case the listing is improper. In either event, it constitutes de facto responsive argument that should have been included as part of intervenor’s brief so that it could have been available to petitioners before oral argument. We do not consider the tabular listing of findings.

OAR 661-010-0040(5) states, “Demonstrative exhibits presented at oral argument shall be limited to copies of materials already in the record, including reductions or enlargements, or materials created during the party’s presentation at oral argument.” There is, however, no reason why you cannot include a tabular listing of findings in a brief.

C. Kane v. City of Beaverton, 61 Or LUBa 234 (2010)

In a letter dated March 29, 2010, LUBA notified the parties that oral argument in this appeal would be held at 11:00 a.m. on May 6, 2010, at LUBA’s offices in Salem. The March 29, 2010 letter states, in relevant part, that: “[i]f any party wishes to participate in oral argument via telephone conference, please notify the Board at least 14 days prior to oral argument to ensure availability of a conference line.” After the close of business on May 5, 2010, the day before oral argument, petitioner sent a facsimile message to LUBA’s offices stating in its entirety that “[a]ppellant requests the Board to hear [oral] argument by long distance telephone. The reason is that appellant cannot travel to and from Salem for oral argument.”

OAR 661-010-0040(6) provides that LUBA “may conduct oral argument by telephone conference call.” Generally, when LUBA receives a timely request to participate at oral argument by telephone, LUBA obtains a conference call number from the telephone company and advises the requesting party by letter how to call into the conference line in LUBA’s hearing room. Petitioner’s untimely request made this arrangement impossible, and petitioner did not contact LUBA by phone or other means prior to the scheduled start of oral argument at 11:00 a.m., to set up alternative means to participate in oral argument by telephone. LUBA staff called petitioner and gave him the option of placing a call to the hearing room telephone line so he could participate in oral argument. However, petitioner declined, apparently because his telephone plan does not allow long-distance calls from Beaverton to Salem. These efforts delayed oral argument by approximately 20 minutes.



At that point, with the other parties present in the hearing room, the Board elected to commence oral argument, pursuant to OAR 661-010-0040(2).

The day after oral argument petitioner filed a “Motion for Leave to File Written Argument, Petitioner’s Written Oral Argument, and Endnote in Support of Motion.” The motion apparently contains what petitioner would have said at oral argument had he participated. The city objects to petitioner’s “written oral argument,” and we agree with the city that petitioner has not established any basis under our rules to consider that written oral argument. Conducting oral argument by telephone is a convenience to the parties that the Board “may” allow, if a timely request is made and the party requesting telephonic conference complies with the procedures necessary to accomplish that participation. Petitioner failed in both respects. Under OAR 661-010-0040(2), petitioner failed to appear for oral argument and has not presented sufficient grounds for excusing that failure, or any other basis to consider his written oral argument. Therefore, petitioner’s motion to submit written oral argument is denied.

LUBA’s procedures provide an orderly process for the parties to use; they also help LUBA provide service to the parties. LUBA will always try to work with the parties to make some accommodation, but be respectful and try to avoid last minute requests for special accommodation.

Xii. STandaRdS OF REViEw; REMand OR REVERSaL OF Land USE dECiSiOnS

a. Bowers v. City of Eugene, 58 Or LUBa 51 (2008)

This case involves several pro se arguments and several standards of review. For each, LUBA explains what arguments a petitioner must make to successfully challenge a local government decision. For example, the intervenor-petitioner argued, “This statement is blatantly false.” In response, LUBA stated, “Intervenor-petitioner must do more than assert that the challenged finding is false. That intervenor-petitioner disagrees with the city’s findings does not establish that those findings are inadequate.”

In response to another argument, LUBA stated, “Erroneous information, if relied on by the city council, might result in a decision that is not supported by substantial evidence, but we have some difficulty seeing how city council’s receipt of erroneous information could result in a procedural error that would prejudice intervenor-petitioner’s substantial rights.”

If you’re new to land use, read a lot of LUBA opinions and read a lot of appellate court decisions to understand how to make arguments that work. Here, LUBA notes that parties must explain why or how in terms of the standards of review. See also Kane v. City of Beaverton, 56 Or LUBA 240 (2008), another pro se case in which LUBA succinctly addressed one argument as follows:

Second, petitioners aim a series of unconnected critiques at the TIA [traffic impact analysis] and argue that the TIA is inadequate. For example, petitioners critique the TIA for failing to clarify how many [school] buses turning left to enter the subject property will be “short” buses and how many will be “long” buses. What is missing is any explanation for why that alleged failure undermines the reliability of the TIA’s conclusions, or the other evidence the city chose to rely upon. We agree with respondents that petitioners’ critiques of the TIA and citations to petitioners’ testimony below fall short of demonstrating that the TIA is not substantial evidence on which a reasonable person would rely.

B. Carrigg v. City of Enterprise, 48 Or LUBa 328 (2004)

On July 7, 2004, during the staff report portion of a hearing, one city councilor disclosed that he had visited the subject property and stated what he saw. On July 19, 2004, during deliberation, after the public testimony portion of the hearing had closed, the mayor and two other councilors disclosed they too had visited the subject property. On July 29, 2004, the City Council reconvened to approve



the findings and issues its final decision. LUBA concluded that the petitioner had an opportunity to object to the disclosure of the site visit during the 10-day period between deliberation and adoption of the final order. This was so, even though the city did not provide an opportunity for public comment during or after deliberation.

Site visits are a difficult subject for redress at LUBA. Paper records and audio recordings are simply not good at capturing what a city councilor might have seen, heard, or said during a site visit, and thus there is little record for LUBA to review. Here, the violation was procedural in nature—failure to disclose the site visits—which is not difficult to review, but imagine if the mayor and councilors had disclosed their site visits and you want to make a substantial evidence argument based on their observations during the site visit, or that they received ex parte communications during the site visit. How will you demonstrate these points to LUBA?

C. Willamette Oaks v. City of Eugene, 248 Or app 212 (2012)

In this case, the petitioner argued to the Court of Appeals that LUBA erred by remanding rather than reversing a land use decision. The Court of Appeals observed that the petitioner had sought “remand or reversal” from LUBA and thus concluded that the petitioner “did not preserve its contention that the claimed errors required reversal of the city decisions and that any error of LUBA in failing to reverse is not plain.” LUBA rule 661-010-0030(4)(b)(A) requires the petitioner to specify the relief sought. This puts a petitioner is bit a tricky position. Petitioners want to expand the opportunity for LUBA to grant some relief, but that flexibility may mean that LUBA will grant less-preferred relief.

Xiii. CLaRiTY and GRaMMaR

a. Shaffer v. City of Happy Valley, 44 Or LUBa 536 (2003)

LUBA began its analysis with this sentence: “The issue raised in the first assignment of error, and a threshold issue for this appeal, is what documents in the record, if any, embody the city council’s final decision on the application for preliminary plat approval.”

The actual facts are not particularly important to discuss. What is important to keep in mind is that during a land use hearing, there may be multiple decisions—a staff recommendation, a hearings official decision, a Planning Commission decision, and a governing board decision. Each may have different requirements, and the requirements vary from one local government to another. Make sure the local government follows the requirement for the decision; at the very least, LUBA should be able to discern the local government’s decision on review.

Additionally, most local governments send out decisions with a separate notice of the decision document, which might have a different date than the actual decision, and might or might not attach the actual decision.

Some decisions also incorporate portions of prior decisions—findings or conditions of approval. Related, local governments often try to save time by incorporating material from an application submittal, or other document or testimony into a finding or a condition of approval. Such incorporation is inherently risky because decisions may not clearly and precisely specify what is and what is not incorporated, and because sometimes the incorporated fact or condition conflicts with other portions of the incorporating document.

B. Willamette Oaks LLC v. City of Eugene, LUBa no. 2011-027 (aug. 9, 2011)

We review the hearings officer’s decision to determine whether it correctly interprets and applies the applicable law. McCoy v. Linn County, 90 Or App 271, 275, 752 P2d 323 (1988). Although it is not entirely clear, the planning director’s finding quoted above appears to evaluate whether the proposed Tentative PUD modification is consistent with the Final PUD approval conditions that are discussed and imposed later in the portion of the



decision approving Goodpasture’s Final PUD application, and not with the “conditions of the original approval.” . . . In so finding, we understand the planning director and the hearings officer to have determined that EC 9.8335(1), which applies to Tentative PUD modifications, is met because the city approved the Final PUD with, at least in some cases, modified versions of the original conditions of approval, and that action resolved any inconsistencies between the conditions of the original approval and the proposed modifications under EC 9.8335(1). If that is what the hearings officer and the planning director determined. . . .

(Emphases added.)

Make sure that LUBA can decipher decisions. For government folks, this means writing decisions in plain English with few incorporations by reference. For applicants, this means policing government decisions. For opponents, you risk LUBA understanding a decision in a way that is not helpful to you. Make sure the average fourth grader can understand what you write. LUBA board members can expertly decipher the illiterate, but why make their work harder than it already is?

C. Keep Keizer Livable v. City of Keizer, LUBa no. 2011-041, (aug. 19, 2011)

The text at issue requires that “[t]he approved Master Plan shall be conditioned to require such development to be constructed before or concurrently with the Larger Format Store.” KDC 2.107.05(D)(3). Grammatically speaking, “to be constructed” is the core of an infinitive verb phrase in the passive voice.3 The object of that transitive verb is “such development,” i.e., the required mixed use development. “Before” and “with” are prepositions, part of a compound prepositional phrase, the shared object of which is “the Larger Format Store.” That compound prepositional phrase as a whole acts as an adverbial phrase modifying the verb “constructed.” “Concurrently” is a single adverb embedded within that compound prepositional phrase, which modifies only the preposition “with.” Structurally and semantically, the compound prepositional phrase as a whole prescribes when the required mixed use development must be “constructed,” using as a reference point the construction of the Larger Format Store: the construction of the mixed use development must occur before, or concurrently with, the construction of the Larger Format Store.

[fn 3] The grammatical relations would be simplified somewhat if the sentence were re-phrased entirely in the active voice, e.g., “The city shall condition the approved Master Plan to require the applicant to construct such development before or concurrently with the Larger Format Store.”

The grammatical analysis in this case goes on for three more pages. LUBA will parse through the grammar of the code in great detail, so you need to be facile with grammar. The Oregon Appellate Courts Style Manual 59 (2002) lists several grammar and style guides that the Oregon appellate courts use. You should use the Oregon Appellate Courts Style Manual (http://www.publications.ojd.state.or.us/Publications/Style%20Manual%202002.pdf) and own and use at least one of the recommended commercial style manuals

XiV. a COUPLE OF EaSY TRaPS TO aVOid

a. Wynnyk v. Jackson County, 39 Or LUBa 500 (2001)

Although OAR 661-010-0067(2) authorizes LUBA to suspend the deadline for filing the petition for review to allow time to rule on a motion to dismiss, the filing of a motion to dismiss or a memorandum opposing a motion to dismiss does not automatically suspend the deadline for filing the petition for review.

http://www.publications.ojd.state.or.us/Publications/Style Manual 2002.pdf

http://www.publications.ojd.state.or.us/Publications/Style Manual 2002.pdf



B. Ehle v. City of Salem, 55 Or LUBa 685 (2007)

LUBA lacks authority to grant a motion to transfer an appeal to circuit court once the board has issued a final opinion and order dismissing that appeal. File the motion to transfer immediately when jurisdiction is challenged or questioned.

Metes and Bounds of Real Estate and Land Use La · Mr. Litwak is the author of the first casebook...

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