Real Estate and Land Use Fall Forum: Residential Real ...

Friday, November 8, 2013 9 a.m.–4:30 p.m.

Oregon State Bar Center Tigard, Oregon

6.5 General CLE credits

Cosponsored by the Real Estate and Land Use Section

Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics

Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics ii

REAL ESTATE AND LAND USE FALL FORUM: RESIDENTIAL REAL ESTATE AND OTHER TIMELY TOPICS

SECTION PLANNERS

Thomas E. Bahrman, Bahrman Law LLC, BendDustin R. Klinger, Miller Nash LLP, Vancouver

Alan M. Sorem, Saalfeld Griggs PC, SalemIsa A. Taylor, Jaques Sharp Sherrerd & FitzSimons, Hood River

OREGON STATE BAR REAL ESTATE AND LAND USE SECTION EXECUTIVE COMMITTEE

Jeffrey B. Litwak, ChairTod A. Bassham, Chair-ElectJennifer M. Bragar, TreasurerThomas Bahrman, Secretary

Dina E. AlexanderEugene V. AndersonLaura Craska CooperLaurie E. Craghead

Patricia A. IhnatDustin R. Klinger

Alan Matthew SoremIsa Anne Taylor

Rebecca Biermann TomKristin H. Yuille

Norma 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 © 2013

OREGON STATE BAR16037 SW Upper Boones Ferry Road

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

Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics iii

TABLE OF CONTENTS

1. Representing Sellers and Buyers in New-Construction Residential Sale Transactions . . . 1–i— Marisol R. McAllister, Farleigh Wada Witt, Portland, Oregon— Patricia A. Ihnat, Fidelity National Title, Portland, Oregon

2. Residential Construction Contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–i— Hunter B. Emerick, Saalfeld Griggs PC, Salem, Oregon

3. Small Business Administration (SBA) Financing . . . . . . . . . . . . . . . . . . . . . . . . 3–i— Casey Moltrum, Vice President, Commercial Banking Officer, Columbia Bank, Vancouver,

Washington

4. Residential Due Diligence: Helping Clients Avoid “The Money Pit”. . . . . . . . . . . . . 4–i— Benjamin Leedy, Stoll Berne, Portland, Oregon

5. Legal and Financial Options for Clients at Risk of Foreclosure . . . . . . . . . . . . . . . . 5–i— Benjamin D. Knaupp, Garland Griffiths Knaupp, Attorneys, Hillsboro, Oregon

6. The Quiet Revolution Goes West: The Oregon Planning Program 1961–2011 . . . . . . . . 6–i— Edward J. Sullivan, Garvey Schubert Barer, Portland, Oregon

7. Property Line Disputes: Practical Advice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–i— Isa Anne Taylor, Jaques Sharp Sherrerd FitzSimons & Ostrye, Hood River, Oregon

8. Monetary Exactions in Oregon Post-Koontz v. St. Johns River Water Management District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–i— Jeffrey G. Condit, Miller Nash LLP, Portland, Oregon

9. LUBA: Preparing the Record and Motion Practice . . . . . . . . . . . . . . . . . . . . . . . . 9–i— Tod A. Bassham, Land Use Board of Appeals, Salem, Oregon— Laurie E. Craghead, Deschutes County Legal Counsel, Bend, Oregon— Alan M. Sorem, Saalfeld Griggs PC, Salem, Oregon

1. Constitutional Protection Against Government Abuse—Presentation Slides . . . . . . . 10–i— Bradley W. Andersen, Landerholm PS, Vancouver, Washington

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SCHEDULE

8:00 Registration

9:00 Representing Sellers and Buyers in New-Construction Residential Sale Transactions

F Issues affecting sellers and buyers of new construction or remodeled residential propertyF Seller obligations under the Homebuyer Protection ActF Closing and title insurance concernsPatricia A. Ihnat, Fidelity National Title, PortlandMarisol R. McAllister, Farleigh Wada Witt, Portland

10:00 Residential Construction Contracting

F Identify construction contract provisions that create the most risk for the residential purchaserF Recent legislative and case law changesF Practical advice for negotiating residential construction contractsHunter B. Emerick, Saalfeld Griggs PC, Salem

10:30 Break

10:45 Small Business Administration (SBA) Financing

Casey Moltrum, Vice President, Commercial Banking Officer, Columbia Bank, Vancouver

11:15 Residential Due Diligence: Helping Clients Avoid “The Money Pit”

F Residential due diligence issues and sample checklistF How residential and commercial due diligence differF Reviewing condominium or homeowners association documentsBenjamin Leedy, Stoll Berne, Portland

11:45 Legal and Financial Options for Clients at Risk of Foreclosure

F Refinancing considerationsF Short salesF Loan modificationsF Deed in lieu of foreclosure arrangementsBenjamin D. Knaupp, Garland Griffiths Knaupp, Attorneys, Hillsboro

12:15 Lunch

1:15 Celebrating the 40th Anniversary of SB 100

F Origins and evolution of the Oregon planning systemF Ten planning crises and their resolutionF Oregon’s planning program in the national contextEdward J. Sullivan, Garvey Schubert Barer, Portland

1:45 Encroachments and Boundary Line Disputes

F Resolving disputes without litigationF Costs and outcomes of litigationF Documenting the resolutionIsa Anne Taylor, Jaques Sharp Sherrerd FitzSimons & Ostrye, Hood River

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SCHEDULE (Continued)

2:15 Monetary Exactions in Oregon post-Koontz v. St. Johns River Water Management DistrictF How the application of Nollan/Dolan heightened scrutiny of monetary exactionsF How the U.S. Supreme Court’s June 2013 decision in Koontz affects existing case lawF Applicability of KoontzJeffrey G. Condit, Miller Nash LLP, Portland

2:45 Break

3:00 LUBA: Preparing the Record and Motion PracticeF How to make a land use record that will withstand judicial reviewF Best practices for record management for attorneys representing the applicant, government,

and opponentsF Review the scope of available motions before LUBATod A. Bassham, Land Use Board of Appeals, SalemLaurie E. Craghead, Deschutes County Legal Counsel, BendAlan M. Sorem, Saalfeld Griggs PC, Salem

4:00 Lessons Learned from David Hill Development v. City of Forest GroveF An entertaining look at the legal arguments that led to a $6.5 million federal jury verdict for

violations of a developer’s constitutional rightsBradley W. Andersen, Landerholm PS, Vancouver

4:30 Adjourn

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FACULTY

Bradley W. Andersen, Landerholm PS, Vancouver. Mr. Andersen is a trial attorney and litigator representing a broad range of clients in a wide variety of litigation matters, such as business, construction, real estate and employment disputes, government wrongdoing, land use, condemnation, personal injury, and estate/probate litigation. Mr. Andersen is a member of the American Bar Association, the Clark County Building Industry Association, the Washington State Building Industry Association, the Skamania County Economic Development Counsel, and the Washington State District Admissible Court Judges Association. He received the Washington State Coalition for Open Governments Key Award for his work on getting an elected official removed from office and prosecuted. He serves as a part-time municipal judge for the City of Stevenson, Washington. He is admitted to practice in Oregon and Washington and before the United States Supreme Court.

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. Mr. Condit’s practice focuses on government, education, and administrative law and land use planning for public- and private-sector clients. He is a member of the Oregon State Bar Real Estate and Land Use, Constitutional Law, Appellate Practice, Government Law, and Sustainable Future sections, the American Bar Association, the Multnomah Bar Association, the Oregon Law Institute of Lewis & Clark College board, the National Association of College and University Attorneys, the Oregon Council of School Attorneys, the Oregon City Attorneys Association, and the Center for Innovative School Facilities board, and he is the Oregon State Chair of the International Municipal Lawyers Association. Mr. Condit is an adjunct professor at Portland State University, teaching Legal Processes in Land Use Planning. He is licensed to practice in Oregon and Washington and before the United States Supreme Court.

Laurie E. Craghead, Deschutes County Legal Counsel, Bend. Ms. Craghead’s primary focus is on land use and assessment and taxation. She also advises Deschutes County regarding recording and election, special districts, public contracting, surveyor, and other miscellaneous government law issues. She has been an active member of Oregon Women Lawyers (OWLS), including as coordinator of the Central Oregon chapter of OWLS, a member of Cascade Women Lawyers, a board member of the Oregon Women Lawyers Foundation, and a member of both the Oregon State Bar Real Estate and Land Use and Government Law section executive committees. Ms. Craghead is a past president of the Deschutes County Bar Association.

Hunter B. Emerick, Saalfeld Griggs PC, Salem. Mr. Emerick focuses his practice on business litigation and related areas. He concentrates on resolving disputes involving construction law and litigation; real property, including condemnation; ownership and operation of corporations, LLCs, and partnerships; business sales; estate and trust administration; and other complex litigation. Mr. Emerick is a member of the Oregon State Bar Litigation and Construction Law sections. He is admitted to practice in Oregon and Washington. He is a past president of the Marion County Bar Association and a member of the Oregon State Bar Board of Governors.

Patricia A. Ihnat, Fidelity National Title, Portland. For the past 20 years, Ms. Ihnat has held various positions with Fidelity including litigation counsel, claims counsel, and underwriting counsel. Prior to her work in the title insurance industry, Ms. Ihnat had an active litigation and appellate practice focusing on real estate and commercial issues in Arizona. She also worked as a staff attorney for the Arizona Court of Appeals. Ms. Ihnat is a member of the Oregon State Bar Real Estate and Land Use Section Executive Committee and Legislative Subcommittee and past president of the Oregon Land Title Association. She is admitted to practice law in Oregon, California, and Arizona.

Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics viii

Benjamin D. Knaupp, Garland Griffiths Knaupp, Attorneys, Hillsboro. Mr. Knaupp is the Managing Attorney at Garland Griffiths Knaupp, Attorneys. He has been in private practice since 1997 and has represented many different clients in his career, including individual Oregonians, small businesses, software companies, real estate investors, medical clinics, franchisors, public charities, homeowners associations, manufacturers, retailers, trust companies, and a health care network. His current practice areas include real estate and business litigation and transactions, estate planning, probate, and tax law. He is a frequent speaker and certified trainer for Oregon realtors, and he served as the editor-in-chief of the Oregon Health Law Manual from 2008 through 2010. He is admitted to practice before the United States Tax Court.

Benjamin Leedy, Stoll Berne, Portland. Mr. Leedy’s practice focuses on the areas of commercial real estate acquisitions and dispositions, real estate finance, leasing, and real estate development. He frequently advises clients in connection with purchase and sale transactions, office, retail, and industrial leases, and secured lending transactions. He is a member of the Oregon State Bar Real Estate and Land Use Section Education Committee and the Urban Land Institute Northwest Portland YLG Leadership Team.

Marisol R. McAllister, Farleigh Wada Witt, Portland. Ms. McAllister’s practice emphasizes real estate and business law. She has vast experience advising 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 practices in the areas of business transactions, financial services, leasing, and construction. Ms. McAllister is a member of the American Bar Association, a member of the Multnomah Bar Association, a founding member of the Oregon Hispanic Bar Association, a member of the Oregon State Bar Real Estate and Land Use Legislative Committee, and chair of the Commercial Real Estate Women (Portland Chapter) Marketing Committee. Ms. McAllister is a regular CLE presenter and is admitted to practice in Oregon and Washington.

Casey Moltrum, Vice President, Commercial Banking Officer, Columbia Bank, Vancouver.

Alan M. Sorem, Saalfeld Griggs PC, Salem. Mr. Sorem is a member of the Oregon State Bar Real Estate and Land Use Section Executive Committee and chair of the Oregon State Bar Legislative Land Use Committee.

Edward J. Sullivan, Garvey Schubert Barer, Portland. Mr. Sullivan concentrates his legal practice in matters involving planning, administrative, and municipal law. He is frequently involved in major land use controversies in Oregon, acting on behalf of appellants, opponents, or public entities. He is city attorney for the cities of Oregon City, Island City, and Rivergrove and acts as special counsel for other local governments. Mr. Sullivan is a member of the American Planning Association Oregon Chapter board, a member of the Amicus Curiae Committee, a council member of the American Bar Association, and chair of the 120-Day Club. Mr. Sullivan serves as an adjunct professor at Portland State University and as an instructor at Lewis & Clark Law School. Mr. Sullivan is a regular author and speaker on land use and government law topics. He received a 2012 Award of Recognition from the Oregon City Attorneys Association, and he holds an LL.M. from University College (London). Mr. Sullivan is admitted to practice in Oregon, Washington, and the District of Columbia (inactive).

Isa Anne Taylor, Jaques Sharp Sherrerd FitzSimons & Ostrye, Hood River. Ms. Taylor has extensive experience in land use law. Throughout Oregon and Washington, she has worked for rural and urban property owners, commercial developers, development opponents, and local governments. Her practice also emphasizes real estate transactions and disputes, litigation, local government law, landlord-tenant law, business law, and appeals. Ms. Taylor’s published work appears in Urban Lawyer, the Real Estate and Land Use Digest, and Land Use (OSB Legal Pubs 2010).

FACULTY (Continued)

Chapter 1

Representing Sellers and Buyers in New-Construction Residential Sale Transactions

Marisol r. Mcallister1

Farleigh Wada WittPortland, Oregon

Patricia a. ihnat

Fidelity National TitlePortland, Oregon

1 With special thanks to Rebecca Biermann Tom, Barg Tom PC, Portland, Oregon, for her substantial contributions to these materials including discussion of planned communities, condominiums, buyer issues, and the Interstate Land Sales Full Disclosure Act.

Contents

Introduction—Seller Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–1

I. Contractor’s License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–1

II. Special Sale Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–3A. Subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–3B. Condominiums. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–3C. Interstate Land Sales Full Disclosure Act . . . . . . . . . . . . . . . . . . . . . . . . . . 1–5

III. Sale Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–5A. Oregon Condominium Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–5B. Subdivisions and Planned Communities . . . . . . . . . . . . . . . . . . . . . . . . . . 1–6C. Oregon Real Estate Forms LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–6

IV. Cancellation, Rescission, and Revocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–6A. CCB Act Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–6B. Oregon Condominium Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–6C. Home Solicitation Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–6D. Interstate Land Sales Full Disclosure Act . . . . . . . . . . . . . . . . . . . . . . . . . . 1–7E. Seller’s Property Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–7

V. Seller Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–8A. Seller Property Disclosure Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–8B. CCB Required Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–8C. Oregon Condominium Act Disclosure Statement . . . . . . . . . . . . . . . . . . . . . 1–8D. FTC Insulation Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–8

VI. Warranties and Maintenance Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–9A. Contractor Warranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–9B. Condominium Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–9C. Maintenance Schedule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–10

VII. Construction Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–10A. Construction Lien Priority Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–10B. Construction Lien Perfection and Foreclosure Overview. . . . . . . . . . . . . . . . . 1–12

VIII. Representing Buyers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–14A. Due Diligence Research on Seller and Builder . . . . . . . . . . . . . . . . . . . . . . 1–14

Chapter 1—Representing Sellers and Buyers in New-Construction Residential Sale Transactions

Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics 1–ii

B. Review of Documents Governing the Project. . . . . . . . . . . . . . . . . . . . . . . 1–15C. Use Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–16D. Rental Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–16E. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–17F. Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–17G. Purchasing Bank-Owned Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–17

IX. Homebuyer Protection Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–17

X. Title Insurance—New Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–18A. Standard Coverage Owner’s Policy of Title Insurance . . . . . . . . . . . . . . . . . 1–18B. Early Issue Construction Lien Coverage . . . . . . . . . . . . . . . . . . . . . . . . . 1–19

XI. Earnest Money and Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–20

AppendixesA. Sample Checklist for New Condominium Sales . . . . . . . . . . . . . . . . . . . . . 1–23B. CCB Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1–25C. CCB Suggested Maintenance Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . 1–31D. Notice of Compliance with the Homebuyer Protection Act. . . . . . . . . . . . . . . 1–33E. OTIRO Manual Chapter Five: Elimination of Standard Exceptions . . . . . . . . . . 1–35

Contents (continued)


Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics 1–1

INTRODUCTION—SELLER ISSUES

Sellers of new construction or remodeled residential property in Oregon vary in who they are and what legal and practical considerations they face. They may be developers selling finished single family homes in new subdivisions, townhomes on small urban lots, or new or conversion condominiums units. Or they may be construction contractors or homebuilders who either build model or spec homes to sell, or sell lots and simultaneously enter into construction contracts to construct the homes for the buyers of those lots. They may be flippers who purchase homes, remodel, and sell, or homeowners who contract for work on the home prior to selling. Legal practitioners representing sellers in residential transactions need to understand the seller’s business model and objectives and need to know the various consumer protection statutes and rules that impact those transactions when construction is involved.

This presentation will focus on particular transactional issues related to sellers of new construction, including developers as sellers, but will not describe the many development issues confronting developers in general. In addition, this presentation will not describe laws applicable to Oregon residential sales transactions in general (e.g., lead paint disclosures, requirement for carbon monoxide monitors, etc.).

I. CONTRACTOR’S LICENSE

When representing sellers of new or remodeled homes, attorneys should consider the threshold question whether the seller is required to have or obtain a license from the Oregon Construction Contractors Board (“CCB”) pursuant to Oregon’s Construction Contractors Licensing Act (“CCB Act”). When the seller is a construction contractor actually performing contracting services for the buyer, there is little question that the seller must have a license from the CCB. However, many developers and flippers believe that they do not need a contractor’s license if they hire a licensed general contractor to do the remodeling or if they build or remodel a home on land that they own. With some exceptions, this can be a mistaken belief that poses significant risks to the seller and its business.

Failure to obtain a license from the CCB when required may result in civil penalties up to $5,000 for each violation. ORS 701.992. Further, a seller required to have a license, and doing business without a valid CCB license may be subject to criminal prosecution for a Class A misdemeanor, punishable by up to one year in prison and up to a $6,250 fine. ORS 701.990(1); ORS 161.615(1); ORS 161.635(a). The CCB also may issue injunctions and cease-and-desist orders that could threaten the construction project. ORS 701.098(5).

Additionally, without a valid CCB license at the time a contract is entered, a seller required to have a license cannot “commence an arbitration or a court action for compensation for the performance of any work or for the breach of any contract for work” that is subject to the CCB Act. ORS 701.131(1). In other words, an unlicensed contractor may lose its opportunity to file suit and recover money earned. One important exception exists. An unlicensed contractor may still bring a defect claim against a contractor, developer, architect, engineer, one who provides “construction or design labor or services,” or one who “[m]anufactures, distributes, rents, or otherwise provides materials, supplies, equipment, systems or products.” ORS 701.131(2)(c)(A). However, any claim must arise “out of defects, deficiencies or inadequate performance in the construction, design, labor, services, materials, supplies, equipment, systems or products provided.” ORS 701.131(2)(c)(B). Therefore, the seller required to have a contractor’s license would most likely have claims against the general contractor or subcontractors for performance issues. However, without a valid license, the seller would not be able to sue for liquidated damages or any other monetary remedy under a construction contract.

In addition, a buyer who elects not to proceed with the purchase of a home or condominium unit could use the seller’s unlicensed status as a basis for refusing to close. The buyer could argue



that the seller’s unlicensed status prevents the seller from enforcing the purchase agreement under ORS 701.131.

“Contractor” is defined under ORS 701.005 as a person who constructs or arranges for construction work. Under ORS 701.021, a contractor’s license or developer’s license is generally required for a person to undertake any construction work. The Act requires developers of property intended for sale to obtain a license from the CCB. ORS 701.026(1). Oregon law defines a “developer” as a contractor “that owns property or an interest in property and engages in the business of arranging for construction work or performing other activities associated with the improvement of real property, with the intent to sell the property.” ORS 701.005(6) (emphasis added).

If the seller is hiring a licensed general contractor to perform the construction work and will not perform such work itself, the seller will likely qualify for the developer’s classification of license. CCB imposes a $260 fee for a two-year developer license. Unlike other classifications of contractors, developers are not required to complete any training or pass any tests in order to obtain a developer’s license. A developer must obtain a surety bond in the amount of $20,000 and public liability, personal injury, and property damage insurance covering the project including liability for products and completed operations in an amount not less than $500,000. ORS 701.081(4); ORS 701.084(5). According to attorneys who practice in this area, the bond and insurance premiums can be expensive and the coverage may be difficult to obtain, especially for condominium and townhome projects and for developers without previous experience.

A CCB license application requires disclosure of the name, Social Security number, and address of each partner of a partnership, owner of a sole proprietorship, officer of a corporation, and member and manager of a limited liability company. The application also requires disclosure of any judgments, court actions, administrative actions, or convictions arising from construction activities against any of those persons.

One important limited exemption from the licensing requirement applies to a developer who arranges for construction work on an existing “residential structure.” Under ORS 701.010(6), an owner who contracts with licensed contractors to perform work within the same calendar year on three or fewer existing residential structures is not required to obtain a developer license. If the construction work requires a building permit, the work must be performed by or under the direction of a general contractor.

The term “residential structure” is defined in ORS 701.005(15) and includes a site-built residence; a structure that contains one or more dwelling units and is four stories or less 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 home, structure, unit, or dwelling. The statutes specifically excludes certain structures, including a structure that contains both residential and nonresidential unit, transient lodging, a residential school or residence hall, a state or local correctional facility other than a local facility for persons enrolled in work release programs maintained under ORS 144.460, a youth correction facility as defined in ORS 420.005, a youth care center operated by a county juvenile department under administrative control of a juvenile court pursuant to ORS 420.855 to 420.885, a detention facility as defined in ORS 419A.004, a nursing home, a hospital, or a place constructed primarily for recreational activities. ORS 701.005(15)(b).

Therefore, a flipper who remodels fewer than three homes in the same calendar year and a homeowner who remodels his or her own residence before sale likely is not required to obtain a developer’s license. However, many sellers will be required to obtain a developer’s license under these



rules, and this issue should be considered in light of the seller’s past, current, and planned future activities.

Sellers who are required to have a license with the CCB may not perform work to construct, improve, or repair a residential structure or zero-lot-line dwelling for a buyer or property owner without a written contract if the aggregate contract price exceeds $2,000. If the price of a contract was initially less than $2,000 but during the course of performance the contract exceeds that amount, the contractor must mail or otherwise deliver a written contract to the property owner not later than five days after the contractor knows or should reasonably know that the contract price will exceed $2,000. Failure to have a written contract will not void the contract. ORS 701.305(1).

The 2013 legislature amended ORS 701.305 and eliminated the requirement to include specific terms in the residential construction contract but continued to allow the CCB to adopt rules that require a contractor to use standard contractual terms. Chapter 168, 2013 Oregon Laws (SB 205). Prior to amendment, the statute required the contract to include (1) a statement that the contractor is licensed by the CCB; (2) the name, license number, address, and telephone number of the contractor; (3) an acknowledgment of a written offer of a warranty, if an offer is required by ORS 701.320, and indication of the acceptance or rejection of the offered warranty; (4) a list of the required statutory notices; and (5) an explanation of the property owner’s rights under the contract, including, but not limited to, the ability to file a claim with the CCB and the existence of any mediation or arbitration provision in the contract, set forth in a conspicuous manner.

The contract for the performance of work on a residential structure and that is subject the CCB Act may not contain a provision that limits the right of a person to file a complaint with the CCB, but it may contain a provision requiring mediation or arbitration of a dispute arising from the contract. ORS 701.315.

II. SPECIAL SALE CONSIDERATIONS

A. Subdivisions

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).

B. Condominiums

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 with potential purchasers of 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. Unlike home sales generally, a condominium purchaser’s reservation deposits are required to be held in escrow until closing. 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 Oregon Condominium Act, 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 of developer is broader than simply the declarant, which is the entity or person who forms the condominium. Owners of units who do not acquire the units 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 within which to acknowledge receipt of a complete filing and 45 calendar days thereafter to review the documents and provide comments. If the REA does not respond with comments within the 45-day period, the filing is deemed approved under ORS 100.675; however, in order to record the final declaration, bylaws, and plat to form the condominium, the developer must obtain a signature from a representative on behalf of the Real Estate Commissioner. The developer is responsible for reporting any material changes to the information submitted to the REA 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. Buyers must sign receipts for such documents which receipts must be retained by the developer for three years and are subject to inspection by the Real Estate Commissioner. Whenever possible, it is preferable for a developer to utilize the services of 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 A.



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.

C. Interstate Land Sales Full Disclosure Act

In addition to Oregon statutory requirements, developers of lots and condominium units 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. The ILSFDA is a complex act that impacts various property sales transactions. Congress enacted the act in 1968 to combat real estate fraud. The act has two components, the anti-fraud provisions and the registration provisions that require developers to register the project with the Bureau of Consumer Financial Protection (“CFP”) and provide a detailed property report to prospective buyers.

Any developer that 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 CFP. 15 U.S.C. 1702 and 12 C.F.R. 1010 set forth partial and complete or full 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 is 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 buyers’ rescission rights 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).

Note that the U.S. House of Representatives passed a bill in September 2013 that exempts condominiums from filing and registration requirements under the ILFSDA.

III. SALE CONTRACTS

A. Oregon Condominium Act

If the property is a new condominium or the seller is a developer subject to the Oregon Condominium Act, the seller is required to use only the form of unit sales agreement approved by the Oregon Real Estate Agency. A buyer’s ability to negotiate the terms of the unit sale agreement is limited, given the constraints of the approved form and a seller’s resistance to negotiating different terms for numerous buyers.



B. Subdivisions and Planned Communities

Although no statute or rule prescribes or limits the type of sales agreement for use in subdivisions and planned communities, builders and developers often will require the use of a form selected by the builder or developer as seller and drafted by the seller’s attorney. The builder or developer drafted agreement generally will include special provisions relating to plans and specifications, methods and timing for selecting finishes and/or upgrades, and completion of punch-list items in connection with closing.

C. Oregon Real Estate Forms LLC

Builders, developers, flippers, and homeowners who have completed construction of new homes or substantial remodeling projects on existing homes generally engage the services of an Oregon licensed real estate broker. If the seller does not have its own form of sale agreement, the contract form will be selected by the real estate broker who submits the buyer’s offer, and it is likely that the broker will use a form distributed by Oregon Real Estate Forms LLC (“OREF”). Samples of the complete forms can be viewed at the OREF website: http://www.orefonline.com/formschange.asp.

Attorneys representing sellers who prefer to utilize broker-drafted agreements for their sale transactions should familiarize themselves with the various OREF forms and assist their seller clients in drafting appropriate addenda to those contracts where appropriate. The sale contract forms available from OREF include Residential Sale Agreement, Farms and Ranches Sale Agreement, New Construction Sale Agreement, Residential Condominium Sale Agreement, and Vacant Land Sale Agreement.

IV. CANCELLATION, RESCISSION, AND REVOCATION

A. CCB Act Rights

A property owner who enters into an initial written contract for the construction, improvement, or repair of a residential structure or zero-lot-line dwelling on real property owned by the property owner may cancel the contract by delivery of a written notice of cancellation any time prior to midnight at the end of the next business day. ORS 701.310(1). The buyer’s notice of cancellation may be delivered in any written form or by any means that can be readily converted to written form, including, but not limited to, facsimile, electronic mail, and regular mail. The notice must state the intention of the property owner to cancel the contract. ORS 701.310(1). The property owner cannot cancel a contract after a contractor substantially begins the residential construction, improvement, or repair. ORS 701.310(2).

B. Oregon Condominium Act

A buyer of a residential condominium unit may cancel a sale from a developer within five business days (excluding Saturdays and holidays) after the date on which the latest of the following events occurs: (1) the signing by the buyer of the unit sales agreement; (2) the signing by the buyer of the receipt required under ORS 100.705(2) upon the delivery of the disclosure statement, if any; or (3) the signing by the buyer of the receipt required under ORS 100.725(4) upon delivery of a copy of the documents specified in ORS 100.725(1). ORS 100.730(1); ORS 100.730(8). The cancellation notice is not required to be in a particular form and is effective when deposited in the mail. ORS 100.730(3) and 100.730(4). The buyer can waive the cancellation right in writing after the unit sales agreement is fully executed by both parties. ORS 100.735. The developer is required to provide a notice regarding the buyer’s cancellation rights in the first page or on a separate page attached to the front of the unit sales agreement. ORS 100.740.

C. Home Solicitation Contract

Oregon law provides for a mandatory, three-day cancellation right. ORS 83.710 et seq. A buyer may cancel a home solicitation contract when the contract is solicited at any place that is not the seller’s permanent place of business. This law applies to construction contracts as well as most other types of

http://www.orefonline.com/formschange.asp



contracts. A construction contract is subject to this law if there is a personal solicitation made by the contractor or the contractor’s agent and if the contractor’s offer is accepted by the property owner or buyer anywhere other than the contractor’s permanent place of business. Regardless of who initiates the contact, in every such situation, the property owner must be given notice of his or her right to rescind the contract. The form of notice is specified in ORS 83.730.

D. Interstate Land Sales Full Disclosure Act

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 by using 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 after closing and transfer of title from the seller to the buyer. 15 U.S.C. 1703(c) and (d). This remedy has been utilized by many buyers during the recent recession years, particularly in Florida.

E. Seller’s Property Disclosure Statement

With some exclusions and exemptions, sellers are required to complete, sign, and deliver a seller’s property disclosure statement to each buyer who makes a written offer to purchase real property in Oregon. ORS 105.465. Unless the buyer indicates to the seller that the buyer will use the real property for purposes other than a residence for the buyer or the buyer’s spouse, parent, or child, the requirement to provide the seller’s disclosure statement applies to: (1) real property consisting of or improved by one to four dwelling units; (2) a condominium unit not subject to disclosure under the Oregon Condominium Act; (3) timeshare property as defined in ORS 94.803 and not subject to disclosure under ORS 94.829; and (4) a manufactured dwelling, as defined in ORS 446.003, that is owned by the same person who owns the land upon which the manufactured dwelling is situated.

Sellers of newly constructed homes or units may qualify for an exclusion from this requirement as set forth in the statutes and in the statutory form. The exclusion applies if the seller completes and provides to the buyer the following statement on or before the date the buyer is legally obligated to complete the purchase: “This is the first sale of a dwelling never occupied. The dwelling is constructed or installed under building or installation permit(s) #__________, issued by _________.”

If no exclusion applies, disclosure is required in the form set forth in ORS 105.464. The buyer has five business days after delivery of the seller’s property disclosure statement to revoke the buyer’s offer by delivering to the seller a separate signed written statement of revocation disapproving the seller’s disclosure. If the buyer fails to deliver the written revocation, the buyer’s right to revocation expires. ORS 105.475. This right of revocation can be waived by the buyer.

If the seller fails or refuses to provide a seller’s property disclosure statement if required, the buyer’s right of revocation continues until the right is terminated by delivery of the disclosure statement and expiration of the five-day period or by the buyer closing the purchase transaction.

If the buyer revokes the offer pursuant to ORS 105.475, notwithstanding ORS 696.581, the buyer is entitled to immediate return of all deposits and other considerations delivered to any party or escrow agent with respect to the buyer’s offer, and the buyer’s offer is void. When the deposits have been returned to the buyer, upon the buyer’s signed, written release and indemnification of the holders of the deposits and other considerations, the holders are released from all liability for the deposits.

The statute also provides that a seller’s property disclosure statement becomes part of and incorporated into the offer and the acceptance.



V. SELLER DISCLOSURES

A. Seller Property Disclosure Statement

See discussion above.

B. CCB Required Notices

Licensed contractors contracting for work on a residential construction project must also provide owners with three notices:

1. Consumer Protection Notice;

2. Notice of Procedure; and

3. Information Notice to Owner About Construction Liens.

The notices and other significant information and instructions can be found on the CCB website at http://www.oregon.gov/CCB/Contractor_Forms.shtml. Copies of the notices are included with these materials. See Appendix B. The notices must be provided at the time of the contract and signed by both the contractor and the property owner/buyer.

C. Oregon Condominium Act Disclosure Statement

For a sale of a condominium unit by a developer, the buyer must be provided a copy of the REA 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 must include 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.

D. FTC Insulation Notice

Sellers of new homes to consumers are subject to the Federal Trade Commission’s home insulation notice requirements. The FTC regulations deal with home insulation labels, fact sheets, ads, and other promotional materials in or affecting commerce, as “commerce” is defined in the FTC Act. Violating any of the FTC’s rules constitutes an unfair and deceptive act or practice or an unfair method of competition under section 5 of that act and can result in per violation fines up to $11,000 plus an adjustment for inflation, under section 1.98 of the act. The FTC Act and regulations apply to members of the home insulation industry. 16 CFR 460.3. Requirements of the FTC regulations must be satisfied by a person who imports, manufactures, distributes, sells, installs, promotes, or labels home insulation. A seller who prepares, approves, places, or pays for home insulation labels, fact sheets, ads, or other promotional materials for consumer use, or who supplies anyone covered by the regulation with written information that is to be used in labels, fact sheets, ads, or other promotional materials for consumer use, must comply with the FTC requirements. Testing labs must follow the rules unless the industry member tells the lab, in writing, that labels, fact sheets, ads, or other promotional materials for home insulation will not be based on the test results. 16 CFR 460.4. A seller of a new home must include the following information in every sale contract: type, thickness, and R-value of the insulation that will be installed in each part of the house. If the sale contract is signed by the buyer before the insulation type, thickness, and R-value has been determined, or if there is a change in the contract, seller can provide the buyer with the required information as soon as it is known. 16 CFR 460.16.

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



VI. WARRANTIES AND MAINTENANCE SCHEDULES

A warranty is an obligation by the seller that the seller’s product is free from defective materials or workmanship, together with a promise to repair or replace the defective items and faulty work. Oregon statutes may require the seller to offer or provide warranties to buyers.

A. Contractor Warranty

If the seller is required to have a license issued by the CCB and enters into a contract to construct or sell a new residential structure or zero-lot-line dwelling, the seller is required to offer a warranty in writing to the property owner or original purchaser. ORS 701.320(1). This requirement does not apply to a manufactured dwelling. ORS 701.320(2). The seller must include statements in the construction contract or sales contract that: (1) the seller made a written offer of warranty, and (2) the owner or purchaser accepted or rejected the offer.

Warranties can cover structural defects, major home system failures (plumbing, electrical, heating, and air-conditioning systems), major appliances (refrigerators, dishwashers, ovens, and stovetops), and workmanship (defects in the work performed, such as installation). The law does not require the contractor to supply the warranty personally. The contractor can purchase the warranty through a company that sells warranties (e.g., 2-10 Home Buyers Warranty). In addition, the law does not require the warranty to cover a specific term. The CCB’s website tells consumers that a typical new home warranty protects against structural defects for five to ten years and promises to repair or replace major systems for one to two years. Additionally, the contractor can charge for the warranties. There is typically a service fee, like a deductible, that the homeowner pays when requesting warranty service.

B. Condominium Warranty

The Oregon Condominium Act requires developers of new construction condominiums to provide buyers with a one-year warranty pursuant to ORS 100.185. These requirements differ from the CCB requirements, but both will be applicable to new construction condominiums. ORS 100.185(1) requires the developer to expressly warrant against defects in the plumbing, electrical, mechanical, structural, and all other components of the newly constructed units and common elements.

The warranty must: (1) exist on a unit and the related limited common elements for not less than one year from the date of delivery of possession of that unit by the developer to the first unit owner other than the developer; (2) exist on the general common elements for not less than one year from the initial conveyance of title to a unit by the developer to a unit owner other than the developer, or, in the case of a staged or a flexible condominium, for not less than one year from such initial conveyance of title or completion of the construction of the specific general common element, whichever is later; (3) be contained in the contract or other agreement to purchase; (4) be separate from, and in addition to, any warranties provided by any other person; (5) be in lieu of any implied warranties by the developer against defects in the plumbing, electrical, mechanical, structural, or other components of any newly constructed unit or common elements; and (6) name the association of unit owners as an express beneficiary with regard to general common elements.

A written claim reasonably specifying a breach of the warranty on the unit and the related limited common elements must be delivered to the developer before the expiration of such warranty. A written claim reasonably specifying a breach of the warranty on the general common elements must be delivered to the developer within two years of expiration of such warranty, but the claim must be for a defect existing prior to the expiration of such warranty under this section. An action to enforce such warranty shall not be commenced later than four years after expiration of such warranty. ORS 100.185(2).

The term “newly constructed units and common elements” is defined as units and related limited common elements that have been substantially completed for less than three years and occupied for less than twelve months and general common elements that have been substantially completed for less



than three years and that were constructed contemporaneously with units that have been occupied for less than 12 months.

C. Maintenance Schedule

At the time the warranty is offered, builders of residential structures also are required to provide their buyers with a recommended maintenance schedule for the structure. 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 C. 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.

VII. CONSTRUCTION LIENS

A. Construction Lien Priority Overview

Oregon’s construction lien laws are weighted heavily in favor of the construction lien claimant. All construction liens relate to the date of commencement of the improvement—that is, “the first actual preparation or construction upon the site or the first delivery to the site of materials of such substantial character as to notify interested persons that preparation or construction upon the site has begun or is about to begin.” See ORS 87.005(1).

1. Lien Claims That Do Not Have Priority over a Previously Recorded Trust Deed. A construction lien perfected by a lien claimant described in ORS 87.010(2) or (6) will be preferred to any lien, mortgage or other encumbrance (1) that attaches to the land after the time of commencement of the improvement or (2) that was unrecorded at the time of commencement of the improvement. ORS 87.025(1). These lien claimants cannot establish priority over a trust deed recorded before the commencement of improvements and include the following persons.

Any person who engages in or rents equipment for the preparation of a lot or parcel of land, or improves or rents equipment for the improvement of a street or road adjoining a lot or parcel of land at the request of the owner of the lot or parcel, shall have a lien upon the land for work done, materials furnished or equipment rented.

ORS 87.010(2).

A landscape architect, land surveyor or other person who prepares plans, drawings, surveys or specifications that are used for the landscaping or preparation of a lot or parcel of land or who supervises the landscaping or preparation shall have a lien upon the land for the plans, drawings, surveys or specifications used or supervision performed.

ORS 87.010(6).

2. Lien Claims That May Have Priority over a Previously Recorded Trust Deed. Subject to certain exceptions described below, a construction lien perfected by a lien claimant described in ORS 87.010(1), (4), or (5) will be preferred to all prior liens, mortgages, or other encumbrances upon the land upon which the improvement was constructed. ORS 87.025(2). The following lien claimants may be able to establish priority over a trust deed recorded before the commencement of improvements.

Any person performing labor upon, transporting, or furnishing any material to be used, or renting equipment used in the construction of any improvement shall have a lien upon



the improvement for the labor, transportation, or material furnished or equipment rented at the instance of the owner of the improvement or the construction agent of the owner.

ORS 87.010(1).

Trustees of an employee benefit plan shall have a lien upon the improvement for the amount of the contributions, due to labor performed on that improvement, required to be paid by agreement or otherwise into a fund of the employee benefit plan.

ORS 87.010(4).

An architect, landscape architect, land surveyor, or registered engineer who, at the request of the owner or an agent of the owner, prepares plans, drawings, or specifications that are intended for use or to facilitate the construction of an improvement or who supervises the construction shall have a lien upon the land and structures necessary for the use of the plans, drawings, or specifications so provided or supervision performed.

ORS 87.010(5).

Although ORS 87.010 states that construction liens of the type described in ORS 87.010(1) and (4) apply only to the improvements, ORS 87.015(1) extends the scope of the lien under ORS 87.010(1), (4), and (5) to a portion of the land “that may be required for the convenient use and occupation of the improvement constructed on the site, to be determined by the court at the time of the foreclosure of the lien” if, at the time of the commencement of the improvement, the person who caused the improvement to be constructed was the owner of that site and land. If the person owned less than a fee-simple estate in the site and land, then only the interest owned by the person who caused the improvement to be constructed will be subject to the lien.

The general rules set forth above as to construction lien priority are subject, however, to the exceptions described in ORS 87.025(3) and (6).

excePtion 1. Under ORS 87.025(3), a construction lien for materials or supplies will not have priority over any recorded mortgage or trust deed on either the land or improvements unless the person furnishing the material or supplies, not later than eight days (not including Saturdays, Sundays, and other holidays) after the date of delivery of material or supplies for which a lien may be claimed delivers to the lender either a copy of the Notice of Right to a Lien given to the owner under ORS 87.021 to protect the right to claim a lien on the material or supplies (discussed below), or a notice in any form that provides substantially the same information as the Notice of Right to a Lien form set forth in ORS 87.023.

excePtion 2. ORS 87.025(6) distinguishes between construction liens arising from new construction and construction liens arising from the alteration or repair of an existing improvement. A construction lien under ORS 87.010(1), (4), or (5) has priority over prior liens, mortgages, and encumbrances only when the claimant has participated in the original construction of a new improvement. If, on the other hand, a lien claimant has participated in the alteration or repair of an existing improvement, the construction lien will not have priority over a previously recorded mortgage or trust deed on the land or improvement unless that mortgage or trust deed was given to secure a loan made to finance the alteration or repair. ORS 87.025(6).

In other words:

F If the construction lien arises from the original construction of new improvements on the property (as opposed to the alteration or repair of an existing improvement), the construction lien will have priority over all recorded trust deeds, even those recorded before the commencement of the



improvement (if none of the proceeds from the previously recorded trust deed are used to finance the construction, query whether the priority extends to both land and improvements or just to the improvements?)

F If the construction lien arises from the alteration or repair of an existing improvement (as opposed to new construction), the construction lien will have priority over (a) all trust deeds recorded after the commencement of the improvement, and (b) any trust deed recorded before the commencement of the improvement, but only if proceeds from the loan are used to finance the alteration or repair. The construction lien will not have priority over a trust deed recorded before the commencement of the improvement if none of the loan proceeds are used to finance the alteration or repair. This priority is relatively easy to prove with respect to a closed-end loan. Revolving lines of credit pose risks with respect to construction lien priority because the borrower can use funds from the revolving line of credit to finance repairs or alterations.

B. Construction Lien Perfection and Foreclosure Overview.

1. Information Notice to Owner. An “original contractor” (i.e., a contractor who has a contractual relationship directly with the owner) is required to mail or deliver an “Information Notice to Owner” to:

F The first purchaser of residential property constructed by the contractor and sold before or within the 75-day period immediately following the completion of construction, and

F The owner or an agent of the owner (other than an original contractor) at the time of signing a written residential construction or improvement contract with the owner.

A general contractor who contracts directly with the landowner for a residential structure must provide the owner or an agent of the owner with an “Information Notice to Owner” at the time the construction contract is signed.

This notice requirement applies only to a residential construction or improvement contract when the aggregate contract price exceeds $1,000. The “Information Notice to Owner” form has been created by the Oregon Construction Contractors Board and is available at the CCB website. A copy of the notice is included with these materials along with other notices. See Appendix B. If the original contractor fails to deliver the required Information Notice, the original contractor may not claim any construction lien on the land or the improvements, the CCB may suspend the original contractor’s license, and the original contractor may be subject to a civil penalty of up to $5,000.

2. Notice of Right to a Lien. The first step in the construction lien process usually involves delivery of the “Notice of Right to a Lien” pursuant to ORS 87.021. Unless the lien claimant furnished material, equipment, services, or labor to a residential project at the owner’s request (i.e., the claimant dealt directly with the owner), the lien claimant is required to deliver a “Notice of Right to a Lien” to the owner.

The notice may be delivered in person or by registered or certified mail. The form and content of the notice is specified in ORS 87.023. The notice may be given at any time during construction, but the notice only protects the right to perfect a lien for materials, equipment, and labor or services provided after a date that is eight days (not including Saturdays, Sundays, and other holidays) before the notice is delivered. ORS 87.021(1). If the lien involves the delivery of materials or supplies, the claimant must deliver or mail a copy to the lender if the claimant intends to claim that the construction lien has priority over the lender’s trust deed. ORS 87.025(3).

The chart below indicates when delivery of the Notice of Right to a Lien is required to establish and/or protect the claimant’s lien rights.



When a Construction Lien Claimant Must Send a Notice of Right to a Lien

Only Materials Provided

Labor and Materials Provided

Only Labor Provided

Owner Lender Owner Lender Owner LenderClaimant contracted directly with owner of commercial property No Yes No Yes No No

Claimant did not contract directly with owner of commercial property Yes Yes No Yes No No

Claimant contracted directly with owner of residential property No Yes No Yes No No

Claimant did not contract directly with owner of residential property Yes Yes Yes Yes Yes No

3. Owner’s Demand. If an owner receives a Notice of Right to a Lien from a person who provided materials, equipment, services, or labor, the owner may make written demand for “a list of materials or equipment or description of labor or services supplied or a statement of the contractual basis for supplying the materials, equipment, services or labor, including the percentage of the contract completed, and the charge therefore to the date of the demand.” The supplier must provide the requested information within 15 days (not including Saturdays, Sundays, and holidays) after receiving the owner’s written demand. Failure of the supplier to furnish the requested information to the owner results in a loss of the claimant’s ability to seek an award of attorney fees and costs that otherwise might be allowed in a suit to foreclose the lien. ORS 87.027. A seller should always make demand for the list of materials and supplies and a statement of the amount due from a lien claimant.

4. Completion Notice. When construction is substantially complete, any original contractor, the property owner, or any lender holding a mortgage or trust deed on the property (or an agent of any of the foregoing) may post a “Completion Notice” on the property in order to commence the running of the 75-day lien filing period discussed below. The form of the completion notice is set forth in ORS 87.045.

The Completion Notice must be posted on the date it bears in some conspicuous place on the land or the improvements constructed on the land. Within five days after the date the notice is posted, the party posting it (or the agent of that party) must record the notice, together with an affidavit made by the person posting the notice stating the date, place, and manner of posting the notice.

note: Sellers should require that a Completion Notice be properly prepared, posted, and recorded with the required affidavit. This helps to define the period of time within which a construction lien may be asserted.

5. Perfection by Filing Claim of Lien. A construction lien is “perfected” when the lien claimant records—“files”—the claim of lien with the county clerk in the county where the improvements are located. The claim of lien must contain (a) a true statement of demand, after deducting all credits and offsets, (b) the name of the owner (or reputed owner) of the subject property if known, (c) the name of the person by whom the claimant was employed or to whom the claimant furnished the materials or rented the equipment or by whom contributions are owed, and (d) a description of the property to be charged with the lien sufficient for identification, including the address (if known). The claim of lien must be verified under oath. To be effective, a claim of lien in most cases must be filed no later than 75 days after the claimant has ceased to provide labor, rent equipment, or furnish materials, or 75 days after completion of construction, whichever is earlier. ORS 87.035.



6. Notice of Filing of Claim of Lien. Within 20 days after recording the claim of lien, the lien claimant is required to send by certified or registered mail a written notice to the owner and the lender indicating that a claim of lien has been filed. A copy of the claim of lien must be attached to the notice. If a lien claimant fails to comply with this requirement, the lien claimant will not be entitled to recover costs, disbursements, or attorney fees that would otherwise be allowed in a suit to foreclose the lien. ORS 87.039.

7. Notice of Intent to Foreclose. Not later than 10 days before commencing a suit to foreclose a construction lien, the lien claimant must deliver to the owner and lender a notice stating that the lien claimant intends to commence a lien foreclosure action. The notice must be sent by registered or certified mail. Upon receipt of the notice of intent to foreclose, the owner may demand a list of the materials and supplies with the charge therefor or a statement of the contractual basis for the owner’s obligation. The lien claimant must provide the requested information within five days after receipt of the demand. If the lien claimant does not satisfy these requirements, the lien claimant will not be entitled to recover costs, disbursements, or attorney fees that would otherwise be allowed in the suit to foreclose the lien. ORS 87.057.

8. Suit to Enforce Lien. A suit to enforce the lien must be filed by the lien claimant within 120 days after the claim of lien is recorded unless extended payment was provided for and is stated in the recorded claim of lien. If extended payment is provided for the terms of extended payment are stated in the claim of lien, the suit to enforce the lien must be filed within 120 days after the expiration of the extended payment period. However, no lien may be continued in force by any agreement to extend payment for more than two years after the claim of lien is filed. ORS 87.055.

9. Foreclosure Suit. The court’s calendaring of a suit to enforce a perfected construction lien will have a preference over almost all other kinds of civil suits. The court is responsible for allowing or disallowing the lien. If the lien is allowed, the court enters a judgment of foreclosure of the lien and resolves all other issues. If the lien is disallowed and a party has made a demand for a jury trial, the court will empanel a jury to decide any issues triable to a jury. All other issues in the suit will be tried by the court. Unless the lien claimant has failed to give certain of the required notices, the court will allow a reasonable amount as attorney fees at trial and on appeal to the party who prevails on the issues of the validity and foreclosure of the lien. ORS 87.060.

10. Bond or Deposit—Demand for Lien Release. A perfected construction lien may be removed from the property by the owner or an interested party obtaining a valid bond or making a cash deposit in compliance with ORS 87.076. The bond or deposit amount must be 150% of the lien claim amount. Notice to the lien claimant and a recorded affidavit are required.

VIII. REPRESENTING BUYERS

A. Due Diligence Research on Seller and Builder

The two single most important aspects of representing buyers in a transaction where construction recently is completed or is contemplated as part of the transaction are educating clients about the risks involved and advising clients to obtain as much information as possible about both the seller and the seller’s contractor (if different) before entering into the transaction. This includes internet research, requesting and checking builder or seller references, particularly if the seller is not a national homebuilder, and searching the names of the seller and builder at the CCB website. The CCB website includes information about whether the developer or builder has a history of complaints. In addition, the CCB site includes information about seller’s related entities. See https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/ccb_index.htm.

For buyers, the developer’s license requirement is advantageous because it allows the buyer to research the seller and determine whether any prior complaints have been filed against the seller. In

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




addition, because most developers create single-asset LLCs to own a particular development project to insult potential liabilities and the developer’s license requires the disclosure of the names of the owners of the entity, buyers can determine what other projects the seller has been involved in and research those projects. Last, the requirement for a developer’s license assures the buyer that the developer has completed operations coverage for construction defects, has a surety bond, and provides an additional mechanism for complaints through the CCB’s complaint process.

Additional internet searches can reveal news stories about construction defects, lawsuits, embezzlement from the HOA funds, and other information regarding the seller’s business practices and reputation. Troubling information related to a different project from the property under contract will provide your client with information regarding the seller’s history in the building industry. Clients should also be encouraged to talk with other owners in the project.

The CCB has many resources for homeowners and buyers that describe contractor duties and provide tips for construction transactions. For example, the CCB has published a brochure entitled “Risky Home Improvement Shortcuts.”

If the seller does not have a license, the buyer should ask questions to determine whether the seller is required to be licensed and whether the seller’s unlicensed status presents a risk the buyer is willing to take.

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, including certain issues that have been discussed above including the form of sale agreement and buyer’s rescission rights. Other issues to consider in representing a buyer of a new home or unit include the following.

B. Review of Documents Governing the Project

In reviewing the purchase and sale agreement, an attorney representing a buyer should require a contingency in the agreement for review and approval of the HOA documents, including the CCRs or condominium declaration, bylaws, rules, and regulations adopted by 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 condominium buildings or 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 or contemplated 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 FNMA lending requirements 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. In addition, the sale agreement will provide contingencies for title review, financing, and inspection.

Oregon’s Notice of Defect and Opportunity to Cure Act, ORS 701.560–701.600, was designed to foster communication between owners and contractors about defects in residential construction before owners resort to litigation. The act generally requires the owner to send a Notice of Defect letter to the contractor and requires the contractor to respond. A buyer should inquire whether the seller or the HOA has sent a Notice of Defect letter, which would signal a construction defect and possible litigation contemplated by the HOA and for which special assessments may be levied.



C. Use Restrictions

In reviewing the governing documents, particular attention must be paid to the use restrictions that may impact the buyer, especially rent restrictions and architectural guidelines and review requirements. In condominiums, the bylaws 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 buyer 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 the buyer, and whether consent must be obtained from the HOA board to allow such use.

If the buyer is purchasing a lot in a planned community and desires to build on the lot, the sale agreement or an amendment should include a condition for the buyer’s benefit requiring HOA approval of the desired improvements in order for the buyer to be required to close his or her purchase. This condition should allow the buyer sufficient time to get through the design, submission, review, and approval process. If the buyer is purchasing an existing home or unit and intends to make alterations, review the documents and confirm the type of alterations that must be approved by the HOA and the required approval process. Again, a condition should be included in the sale agreement for the buyer’s benefit to obtain the necessary approvals. If the buyer is purchasing a home or unit that is under construction at the time of contract, the buyer must be aware of and must comply with the seller’s timelines for finish and options selections, which may result in a price increase. Developers of planned communities may require buyers to pay for the selected custom modifications prior to closing. Condominium developers are prohibited by the Oregon Condominium Act 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 buyer’s custom modifications and the agreement may provide that the buyer’s entire deposit will be forfeited in the event of the buyer’s failure to close his or her purchase.

D. Rental Restrictions

If the buyer is acquiring a unit or home that is occupied by tenants, as is increasingly the case in today’s real estate market, confirm the buyer’s intentions about retaining the tenant. The tenant’s lease term is unaffected by conveyance of the unit or home. If the buyer wishes to occupy the residence at closing, the lease 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 should include a contingency for the buyer’s review of the lease and any property management agreement.

Even if the residence is not currently rented, you should confirm the buyer’s intentions with regard to rental 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. 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 rental restrictions were adopted by the HOA. Some HOAs impose special fees on rentals beyond the typical owner move-in, move-out fees, on the theory that renters use less care in moving furniture through the common elements or in their general use of the common elements. 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.



E. Insurance

The CCRs and bylaws spell out the types of insurance the buyer 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 buyer should be advised to provide the portions of the documents containing the insurance requirements to his/her insurance agent.

F. 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 whether the unit owner or HOA is responsible for maintaining these areas, so a buyer should be aware of the buyer’s maintenance responsibilities. Invasive inspections will typically not be allowed, but the inspection report can reveal potential problems with moisture, mold, and leaks, for example.

G. Purchasing Bank-Owned Properties

An attorney representing a buyer who purchases real estate acquired by a lender through foreclosure should carefully review the title report and confirm that the policy issued to the buyer will not contain any exceptions from coverage for claims arising from the foreclosure process or matters that should have been eliminated in the foreclosure.

IX. HOMEBUYER PROTECTION ACT

The Homebuyer Protection Act (HPA), ORS 87.007, became law on January 1, 2004, and was designed to protect buyers of new homes from construction liens that may be recorded after closing for work performed prior to closing.

The HPA applies to sales of a single-family residence, condominium unit, or residential structure that contains not more than four dwelling units and that has been completed within three months prior to the closing date or that has had $50,000 or more of construction work performed within three months prior to the closing date. Subsection (2) of the statute provides that “an owner of record” who sells residential property “shall protect the purchaser from claims of lien that arise before the date on which the sale is complete but that may become perfected under ORS 87.035 after the date on which the sale is complete” by one of the methods summarized below:

1. “Purchase or otherwise provide title insurance on the purchaser’s behalf” issued without exception for recorded and unrecorded construction liens that exist on the closing date;

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.

Until 2010, the seller was permitted by statute to obtain the buyer’s waiver of the HPA requirements. The waiver alternative and the statutory waiver form were eliminated effective January 1, 2011. Chapter 77, Oregon Laws 2010 (HB 3689). The CCB updated most of its forms and materials to eliminate a discussion of the waiver; however, outdated materials that reference the waiver still can be found at the CCB website and should be disregarded.



Subsection (3) of the HPA requires that the seller must complete and provide to the buyer the HPA Notice of Compliance indicating the manner in which the seller has complied with the law. The Notice of Compliance form is available at the CCB website. A copy of the form is also included with these materials. See Appendix D. The seller and the buyer must sign and date the Notice of Compliance prior to closing the purchase transaction. Seller’s failure to provide the HPA Notice of Compliance when required is a Class A violation, which carries a fine of up to $720. In addition, the buyer has a right of action against a seller who does not comply with the requirements of ORS 87.007(2) and may seek to recover up to twice the amount of actual damages caused by a violation of the statute plus the buyer’s costs and attorney fees. If the seller is a licensed developer or licensed contractor, seller’s violation of the HPA may result in license suspension or revocation by the CCB.

One method of HPA compliance is for the seller to “purchase or otherwise provide title insurance” for the buyer without an exception from coverage for construction liens. The Oregon Attorney General’s office issued an opinion to the Oregon Insurance Division dated December 17, 2003, under DOJ File No. 440-030-GB0642-03 in which it determined that “purchase or otherwise provide” in ORS 87.007(2)(a) does not mean that a seller is required to pay the additional cost or premium associated with obtaining the title insurance policy for the buyer without an exception for construction liens. In other words, payment of the additional title insurance charges is a negotiable term of the sale agreement.

X. TITLE INSURANCE—NEW CONSTRUCTION

A. Standard Coverage Owner’s Policy of Title Insurance

In a typical residential sale agreement, the seller agrees to furnish to the buyer an owner’s standard coverage policy of title insurance in the amount of the purchase price free and clear of the title exceptions agreed to be removed as part of the transaction. In Oregon, a standard coverage owner’s policy of title insurance does not provide coverage for the matters set forth in the five general or standard exceptions. Those general exceptions are set forth below and include exception 5, which specifically eliminates coverage for construction liens.

(1) Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the Public Records; proceedings by a public agency which may result in taxes or assessments, or notices of such proceedings, whether or not shown by the records of such agency or by the Public Records.

(2) Facts, rights, interests or claims which are not shown by the Public Records but which could be ascertained by an inspection of the Land or by making inquiry of persons in possession thereof.

(3) Easements, or claims of easement, not shown by the Public Records; reservations or exceptions in patents or in Acts authorizing the issuance thereof, water rights, claims or title to water.

(4) Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the Title that would be disclosed by an accurate and complete land survey of the Land. The term ”encroachment” includes encroachments of existing improvements located on the Land onto adjoining land, and encroachments onto the Land of existing improvements located on adjoining land.

(5) Any lien for services, labor or material heretofore or hereafter furnished, or for contributions due to the State of Oregon for unemployment compensation or worker’s compensation, imposed by law and not shown by the Public Records.

In Oregon, title insurance policies, endorsements, and premiums are governed by a manual of rates and forms filed by the Oregon Title Insurance Rating Organization (OTIRO) and regulated by



the State Insurance Division. All of the title insurers in Oregon have adopted the OTIRO manual. The issuance of an owner’s policy of title insurance without one or more of the standard exceptions shown above requires payment of an additional policy premium. See OTIRO Manual Section 5.001, included with these materials as Appendix E. Therefore, if the owner’s policy is issued to the buyer without the exception for construction liens, additional charges will apply. As discussed in the HPA section above, payment of the additional charges associated with obtaining construction lien coverage in an owner’s policy issued to the buyer is a negotiable item and should be addressed in the sale agreement.

Attorneys who assist developers with drafting condominium unit sale agreements should address payment of these title insurance charges in the agreement prior to submission to the REA for approval. For sales of new homes, the issue also should be addressed in the seller’s form contract for the subdivision or planned community. Note, however, that the sales agreement form most often utilized by real estate brokers is the OREF-001 form entitled Residential Sale Agreement, which is a contract form obtained by the brokers from Oregon Real Estate Forms, LLC. Section 5 of this OREF-001 residential sale agreement requires the seller to furnish the buyer with a standard coverage owner’s policy and is silent on the construction lien title coverage issue. A different form, the OREF-006 entitled New Residential Construction Real Estate Sale Agreement, requires that the seller furnish a standard coverage owner’s policy to the buyer and that the parties make an election in the agreement regarding payment of the additional cost associated with obtaining title insurance coverage for construction liens by checking the appropriate box. Section 6 of the OREF-006 agreement form provides in part: “Subject to the requirement of the Homebuyer Protection Act (Section 14), if Buyer requires an early-issue policy of title insurance, Buyer / Seller shall pay the additional premium.” Section 14 of the OREF-006 New Residential Construction Sale Agreement is entitled “HOMEBUYER PROTECTION ACT” and summarizes the purpose, applicability, and requirements of the HPA.

B. Early Issue Construction Lien Coverage

In a typical residential sale transaction, the buyer will fund all or a portion of the purchase price by obtaining a loan from an institutional lender. A lender financing a new home purchase will require an extended coverage loan policy of title insurance that includes coverage against unrecorded construction liens. The buyer typically pays the premiums for the loan policy of title insurance required by the lender.

“Early issue” refers to the issuance of title insurance coverage against unrecorded construction liens before the 75-day construction lien period has expired. There is an additional charge for the early issue title insurance coverage against constructions liens. The premium for early issue coverage for completed construction is an additional $1 per thousand or fraction thereof for the first $100,000 of title policy liability, and $2 per thousand or fraction thereof for the policy liability amount over $100,000. See OTIRO Manual Section 5.002 in Appendix E.

In a transaction where the buyer obtains lender financing, the early issue construction lien coverage will be a lender requirement and the charge will be calculated based on the loan policy amount. The loan policy coverage does not protect the buyer and, as discussed above, the owner’s policy provided to the buyer typically includes a general exception for construction liens. However, if the early issue construction lien coverage is provided to the lender, the title company has the discretion to remove the construction lien exception from the owner’s policy issued to the buyer and there is no additional charge for the buyer’s protection against construction liens. In most arm’s-length residential sale transactions, title companies exercise this discretion in favor of the buyer. See OTIRO Manual Section 5.001A5 in Appendix E.

If the buyer pays cash for the new home and does not obtain financing for the purchase, payment of the premium required to remove the construction lien exception from the owner’s policy will be required as the title insurer has no discretion to provide this coverage at no charge as discussed above.



In addition the early issue charge will apply. Samples of title insurance rating scenarios for policies issued during the construction lien period are below.

exaMPle 1

Purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000Loan amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $450,000Builder rate for standard coverage owner’s policy issued to the buyer (seller pays) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 878Extended coverage rate for loan policy (buyer pays) . . . . . . . . . . . . . . . . . . . . . . . . $ 475Early issue premium for loan policy (buyer pays; negotiable with seller). . . . . . . $ 800Construction lien coverage is provided to buyer at no additional cost.

exaMPle 2

Purchase price (cash purchase/no loan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500,000Builder rate for standard coverage owner’s policy issued to the buyer (seller pays) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 878Additional premium for removal of construction lien exception from owner’s policy issued to buyer (buyer pays; negotiable with seller) . . . . . . . . . . . $ 338Early issue premium (buyer pays; negotiable with seller) . . . . . . . . . . . . . . . . . . . . $ 900

(These examples contain basic insurance premiums based on the Oregon Title Insurance Rating Organization Manual. There are additional costs for lender-required endorsements, escrow services, recording fees, government lien search fees, etc.)

The discussion above deals with early issue construction lien coverage provided after construction has been completed and during the construction lien period. The OTIRO Manual also includes an early issue construction lien coverage rate for coverage provided prior to completion of the construction. This coverage is rated at $2.50 per thousand based on the title policy amount. This coverage is rarely provided due to the associated risk. When a loan policy of title insurance is issued prior to construction in connection with a loan obtained by the buyer to fund the construction of the home, the construction lien exception will remain in the lender’s title insurance policy and will be deleted by endorsement only upon completion of construction and satisfaction of the title insurer’s underwriting requirements. The construction lien exception also will be shown in the owner’s policy issued to the buyer at closing. Some lenders wait until the construction lien period has expired before requiring the title endorsement to remove the construction lien exception from the policy which results in a savings to the buyer-borrower because the early issue charge does not apply if the construction lien coverage is provided by endorsement after the lien period has expired.

Title company requirements for issuing early issue construction lien coverage are governed in part by the OTIRO manual and in part by the title insurer’s underwriting requirements. The title company will require a written assurance from the builder and seller that all subcontractors, suppliers, and laborers have been paid. In some cases, the title company may require lien waivers or evidence of payment. It may require copies of the project budget and a financial statement from the builder to corroborate the builder’s ability to pay subs and suppliers, it may check the builder’s history with the CCB, and it may search the public records for lien claims recorded against the builder on other projects.

XI. EARNEST MONEY AND ESCROW

As discussed in part IV of these materials, statutory cancellation or revocation rights may entitle a buyer to terminate the purchase contract. In addition, the sale agreement may provide that the buyer has a right to cancel the transaction based on inspections or other contingencies and obtain a refund of buyer’s earnest money. The agreement also may specify the circumstances under which the



seller is entitled to seek to retain the buyer’s earnest money deposit if the buyer does not complete the transaction.

Earnest money deposits typically are held in an escrow agent’s trust accounts. Sellers and buyers may point to provisions in the sale agreement and demand that the escrow agent disburse the earnest money deposit pursuant to the clear provisions of the agreement. The escrow agent has no authority to disburse funds based solely on provisions set forth in the sale agreement. ORS 696.581 requires that an escrow agent obtain written signed instructions from both parties in order to disburse funds held in escrow. Subsection (3) of the statute provides: “Except as provided in ORS 314.258, an escrow agent may not close an escrow or disburse any funds or property in an escrow without obtaining dated, separate escrow instructions in writing from the principals to the transaction adequate to administer and close the transaction or, in the case of disbursement, to disburse the funds and property.” There are two exceptions to this statutory requirement for mutual instructions directing disbursement of the buyer’s earnest money deposit. (Note that earnest money deposits are not the same as condominium reservation deposits.)

The first exception to the requirement for mutual disbursement instructions arises under ORS 105.475. If a buyer has not waived the buyer’s right to revoke the offer and if the buyer delivers a timely revocation of the buyer’s offer after receipt of, or absent receipt of, the seller’s property disclosure statement prior to closing, the escrow agent may disburse the earnest money deposit to the buyer based on the buyer’s written representations and assurances regarding proper and timely revocation.

The second exception is provided in ORS 696.581(8) as follows:

(8) Except as authorized in ORS 105.475, notwithstanding the requirement for dated, separate escrow instructions to close an escrow or disburse funds or property in an escrow, an escrow agent:

(a) May disburse earnest money deposited based on an agreement of the parties executed after the initial sales agreement; and

(b) May not impose additional requirements on the principals to the transaction, including a requirement that the principals sign a release of liability in favor of the escrow agent.

Developers who anticipate the earnest money dispute issues that occasionally arise and who are aware of the disbursement constraints provided in ORS 696.581(3) typically prepare a separate agreement or contract addendum governing the circumstances under which the buyer’s earnest money deposit will be returned to buyer or forfeited to seller. If such a separate agreement is signed by seller and buyer after they have executed the sale agreement, the separate agreement may satisfy the requirements of ORS 696.581(8). If so, the escrow agent may disburse the earnest money to the appropriate party without contemporaneous additional written instructions.





APPENDIX A—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 B—CCB NOTICES

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a s

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onst

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the

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exce

eds

$200

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ituat

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E:R

N-c

hart

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 701.590) (2005)

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—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

f:Maintenance Schedule 7-08

(ORS 701.335) (OAR 812-001-0240)Page 1



Page 2

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(OA

R 8

12-0

01-0

240)



APPENDIX D—NOTICE OF COMPLIANCE WITH THE 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—OTIRO MANUAL CHAPTER FIVE: ELIMINATION OF STANDARD EXCEPTIONS

OTIRO Oregon Rating Manual

Page 5 - 1

CHAPTER FIVE: ELIMINATION OF STANDARD EXCEPTIONS

5.001 ELIMINATION OF STANDARD EXCEPTIONS A. The following additional charges shall be made for an owner’s policy with one or more of the Standard Coverage Exceptions eliminated or modified:

1) For the elimination or modification of Standard Coverage Exception No. 1, 5% of the Basic Insurance Rate for amounts of insurance up to $5,000,000.00 and 4% of the Basic Insurance Rate for amounts of insurance above $5,000,000.




5) For the elimination or modification of Standard Coverage Exception No. 5, 25% of the Basic Insurance Rate for amounts of insurance up to $5,000,000.00 and 20% of the Basic Insurance Rate for amounts of insurance above $5,000,000. The charge required under Section 5.002 shall be assessed in addition to the charge under this subsection, based on the liability of the owner’s policy, except when the owner’s policy is issued with a simultaneous Loan Policy without Standard Coverage Exception No. 5, in which event the Company, in its discretion, may eliminate the exception in the owner’s policy at no additional charge. The requirements under Section 5.002 also apply under this subsection.

B. If patents contain no reservations or if all reservations contained therein are included in the policy as typed exceptions, the language “reservations in patents or in Acts authorizing the issuance thereof” may be eliminated from Standard Coverage Exception No. 3 in an owner’s or a Loan Policy without additional charge. C. The charges in Section 4.002 of this Manual for an Extended Coverage Loan Policy apply when one or more of the Standard Coverage Exceptions are eliminated or modified. 5.002 NEW CONSTRUCTION A. “Construction” for purposes of this Section means pending or completed improvements to real property for which claims of construction lien may exist or arise, whether through new improvements or the alteration, expansion, renovation, remodeling or rehabilitation of existing improvements. B. When an owner’s or Loan Policy without Standard Coverage Exception No. 5 (construction liens) is issued after completion of construction on the land but prior to expiration of the statutory period for the filing of construction liens, an additional charge of $1.00 per thousand or fraction thereof for policy liability not exceeding $100,000 and $2.00 per thousand or fraction thereof for policy liability in excess of $100,000 shall be made. The Company must obtain satisfactory evidence that construction liens will not be filed or satisfactory indemnity against loss by reason of such liens.


Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics 1–36 OTIRO Oregon Rating Manual

Page 5 - 2

C. When an owner’s or Loan Policy without Standard Coverage Exception No. 5 (construction liens) is issued prior to completion of construction on the land, an additional charge of $2.50 per thousand or fraction thereof for the policy liability shall be made. The Company must obtain satisfactory evidence that such liens will not be filed and satisfactory indemnity against loss by reason of such liens. D. For (B) and (C) above, satisfactory evidence that construction liens will not be filed may consist of one or more of the following: lien waivers; inspection of the premises; inquiries of occupants and neighbors; inquiries of subcontractors and suppliers; review of construction disbursement program; determination of financial strength and reputation of the mortgagor or contractor; performance bond; completion bond; cash deposit, letter of credit or other security for an indemnity; other reasonable provision for payment of those entitled to assert construction liens. E. The additional charge specified in (B) and (C) above shall be computed based on the amount of the policy except as provided in this subsection (E) and in Section 5.001(A)(5) of this Manual. When the proceeds of a loan are to be used to finance the alteration, expansion, renovation, remodeling or rehabilitation of improvements on the land, the additional charge specified in (B) and (C) above shall be computed either based on the amount of the policy or based on the actual or estimated costs of the improvements that have been or are to be constructed on the land. If the charge is computed based on the actual or estimated costs of the improvements, the policy shall contain the following exception in Schedule B:

“Any lien, or right to a lien, for services, labor, material, equipment rental or worker's compensation heretofore or hereafter furnished, imposed by law and not shown by the public records, but only to the extent that all such liens or rights to a lien exceed in the aggregate the amount of $[specified limit].”

The specified limit in the exception shall be the amount on which the charge is computed. F. For a loan secured by land improved with a one-to-four family residential dwelling, when the primary purpose of the loan is for refinancing existing debt or for uses other than improvement, alteration, expansion, renovation, remodeling or rehabilitation of the dwelling, the Company may waive the charges otherwise applicable under subsection (B) or (C) of this section.





Chapter 2

Residential Construction Contractinghunter B. eMerick

Saalfeld Griggs PCSalem, Oregon

Contents

I. Risky Terms for a Purchaser in Typical Residential Construction Contracts . . . . . . . . . . 2–1A. Compliance with Form and Provision Requirements of ORS 701.305 . . . . . . . . . . 2–1B. Missing or Insufficient Provisions Protecting Against Construction Liens . . . . . . . 2–1C. Missing Provisions for Termination of Contract by Owner . . . . . . . . . . . . . . . . 2–1D. Unknown Site Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–2E. Inadequate Provision Concerning Date of Completion . . . . . . . . . . . . . . . . . . 2–2F. Offers of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–3G. Materials Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–4H. Insurance Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–4

II. Recent Legislative and Case Law Developments Concerning Residential Construction Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–4A. CCB Licensing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–4B. Storm Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–5C. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–5D. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–5

III. Negotiating Residential Construction Contracts with Builders and Design Professionals . . . . 2–6

AppendixesA. CCB Sample Contract for Construction Work . . . . . . . . . . . . . . . . . . . . . . . 2–7B. CCB Recommended Contract Addendum . . . . . . . . . . . . . . . . . . . . . . . . . 2–9C. CCB Residential Construction Contract Checklist . . . . . . . . . . . . . . . . . . . . 2–11D. ORS 701.035. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–13E. OAR 812-012-0110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–15F. ORS 87.010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–17G. ORS 87.076 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–19H. ORS 87.007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–21I. OAR 812-012-0145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–23J. Oregon State Highway Commission v. DeLong Corp. . . . . . . . . . . . . . . . . . . . . 2–25K. Abraham v. T. Henry Constr. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–45

Chapter 2—Residential Construction Contracting




I. RISKY TERMS FOR A PURCHASER IN TYPICAL RESIDENTIAL CONSTRUCTION CONTRACTS

This section should really be titled “Risky Terms Typically Not Included in Residential Construction Contracts.” Since most forms of private residential construction contracts are created by contractors, the agreements usually do not adequately address purchasers’ issues. Certainly, the form agreements contain favorable terms for contractors, but it’s what isn’t in the agreements can be as dangerous for purchasers as what is in the form agreement. Thankfully, with residential construction contracts, a well-informed and well-represented purchaser may be able to negotiate for a more balanced agreement.

A. Compliance with Form and Provision Requirements of ORS 701.305

Even though this statute was adopted in 2007, there remain a significant number of residential contracts that do not conform to the statutory and administrative requirements for a residential construction contract. The statute prohibits any work to construct a residential structure without a written contract that fulfills its requirements. However, the statute also recognizes that a failure to have a written agreement shall not void the construction contract. Unfortunately, case law has not yet explained these somewhat contradictory provisions. Failing to have a written construction contract that complies with ORS 701.305 and the administrative regulations adopted by the CCB thereunder (OAR 812-012-0110) can put the purchaser of a newly constructed residence at risk because of the uncertainty resulting from a noncomplying contract. Lenders and insurers may well condition their obligations on the existence of a valid and enforceable contract for the construction of the residence.

B. Missing or Insufficient Provisions Protecting Against Construction Liens

Generally, any licensed contractor, licensed subcontractor, material and/or equipment supplier, or laborer improving a structure can file a lien against the property. Contracts drafted by construction contractors sometimes fail to include provisions that adequately guard against the imposition of liens. At a minimum, the contract should include provisions requiring the general contractor to timely pay its laborers, subcontractors, and material and/or equipment suppliers. The contract should also state that the general contractor must not allow any construction liens to be filed against the property. In the event of such a filing, the contract must require the contractor to defend, indemnify, and hold the property and owner harmless from the lien. In addition, the contractor should be required to bond around any such lien. Of course, any payment under the contract must be conditioned on receipt of properly executed lien waivers. Proper lien waivers that are executed by all providers throughout the course of construction are the best insurance against lien encumbrances.

For the purchaser of a newly constructed residence, the contract should provide for one or more of the solutions identified by ORS 87.007 to protect against liens filed after the closing date of a newly constructed residence or significant remodel to a residential structure.

C. Missing Provisions for Termination of Contract by Owner

Most construction contracts include detailed provisions addressing how and when a contractor may terminate the construction contract. Frequently, those termination provisions also state the damages and or costs that the contractor may recover upon a termination in accordance with the contract. Rarely, however, do construction contracts contain express provisions detailing how, when, or why an owner can terminate the construction contract. Even without an express termination provision, an owner arguably should be able to terminate a construction contract. Of course, the owner’s ability to terminate the contract will turn on slippery concepts of substantial, material breach and adequate notice. Express provisions contained in the contract that define these concepts and detail when, how, and why an owner can terminate the relationship, as well as what remedies will flow from the termination, will



eliminate a great deal of uncertainty as to how to manage a contractor whose performance is not meeting expectations.

D. Unknown Site Conditions

A recent residential construction contract that I reviewed not only disclaimed any liability for the contractor for unknown or unforeseen site conditions, including detrimental geological and environmental conditions, but also barred the site owner from suing the contractor for any such conditions and required the site owner to defend, indemnify, and hold the contractor harmless from any such conditions, even if resulting from subsequent radon build up or from new legislative definitions of hazardous wastes or substances.

Where the consumer owns the property on which the residence is being constructed, responsibility for unknown or subsurface site conditions is often difficult to assign. Typically, implied warranties concerning the accuracy of the contract documents are imposed against the site owner. If the plans and specifications provided to the contractor fail to identify adverse site conditions, arguably the site owner is responsible for the additional expenses and delays attributable to the undiscovered condition. Some, although not many, residential construction contracts require the contractor to inspect the site. Usually, site inspection requirements do not require the contractor to conduct soil, geological, or environmental tests. If a building site has unknown soil conditions that are beyond normal circumstances and make construction materially more expensive or difficult, the contractor may well have a basis under most construction contracts to seek a change of circumstance adjustment to price and/or time or to terminate the project.

A residential site owner or purchaser must carefully evaluate the need for soil and underground evaluations. If the lot is purchased in a subdivision, the permitting jurisdiction may have required the developer to obtain those types of studies. If that information is available, the site owner or purchaser should obtain the studies and engage a soils or geology expert to advise them in the purchase. Of course, if property requires any special excavation, shoring, or foundation work, the expert should prepare the plans for use by the owner’s contractor to construct a stable structure. If the property was not developed as part of a subdivision, the site owner should consider engaging his or her own soils engineer/geologist to study the property to identify any issues or concerns with soils stability or potential underground anomalies. It would be pretty unusual for a contractor who didn’t own the lot or didn’t otherwise have any knowledge of underground challenges to be responsible for additional expenses or damages resulting from unusual soil conditions.

Since most residential construction contracts are fixed-price, the contractor selling the lot as part of the construction of the residential structure will bear any additional expenses resulting from underground construction challenges. However, more custom residential construction contracts are moving to a cost-plus pricing structure. If a guaranteed maximum price isn’t negotiated as part of the cost-plus pricing, it will be critical for the purchaser to require the contractor to carefully analyze the underground features of the property. In any event, if the consumer is purchasing the lot from the contractor as part of the residential structure, consideration should be given to whether the warranty will cover ongoing problems with settlement or earth movement. Typical warranties seek to exclude these conditions. Moreover, these conditions may not reveal themselves until after expiration of the warranty. If construction problems resulting from settlement aren’t included within a warranty’s definition of defect or period of limitations, the owner’s only remedy will be to pursue remedies under the construction contract or negligence.

E. Inadequate Provision Concerning Date of Completion

Timely completion of a residential structure is often an important goal for any individual having a home built for him or herself. However, many contracts proposed by contractors contain no or, at best,



unenforceable provisions committing to a date on which the structure will be completed and ready for occupancy. Even in contracts that set forth a date certain for completion of the construction, often no remedy is provided for the contractor’s failure to meet the agreed-upon schedule. Contractors are understandably reluctant to commit to timely delivery of a residential structure when its construction schedule can easily be delayed by the weather, unavailability of materials, subcontractors’ or supplier’s schedules, or owner’s delays in selection of allowance items or in approval of materials, plans, or drawings. Even if a contractor is willing to make such a commitment, it may be difficult to obtain any meaningful remedy for a material delay in completion of the structure.

However, for those purchasers who have outside pressures, such as financing or an inflexible closing date for the sale of the purchaser’s existing residence, which makes timely completion of the residence a necessity, these commitments can be negotiated. To induce such a commitment, the contract must contain a feasible and well-structured schedule for the progress of construction. The schedule should be attached as an exhibit to the contract. In addition, proper change order provisions must be included in the agreement that allow for increases or decreases in the time schedule for certain phases or tasks. A carefully crafted force majeure provision will also be critical. This provision must mesh with the change order procedure for obtaining time extensions. Finally, the remedy selected for the contractor’s failure to complete the structure within the allotted time must carefully explain how any liquidated damages were estimated by the parties during their negotiations to avoid the court later determining that the remedy selected is an unenforceable penalty.

F. Offers of Warranty

A significant change to residential construction contracts in the state of Oregon was the 2007 legislation requiring that a contractor building a new residence or offering a new residence for sale constructed by the contractor to offer in writing a warranty against defects in workmanship and materials for the structure or dwelling. Other than requiring that the offer be included in an agreement required by ORS 701.305, the statutes and case law are silent as to the specific terms, conditions, or limitations that may be included in such a warranty.

Recently, contractors have taken to referring to industry standards to define the type of defect that will trigger liability under a warranty. There are at least two standards commonly used to provide more uniformity in this area. One such guideline is the Residential Construction Performance Guidelines for Professional Builders and Remodelers from the National Association of Home Builders. Other industry standards used to define defects are the Residential Construction Standards promulgated by the National Association of State Contractors Licensing Agencies. In fact, Oregon’s CCB references both of these standards for its use in deciding defect claims filed under ORS chapter 701. Certainly, if the contract adopts any specific set of standards to determine whether the workmanship is defective, the owner must obtain a copy of the standards to determine whether the level of workmanship described in the publication would be acceptable.

Some contractors have expanded upon the statutory requirement to offer a written warranty for defects in materials and workmanship. Often, written warranties include provisions expressly excluding certain items from the scope of the warranty. Typical exclusions often identify problems with discoloration of exterior materials, damage from animals or lack of maintenance or soil movement. Whether these exclusion are permissible, given the broad requirement to offer a written warranty against defects for workmanship and materials, remains to be seen.

Also, written warranties typically include contractual time periods within which a claim on the warranty must be made and the manner in which such a claim can be made. Although ORS 701.320 doesn’t address contractual time limits or claims procedures, overly aggressive time limitations or difficult claims procedures may be argued to sufficiently undermine the protections intended by the written warranty that the offer warranty doesn’t satisfy the statutory obligation. However, the



statute only requires that a contractor offers a written warranty, not that construction contracts for new residential structures contain a written warranty against workmanship and material defects. It may be that contractors have a fair degree of latitude in crafting the warranties they offer to consumers.

The requirement of an offer of a written warranty is paired with a requirement that contractors building or selling new residential structures provide the first purchaser of that structure with a recommended maintenance schedule. ORS 701.335. The maintenance schedule is to be provided to the owner or purchaser when the written warranty is offered. The purpose of the maintenance schedule is to assist the owner in preventing water intrusion or damage. The Oregon Administrative Rules provide a fairly detailed form for the maintenance schedule. OAR 812-012-0120. Of course, most written warranties exclude any defects resulting from the owner of the structure failing to conduct reasonable periodic maintenance on the building.

G. Materials Provisions

Typically, construction contracts allow the contractor to substitute for materials specified in the plans, drawings, or specifications. The contractor is required to use good and sufficient materials of the type commonly used for construction in that locality. Frequently, the basis for a contractor’s decision to substitute is not expressed. Presumably, substitution should occur only because the specified materials aren’t available in that locale within the construction schedule. Also, such provisions rarely address the savings or increased expense of such a substitution. Finally, if the materials are an important part of the project, such as specific flooring, cabinetry, or countertops, the owner might consider eliminating the contractor’s authority to make such changes.

As activity in the residential market slowly returns, reports of shortages in material and labor are beginning to surface. If the construction contract contains a fixed price or a guarantee maximum price, the contractor may want to include an escalation clause for specified materials. If such a provision is requested, the contractor should specify which materials or labor might be subject to escalation, as well as the current price per unit of measurement. Best efforts by the contractor to find the lowest price on qualified materials must be required. Also, the contractor should be required to notify the owner in writing of any materials being purchased in accordance with the escalator clause. Finally, the owner should have an option to substitute different materials, change plans, or terminate the contract in the event an escalation in price in critical materials will make the project uneconomical for the owner.

H. Insurance Provisions

Oftentimes, contracts prepared by a contractor for residential structures are somewhat lax on insurance requirements. Insurance is particularly important if the contractor is building the structure on the owner’s lot or property. In that case, the lack of proper insurance can put the site owner at risk.

Typically, the contractor building a residential structure for a site owner should be required to provide the following policies of insurance: worker’s compensation, commercial general liability with endorsements for completed product operations, and contractual liability. The contractor should also be required to obligate its subcontractors to obtain similar policies of insurance. Some policies for general contractors exclude coverage for any work performed by a subcontractor. Certificates of the required policies of insurance should be required to be provided to the owner at the commencement of construction and written notices of lapse of the policy for any reason should be provided to the owner.

II. RECENT LEGISLATIVE AND CASE LAW DEVELOPMENTS CONCERNING RESIDENTIAL CONSTRUCTION CONTRACTS

A. CCB Licensing

Although not recent, in 2008 the CCB changed the structure and designation for construction licenses in the State of Oregon. If a consumer isn’t familiar with the new licensing designations, he or she could unknowingly hire a contractor who doesn’t hold the proper license or endorsement. As of



2008, the endorsements most applicable to residential construction are Residential General Contractor, Residential Specialty Contractor, Residential Limited Contractor, and Residential Developer. OAR 812-003-0131 (2008). Additionally, in 2008, continuing education requirements were imposed on construction contractor licensees. These educational requirements were just revised effective January 2014. Although consumers shouldn’t be expected to follow all of these changes, they should be advised that when hiring a construction contractor, they need to get on the CCB website to confirm that the contractor has the proper license and endorsement, confirm that the contractor’s bonding and insurance is current, and review the contractor’s claims history, if any.

B. Storm Water

Many jurisdictions are in the process of developing storm water requirements that will necessarily affect consumers building new residences. Previously, standards for erosion controls were put into effect, in accordance with the Federal Clean Water Act. Now cities are seeking to regulate post-construction water run-off. Generally, this runoff is being proposed to be managed through green storm water infrastructures such as rain gardens, vegetated swales, or storm water planters. In Salem, these structures would be required when a project creates or replaces 1,300 square feet of impervious surfaces, such as roofs and driveways. Some jurisdictions will be implementing these requirements at the beginning of 2014.

C. Insurance Coverage

The battle to find insurance coverage for construction defects continues. A fairly recent development in the area is Parker v. American Family Insurance Company, 2013 WL 254355 (D. Or. Jan. 2013). In Parker, the Oregon U.S. District Court found that the owned-property exclusion in the construction contractor’s commercial general insurance policy excluded coverage for a construction defects lawsuit. Importantly, the court found that the contractor owned the residential structure during the exposure period for the applicable policy of insurance. Since owned-property exclusions were previously ruled by Oregon courts to be unambiguous; the U.S. District Court found that this exclusion properly excluded coverage for the construction defects claim of the initial purchaser of the residence. Most commercial general liability policies exclude coverage for property damage to property owned, rented, or occupied by the insured, the “owned property” exclusion. Accordingly, when a consumer is buying a residential structure, including the lot, from the construction contractor, this decision may create a significant hurdle to collecting on defects claims against the contractor, especially if the contractor did not obtain any insurance after the policy that was in place at the time of the construction.

D. Statute of Limitations

An ambiguity concerning the statute of limitations applicable to a negligence claim for construction defects continues to exist in Oregon. The ambiguity was created by a footnote contained in Abraham v. T. Henry Construction, 350 Or. 29 (2011). In dicta, the Oregon Supreme Court stated that the applicable statute of limitations for a negligence claim for construction defects was two years, referencing ORS 12.110. Id. at 34 fn.3. Prior to Abraham, many practitioners understood that the six-year statute of limitations contained in ORS 12.080(3) applied to tort and contract claims for construction defects. This understanding was bolstered by decisions such as Beveridge v. King, 292 Or. 771 (1982), Taylor v. Settecase, 69 Or. App 222 (1984), and Sutter v. Bingham Const., Inc., 81 Or. App 16 (1986). Because the Oregon Supreme Court has not yet addressed this apparent ambiguity, any lawyer advising clients considering a construction defects claim must carefully evaluate the applicable statute of limitations and err on the side of caution.



III. NEGOTIATING RESIDENTIAL CONSTRUCTION CONTRACTS WITH BUILDERS AND DESIGN PROFESSIONALS

There is so much variability in the sophistication of residential construction contractors that developing any meaningful guidelines for negotiating adequate construction contracts is difficult. Even today, there are a number of residential construction contractors who use minimal contract forms that do not meet CCB requirements. Some of those contractors are open to updating their forms; however, some are of the opinion that, in the end, written agreements do not really matter. Some local home builders associations offer forms of construction contracts for a fee to their members. Other contractors have invested with their attorneys and developed forms of agreements they prefer to use. So long as the contractor isn’t a national construction company, I have had some success in working with the contractor and its counsel to make changes to the form of the agreement that provide the consumer some reasonable protections.

Perhaps the most significant factor in these negotiations is the relative sophistication of the contractor. The contractor’s relative level of sophistication is important for a number of reasons. First, a more experienced contractor may be more open to proposed changes to the construction contract that are reasonable and purposeful. Second, such a contractor may be more organized and deliberate in its operations and finances. If the contractor has significant experience, the job will run much more smoothly, and, if problems do erupt on the project, the contractor may have the financial wherewithal to survive them. The irony in this industry is that consumer’s capacity to finance a project is frequently scrutinized. However, particularly in the residential arena, the financial capacity of the construction contractor isn’t subject to much consideration. In light of the difficulty in obtaining insurance coverage for construction defects, perhaps the contractor’s financial capacity to complete and stand behind the project should be a more prominent part of the negotiations surrounding the construction contract. However, it rarely is.



APPENDIX A—CCB SAMPLE CONTRACT FOR CONSTRUCTION WORK

Disclaimer: The only purpose of this sample contract is to serve as an educational example of the contract terms that are required by ORS 701.305. It does not constitute legal advice, nor does it substitute for legal advice. You should not rely on this sample contract when determining whether your contract is valid, complete, sufficient or enforceable

Sample Contract for Construction Work 1-1-10.doc 1-1-10

Contract for Construction Work

This is a contract for construction work to be performed by ABC Construction, LLC(“ABC”) for _____________________ (“HOMEOWNER”) made this __________ day of ______________.

Information

1. ABC is a construction company licensed by the Construction Contractors Board under license No. 999900.

2. ABC is located at 1234 SE Milken St., Portland, Oregon 97999. ABC,s phone is (503) 123-9999.

3. HOMEOWNER’s name and address are:

[ Insert name, address and phone number. ]

4. The work site is located at:

[ Insert address or location of job site. ]

Scope of Work

ABC shall perform the following work for HOMEOWNER:

[ Insert description of the work to be performed, who is paying for materials, material specifications if any, who is responsible to obtain permits, a reference to contract drawings if any and any other terms that define the scope of work. ]

Payment Terms

HOMEOWNER shall pay for the work on the following schedule:

[ Insert the payment schedule. ]

List of Required Consumer Notices

Oregon law requires construction contractors to give homeowners certain notices before and during a construction project. The following is a list of the required notices. It is important to read and understand these forms.

1. Consumer Protection Notice 2. Information Notice to Owner About Construction Liens3. Notice of Procedure



Disclaimer: The only purpose of this sample contract is to serve as an educational example of the contract terms that are required by ORS 701.305. It does not constitute legal advice, nor does it substitute for legal advice. You should not rely on this sample contract when determining whether your contract is valid, complete, sufficient or enforceable

Sample Contract for Construction Work 1-1-10.doc 1-1-10

These forms are attached to and made a part of this contract.

Explanation of HOMEOWNERS’s Rights

1. Consumers have the right to receive the products and services agreed to in the contract.

2. Consumers have the right to resolve disputes through means outlined in the contract.

3. Consumers have the right to file a complaint with the CCB. Any arbitration or mediation clauses in the contract may need to be complied with during the resolution of the CCB complaint.

Explanation of Mediation or Arbitration Clause

An “arbitration or mediation clause” is a written portion of a contract designed to settle how the parties will solve disputes that may arise during, or after the construction project. Arbitration clauses are very important. They may limit a consumer’s ability to have their dispute resolved by the Oregon court system or the Oregon Construction Contractors Board.

This contract contains an arbitration or mediation clause. This contract DOES NOT contain an arbitration or mediation

clause.

The Oregon Construction Contractors Board urges consumers to read and understand the entire contract – including any arbitration clause before signing a construction contract. Consumers are not obligated to accept contract terms proposed by the contractor, including arbitration provisions. These may be negotiated to the satisfaction of both parties.

Homeowner Date John Smith, Manager Date ABC Construction, LLC



APPENDIX B—CCB RECOMMENDED CONTRACT ADDENDUM

Contract Terms Addendum 1-1-10

CCB Recommended Contract Addendum to Satisfy Contract Terms Requirement

OAR 812-012-0110

1. List of Required Construction Contractor Board (CCB) Consumer Notices Oregon law requires construction contractors to give homeowners certain notices before and during a construction project. The following is a list of the forms. It is important to read and understand these forms.

a. Consumer Protection Notice.

b. Information Notice to Owner About Construction Liens

c. Notice of Procedure

2. Explanation of Property Owner’s Rights a. Consumers have the right to receive the products and services agreed to in the contract. b. Consumers have the right to resolve disputes through means outlined in the contract. c. Consumers have the right to file a complaint with the CCB. Any arbitration or mediation clauses in the contract

may prevent the CCB from processing.

3. Arbitration/Mediation Clause

a. An “arbitration or mediation clause” is a written portion of a contract designed to settle how the parties will solve disputes that may arise during, or after the construction project. Arbitration clauses are very important. They may limit a consumer’s ability to have their dispute resolved by the Oregon court system or the Oregon Construction Contractors Board.

b. The following box should be checked by the contractor:

This contract contains an arbitration or mediation clause.

This contract DOES NOT contain an arbitration or mediation clause. c. The Oregon Construction Contractors Board urges consumers to read and understand the entire contract –

including any arbitration clause before signing a construction contract. Consumers are not obligated to accept contract terms proposed by the contractor, including arbitration provisions. These may be negotiated to the satisfaction of both parties.

4. Offer of Written Warranty (New Residential Structure Only) Purchaser acknowledges the contractor has offered warranty against defects in materials and workmanship to the purchaser. Purchaser has accepted or rejected the offer of a warranty (see appendix ___ in contract.)

____________ purchaser __________ date

Signature

__________________________________________________ ________Consumer Signature Date

__________________________________________________ ________ Contractor Signature Date





APPENDIX C—CCB RESIDENTIAL CONSTRUCTION CONTRACT CHECKLIST

CCB Residential Construction Contract ChecklistThis “checklist” is provided by the Construction Contractors Board (CCB) for use by contractors that offer services on residential structures. (The definition of “residential structures” is available on the CCB website.) It is intended to be a tool contractors may use to review their contracts for required elements.

Check Contract Provision—Requirement Example1. Written Contract Requirements: (ORS 701.305) Contracts with owners of residential structures that exceed $2,000 must be committed to writing.

(Not applicable)

2. Minimum Written Contract Terms: (ORS 701.305 and OAR 812-012-0110) All written residential construction contracts with consumers must contain the following provisions/terms:

(Not applicable)

a. License Status Statement: A statement that the company is licensed.

ABC LLC is currently actively licensed with CCB.

b. Identification Information: Name, address, phone number, and CCB license.

Oregon Contractor’s LLC, CCB number as shown on Board records. 1254 Main St., PO Box 1000, Anytown, OR 97303, Phone: (541) 390-9947

c. List of Consumer NoticesWhen a written contract is required, contractors must provide homeowners with certain notices. A list of these notices must be part of the contract.

List of Required Construction Contractor Board (CCB) Consumer Notices: a. Consumer Protection Notice b. Information Notice to Owner About Construction Liens c. Notice of Procedure

d. Property Owners Rights: An explanation of a property owner’s rights, including: The owner’s ability to file a complaint with the CCB.

Explanation of Property Owner’s Rights: a. Consumers have the right to receive the products and services agreed to in the contract. b. Consumers have the right to resolve disputes through means outlined in the contract.c. Consumers have the right to file a complaint with the CCB. Any arbitration or mediation clauses in the contract may prevent the CCB from processing.

e. Consumer Information: Consumers name and address:

John P. Consumer, 1234 Main St., Anytown OR 97310

f. Job Site Information: Address of where the work will be performed.

Jobsite: 500 Maple St., Anytown OR 97310

g. A Description of the Work:Note: This item may be much more detailed depending on the scope of the work under the terms of the contract.

Paint the Exterior of a HomeContractor will:a. Repair cracks and fill voids in the exterior wood surfaces of owners home.b. Power wash all surfaces. Remove previous paint that has poor adhesion. Remove dirt, oil, grease, wax or other contaminants.c. Lightly sand shiny surfaces to degloss them.d. Brush or roll on one coat of Miller Acri-Latex 7052 Water Based Primer on all surfaces.e. Brush or roll on one coat of Miller Acri-Latex 7400 Water Based Satin Exterior Paint.1. Color for wood-siding: Citron2. Color for wood trim, doors and windows: Gorgeous Hydrangea

f:Res contract checklist_1-1-10



h. Price and Payment Information: Total price is $5,500$2,000 is due before work begins. $3,500 is due within 15 days of completion of the work.

i. The existence of any mediation or arbitration provision in the contract set forth in a conspicuous manner as defined by Board rule.

Arbitration/Mediation Clausea. An “arbitration or mediation clause” is a written portion of a contract designed to settle a dispute. Arbitration clauses are very important. They may limit a consumer’s ability to have their dispute resolved by the Oregon court system or the Oregon Construction Contractors Board.

b. The following box should be checked by the contractor: This contract contains an arbitration or mediation clause. This contract DOES NOT contain an arbitration or mediation clause.

c. The Oregon Construction Contractors Board urges consumers to read and understand the entire contract– including any arbitration clause before signing a construction contract. Consumers are not obligated to accept contract terms proposed by the contractor, including arbitration provisions.These may be negotiated to the satisfaction of both parties.

j. For New Home Construction:Offer of Warranty. Acknowledgement of a written offer of warranty against defects in materials and workmanship to the first purchaser or owner of the structure or dwelling and indication of acceptance or rejection of the offered warranty.Note: ·Not required until 7/1/08 ·Only for new residential structures ·Does not apply to subcontractors or specialty contractors contracts)

NOTE: Contractor may use the example language or may use the CCB recommended contract addendum (available on the CCB website).

Buyer acknowledgement that contractor has offered warranty against defects in materials and workmanship to the purchaser. Purchaser has accepted or rejected the offer of a warranty (see appendix B in contract).____________Purchaser __________ Date

3. General Requirements All information in the contract must be: · Legible · Printed or written in dark ink

(Not applicable)

NOTE: Contractors may use the example language in their contracts or attach the CCB Contract Addendum (available on the CCB website- www.oregon.gov/ccb



APPENDIX D—ORS 701.035

701.035 Applicant required to be independent contractor to be eligible for license; classes of licenses. (1) An applicant must qualify as an independent contractor under ORS 670.600 to be eligible for a license with the Construction Contractors Board.

(2) The board shall establish two classes of independent contractor:

(a) The nonexempt class is composed of the following entities:

(A) Sole proprietorships, partnerships, corporations, limited liability companies with one or more employees; and

(B) Partnerships, corporations and limited liability companies with more than two partners, corporate officers or members, if any of the partners, corporate officers or members are not part of the same family and related as parents, spouses, sisters, brothers, daughters or sons, daughters-in-law or sons-in-law or grandchildren.

(b) The exempt class is composed of all sole proprietorships, partnerships, corporations and limited liability companies that do not qualify as nonexempt.

(3) If a person who is licensed as exempt under subsection (2)(b) of this section hires one or more employees or falls into any of the categories set out in subsection (2)(a)(B) of this section, the person is subject to penalties under ORS 701.992 for improper licensing. If a person who is licensed as exempt under subsection (2)(b) of this section hires one or more employees, the person is also subject to licensing sanctions under ORS 701.098. The person must reapply to the board in the correct class.

(4) The decision of the board that a person is an independent contractor applies only when the person is performing work of the nature described in ORS 701.021.

(5) A person that is within the exempt class described in subsection (2)(b) of this section and is licensed as a commercial contractor shall procure and maintain workers’ compensation insurance as authorized by ORS 656.128. [1989 c.870 §4; 1995 c.216 §1; 1999 c.402 §13; 2007 c.836 §15; 2009 c.408 §§2,3]





APPENDIX E—OAR 812-012-0110

812-012-0110 Terms of Written Contract. (1) If a contractor is required to have a written contract under ORS 701.305, the written contract or attached addendum to the written contract must contain the following:

(a) A statement that the contractor is licensed by the Construction Contractors Board.

(b) The contractor’s name, address, phone number and license number issued by the board as shown on board records.

(c) An acknowledgment of a written offer of a warranty, if an offer is required by ORS 701.320, and indication of the acceptance or rejection of the offered warranty;

(d) A list of the notices required under ORS 87.093 or under rules adopted under ORS 701.330 and 701.335(2);

(e) An explanation of the property owner’s rights under the contract, including, but not limited to, the ability to file a complaint with the board and the existence of any mediation or arbitration provision in the contract, set forth in a conspicuous manner as defined by the board by rule;

(f) Customer’s name and address;

(g) Address where the work is to be performed;

(h) A description of the work to be performed; and

(i) Price and payment terms.

(2) The information described in section (1) of this rule must be legible and in dark ink.

Stat. Auth.: ORS 670.310, 701.235, 701.305, 701,315, 701.320, 701.330 & 701.335Stats. Implemented: ORS 701.305, 701.330 & 701.335Hist.: CCB 7-2007, f. 12-13-07, cert. ef. 1-1-08; CCB 9-2008, f. 6-11-08, cert. ef. 7-1-08; CCB 8-2009, f. 12-28-09, cert. ef. 1-1-10; CCB 7-2010, f. & cert. ef. 4-28-10





APPENDIX F—ORS 87.010

87.010 Construction liens; who is entitled to lien. (1) Any person performing labor upon, transporting or furnishing any material to be used in, or renting equipment used in the construction of any improvement shall have a lien upon the improvement for the labor, transportation or material furnished or equipment rented at the instance of the owner of the improvement or the construction agent of the owner.

(2) Any person who engages in or rents equipment for the preparation of a lot or parcel of land, or improves or rents equipment for the improvement of a street or road adjoining a lot or parcel of land at the request of the owner of the lot or parcel, shall have a lien upon the land for work done, materials furnished or equipment rented.

(3) A lien for rented equipment under subsection (1) or (2) of this section shall be limited to the reasonable rental value of the equipment notwithstanding the terms of the underlying rental agreement.

(4) Trustees of an employee benefit plan shall have a lien upon the improvement for the amount of contributions, due to labor performed on that improvement, required to be paid by agreement or otherwise into a fund of the employee benefit plan.

(5) An architect, landscape architect, land surveyor or registered engineer who, at the request of the owner or an agent of the owner, prepares plans, drawings or specifications that are intended for use in or to facilitate the construction of an improvement or who supervises the construction shall have a lien upon the land and structures necessary for the use of the plans, drawings or specifications so provided or supervision performed.

(6) A landscape architect, land surveyor or other person who prepares plans, drawings, surveys or specifications that are used for the landscaping or preparation of a lot or parcel of land or who supervises the landscaping or preparation shall have a lien upon the land for the plans, drawings, surveys or specifications used or supervision performed. [Amended by 1957 c.651 §2; 1973 c.671 §2; 1975 c.466 §3; 1977 c.596 §2; 1981 c.757 §1]





APPENDIX G—ORS 87.076

87.076 Bond or deposit of money; amount; demand for release of lien; effect. (1) The owner of an improvement or land against which a lien perfected under ORS 87.035 is claimed, or an interested person, may file with the recording officer of the county in whose office the claim of lien is filed a bond executed by a corporation authorized to issue surety bonds in the State of Oregon to the effect that the principal or principals on the bond shall pay the amount of the claim and all costs and attorney fees that are awarded against the improvement or land on account of the lien. The bond shall be in an amount not less than 150 percent of the amount claimed under the lien, or in the amount of $1,000, whichever is greater.

(2) (a) In lieu of the surety bond provided for in subsection (1) of this section, the owner of an improvement or land against which a lien perfected under ORS 87.035 is claimed, or an interested person, may deposit with the treasurer of the county in which the claim of lien is filed a sum of money or the equivalent of money equal in value to 150 percent of the amount claimed under the lien, or in the amount of $1,000, whichever is greater.

(b) A person who makes a deposit under paragraph (a) of this subsection is entitled to any investment income. The treasurer shall pay the investment income to the person who makes the deposit at the time the treasurer, in accordance with ORS 87.083, distributes the money deposited under this subsection. The person who makes the deposit bears the risk for a loss that results from an investment of the money deposited.

(3) A person may file a bond or deposit money under subsection (1) or (2) of this section at any time after the claim of lien is filed under ORS 87.035.

(4) (a) A person entitled to post a bond under subsection (1) of this section or a cash deposit under subsection (2) of this section may deliver pursuant to ORS 87.018 a written demand to the lien claimant that a lien perfected under ORS 87.035 be released and a notice that if the lien is not released the person may recover the actual costs the person incurred in complying with this section and ORS 87.078 and 87.081 or the sum of $500, whichever is greater. If the lien is not released within 10 days after the demand and notice is delivered and the lien claimant or an assignor of the lien claimant does not bring a suit to foreclose the lien within the time provided in ORS 87.055, and if the person who made the demand has complied with this section and ORS 87.078 and 87.081, then the lien claimant or assignor of the lien claimant who fails to release or foreclose the lien is liable to the person for the actual costs the person incurred in complying with this section and ORS 87.078 and 87.081 or the sum of $500, whichever is greater, in addition to any other remedy provided by law or equity.

(b) In an action to recover damages under this subsection in which the plaintiff prevails, the court, at trial and on appeal, shall allow and fix a reasonable amount for attorney fees for prosecution of the action, if the court finds that a written demand for payment of the claim was made on the defendant not less than 20 days before commencement of the action. However, the court may not allow attorney fees to the plaintiff, but shall allow attorney fees to the defendant, if the court finds that the defendant tendered to the plaintiff prior to commencement of the action an amount not less than the damages awarded to the plaintiff.

(c) If a lien claimant or an assignor of the lien claimant is served with a demand under paragraph (a) of this subsection and is a prevailing party in the suit to foreclose the lien, then in addition to other costs and attorney fees to which the lien claimant or the assignor of the lien claimant is entitled, the court shall allow the actual costs incurred in addressing the demand or the sum of $500, whichever is greater. [1975 c.466 §17; 1983 c.513 §3; 1987 c.662 §15; 1999 c.845 §1; 2009 c.513 §1]





APPENDIX H—ORS 87.007

87.007 Protection from construction liens perfected after sale of residential property completed; requirements; seller options; rules; delivery of form to purchaser; penalty; damages; defenses. (1) This section applies to a sale of the following residential property:

(a) A new single family residence or a single family residence where the sales price is $50,000 or more for original construction or the contract price is $50,000 or more for improvements to the residence completed within three months before the date the property is sold.

(b) A new condominium unit or a condominium unit where the sales price is $50,000 or more for original construction or the contract price is $50,000 or more for improvements to the condominium unit completed within three months before the date the property is sold. As used in this paragraph, “condominium unit” has the meaning given that term in ORS 100.005.

(c) A new residential building or a residential building where the sales price is $50,000 or more for original construction or the contract price is $50,000 or more for improvements to the residential building completed within three months before the date the property is sold. As used in this paragraph, “residential building” means a building or structure that contains not more than four dwelling units capable of use as residences or homes.

(2) An owner of record at the time the owner of record sells residential property to a purchaser shall protect the purchaser from claims of lien that arise before the date on which the sale is complete but that may become perfected under ORS 87.035 after the date on which the sale is complete by one of the following methods:

(a) Purchase or otherwise provide title insurance on the purchaser’s behalf by means of a policy issued:

(A) Without exception for filed and unfiled claims of construction lien that exist at the closing date 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.

(b) Retain in escrow, as defined in ORS 696.505, an amount of funds that is not less than 25 percent of the sale price of the residential property. The funds must be maintained in or released from escrow in accordance with written instructions to the escrow agent from the purchaser and the owner that sold the property. The written instructions shall require the escrow agent to pay upon the purchaser’s demand a claim of lien that is perfected after the date of the sale of the property and that the owner that sold the property has not paid. The escrow agent shall make the payment from the amount maintained in escrow. The escrow agent shall release the unused funds from escrow to the owner that sold the property if the escrow agent receives a request from the owner that sold the property and the owner that sold the property provides documentation from a title company that:

(A) A claim of lien has not been perfected against the property and 90 days have passed since the date that construction was completed; or

(B) A claim of lien has been perfected against the property, that 135 days have passed since the date that each such claim of lien was filed and that all perfected claims of lien have been released or waived.

(c) Maintain a bond or letter of credit in an amount that is not less than 25 percent of the sale price of the property. The Construction Contractors Board shall prescribe by rule the amount, terms and conditions of the bond or letter of credit to be maintained under this paragraph.



(d) Obtain written waivers from every person that claims or perfects a lien or liens under ORS 87.010 or 87.035 that, in an aggregate amount, exceed $5,000 with respect to the property and provide copies of the waivers to the purchaser not later than the date the sale of the property is completed.

(e) Complete the sale of the residential property after the deadline for perfecting a claim of lien under ORS 87.035 with respect to the property.

(3) Not later than the date on which the sale of the residential property is completed, the owner who sold the property shall complete, sign and deliver to the purchaser a form that specifies the method that the owner has selected to comply with the requirements of subsection (2) of this section or that states that subsection (2) of this section does not apply to the sale of the property. The notice must be in a form the Construction Contractors Board designates by rule under ORS 701.235.

(4) A real estate licensee, as defined in ORS 696.010, acting in the professional capacity of a licensee is not liable in a criminal, civil or administrative proceeding that arises out of the failure of an owner of record to comply with subsection (2) or (3) of this section.

(5) Violation of subsection (3) of this section is a Class A violation.

(6) In addition to any other remedy or penalty provided by law, a purchaser may bring an action to recover up to twice the amount of actual damages caused by a violation of subsection (2) of this section. The court may award to the prevailing party, in addition to costs and disbursements, reasonable attorney fees. Any action brought under this subsection must be commenced not later than two years after the date on which the sale of the property is completed.

(7) For purposes of subsections (5) and (6) of this section and ORS 646.608:

(a) It is a defense to a violation of subsection (2) or (3) of this section that no enforcement or attempt to enforce a claim of lien against the property that is the subject of the sale occurred before the date the sale of the property was completed; and

(b) As to a claim of lien, it is a defense to a violation of subsection (2) or (3) of this section if the owner that sold the property:

(A) Proves that the claim of lien against the property that is the subject of the sale is invalid; or

(B) Satisfies the claim of lien or obtains a release from the claim of lien on the property that is the subject of the sale.

(8) A violation of subsection (2) or (3) of this section does not occur with respect to a lien described in ORS 87.010 during the period that the validity of the lien is disputed in a judicial proceeding or a proceeding described in ORS chapter 701.

(9) Nothing in this section requires the payment of a lien that is not otherwise valid. This section does not apply to claims of lien perfected by persons that furnish materials, equipment, services or labor at the request of the purchaser of the residential property. [2003 c.778 §2; 2010 c.77 §1]



APPENDIX I—OAR 812-012-0145

812-012-0145 Surety Bond Issued to Protect Purchasers of Residential Property from Lien Claims. A seller of residential property may provide a surety bond to satisfy the requirements of ORS 87.007(2)(c), provided that the bond complies with the following requirements. (1) The bond must be issued by an insurer authorized or approved to do business in this state. (2) The bond must be issued on or after the date of completion of the residential property. For purposes of this rule, the “date of completion” shall be determined in accordance with ORS 87.045. (3) The bond must be issued in an amount of not less than 25 percent of the sales price of the residential property. (4) The bond shall remain in effect: (a) Not less than 75 days after the date of completion if no lien is perfected under ORS 87.035 against the residential property; or (b) If one or more liens are perfected against the residential property within 75 days from the date of completion, until: (A) All liens are released and the releases recorded; (B) The seller files a bond or makes a deposit and the seller files the required affidavit under ORS 87.076 to 87.081; (C) The surety files a bond or makes a deposit and the seller files the required affidavit under ORS 87.076 to 87.081; or (D) The surety pays the buyer the amount of the lien or the penal sum of the bond, whichever is less. (5) The bond shall include the following terms and conditions:

“NOW, THEREFORE, the conditions of the foregoing obligation are that if the principal shall not permit any construction lien to be placed upon the subject property; shall obtain the release of all construction liens upon the subject property and have the releases recorded; or shall file a bond or deposit in accordance with ORS 87.076 to 87.081; then this obligation shall be void; otherwise to remain in full force and effect.“This bond is for the exclusive purpose of paying construction lien obligations encumbering (legal description or address of property) arising out of the sale by principal to (name(s) of purchaser(s)), in compliance with ORS 87.007(2)(c) and OAR 812-012-0145.“The bond shall be one continuing obligation, and the liability of the surety for the aggregate of any and all claims, which may arise hereunder, shall in no event exceed the penalty on this bond.“The bond shall remain in effect for not less than 75 days after the date of completion if no lien is perfected under ORS 87.035 against the property; or, if one or more liens are perfected against the property within 75 days from the date of completion, until (1) all liens are released and the releases recorded; (2) the principal files a bond or makes a deposit and the principal files the required affidavit under ORS 87.076 to 87.081; (3) the surety files a bond or makes a deposit and the surety files the required affidavit under 87.076 to 87.081; or (4) the surety pays the liens.”

Stat. Auth.: ORS 87.007, 670.310 & 701.235Stats. Implemented: ORS 87.007Hist.: CCB 8-2004, f. & cert. ef. 10-1-04; Renumbered from 812-001-0023, CCB 7-2005, f. 12-7-05, cert. ef. 1-1-06; Renumbered from 812-001-0305, CCB 16-2008, f. 9-26-08, cert. ef. 10-1-08





APPENDIX J—OREGON STATE HIGHWAY COMMISSION V. DELONG CORP. Oregon State Highway Commission v. DeLong Corp., 495 P.2d 1215, 9 Or.App. 550, 94 Adv.sh. 983 (Or. App., 1972)

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Page 1215 495 P.2d 1215 9 Or.App. 550

State of OREGON by and through its STATE HIGHWAY COMMISSION, Respondent and Cross-Appellant,

v. DeLONG CORPORATION and Travelers Indemnity Company,

Appellants and Cross-Respondents. Court of Appeals of Oregon, Department 2.

Argued and Submitted Sept. 27, 1971. Decided April 7, 1972.

[9 Or.App. 555]

Page 1218

Norman E. Bayles and Bert B. Rand, Washington, D.C., argued the cause for appellant and cross-respondent DeLong Corp. With them on briefs was George W. Mead, Portland.

Lamar Tooze, Portland, argued the cause for appellant and cross-respondent Travelers Indemnity Co. With him on briefs was Arden E. Shenker and Tooze, Powers, Kerr, Tooze & Peterson, Portland.

Alan H. Johansen and George A. Rhoten, Sp. Asst. Attys. Gen., Salem, argued the cause for respondent and cross-appellant. With them on brief were Lee Johnson, Atty. Gen., and Jacob B. Tanzer, Sol. Gen., Salem.

Before SCHWAB, C.J., and FOLEY and FORT, JJ.

Page 1219

FORT, Judge.

This declaratory judgment proceeding seeks a determination of the rights and liabilities of the parties arising out of a contract for construction of major components of the Columbia river bridge between Astoria, Oregon, and the state of Washington. The [9 Or.App. 556] DeLong Corporation was the contractor

and Travelers Indemnity Company the surety on the performance bond. The case was tried to the court without a jury. Following the conclusion of the trial, 1 the court:

(1) Found that plaintiff properly terminated DeLong's contract prior to its completion;

(2) Granted judgment against both defendants for general damages in the amount of $1,719,864.19;

(3) Granted judgment against both defendants in the amount of $952,000, representing liquidated damages accruing on and after the date the contract was canceled by plaintiff;

(4) Dismissed DeLong's counterclaim;

(5) Awarded plaintiff attorneys' fees in the amount of $250,000.

Defendants appeal and plaintiff cross-appeals, each asserting numerous errors.

SCOPE OF REVIEW

In Reif v. Botz, 241 Or. 489, 406 P.2d 907 (1965), the Supreme Court considered the scope of review on an appeal from a declaratory judgment proceeding. The court said:

'* * * This proceeding being legal in nature, the defendant was entitled to a resolution of the questions of fact as in an action at law. See specially concurring opinion on rehearing in Oregon Farm Bureau v. Thompson, 235 Or. 162, 199, 378 P.2d 563, 384 P.2d 182.



Oregon State Highway Commission v. DeLong Corp., 495 P.2d 1215, 9 Or.App. 550, 94 Adv.sh. 983 (Or. App., 1972)

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'Since the findings of a trial judge sitting as a trier of the facts in an action at law are entitled to the same finality as the verdict of a jury, his findings[9 Or.App. 557] must be sustained if there is any evidence in the record to support them. We measure the evidence against this standard.' 241 Or. at 491, 406 P.2d at 908.

The defendants cite us to Consolidated Freightways, Inc. v. Flagg, 180 Or. 442, 176 P.2d 239, 177 P.2d 422 (1947), in support of their contention that we are at liberty in this proceeding to review the record de novo. The most recent pronouncement of our Supreme Court on the issue, decided since the briefs were filed and the argument heard here, is found in May v. Chicago Insurance Co., 93 Or.Adv.Sh. 846, 490 P.2d 150 (1971), and is as follows:

'As a preliminary matter, we consider the scope of our review. Plaintiffs contend, citing Consolidated Freightways, Inc. v. Flagg, 180 Or. 442, 176 P.2d 239, 177 P.2d 422 (1947), that on review of declaratory judgment proceedings this court is not bound by the trial court's findings of fact. Defendants respond that even though this court may not be bound by findings of fact in a declaratory judgment proceeding, it normally accords weight to the circuit court's decision.

'The parties' contentions on this question are applicable only to declaratory judgment proceedings which are basically equitable in nature. The broad language in Consolidated Freightways on which plaintiffs rely, 180 Or. at 458, 176 P.2d 239, 177 P.2d 422, is no longer controlling in all declaratory judgment proceedings. It is now clear that such proceedings will be treated as either legal or equitable, depending upon their nature. Mayer v. First National Bank of Oregon, Or., 489 P.2d 385, 392 (September 29, 1971); Oregon Farm Bureau v. Thompson, 235 Or. 162, 179, 378 P.2d 563, 384 P.2d 182 (1963). We have treated declaratory judgment proceedings to determine coverage under insurance policies as legal in nature, rather than equitable, with the consequence that the trial court's findings of fact in [9 Or.App. 558] such cases are binding on us if supported by any substantial evidence.

Page 1220

Falk v. Sul America Terrestres, 255 Or. 246, 248, 465 P.2d 714 (1970); Oregon Farm Bureau v. Thompson, supra, 235 Or. at 199, 200--205, 378 P.2d 563 (concurring and dissenting opinions on rehearing, representing the views of five members of the court on this question). See, also, Reif v. Botz, 241 Or. 489, 406 P.2d 907 (1965). We cannot, therefore, accept the parties' invitation to review the evidence in this case de novo. We must accept the trial court's findings of fact if those findings have adequate support in the evidence.' 93 Or.Adv.Sh. at 851, 852, 490 P.2d at 153.

The complaint and the cross-complaint here are both in the nature of an action to recover damages for breach of contract and as such are legal in nature. Accordingly, in reviewing this case on questions of fact we do so only to determine 'if those findings have adequate support in the evidence.' See, also: Oregon Farm Bureau v. Thompson, 235 Or. 162, 176, 378 P.2d 563, 384 P.2d 182 (1963); Williams v. Stockman's Life Ins., 250 Or. 160, 441 P.2d 608 (1968); Western Bank v. Morrill, 245 Or. 47, 61--62, 420 P.2d 119 (1966).

STATEMENT OF FACTS

The facts established by the evidence and necessary to an understanding of the trial court's findings are as follows: The Astoria bridge was to be constructed across the mouth of the Columbia river by the Oregon State Highway Commission, plaintiff herein, pursuant to agreements between the states of Oregon and Washington. Plaintiff and defendant DeLong, on June 29, 1962, entered into a written contract for the construction of certain piers which were to constitute a major portion of the substructure of that bridge. This contract was preceded by years of extensive[9 Or.App. 559] engineering and financial studies by the federal government and both states. Core borings across the proposed alignment of the bridge were made and the




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detailed results were reported in boring logs and laboratory reports.

On May 19, 1962, the Commission put out for bids its proposal for construction of the substructure of the Astoria bridge. It included detailed drawings, the Oregon State Highway Department's 'Standard Specifications for Highway Bridge Construction' and the 'Special Provisions for Highway Construction.' The proposal called for the construction of 27 concrete river piers and five concrete shore piers. Bids were to be submitted on June 27, 1962.

DeLong assembled a team of engineers to study the available data. They visited the site and talked with a number of special consultants familiar with the project area. Thereafter DeLong submitted its bid, and on June 29, 1962, the Commission approved the award of the contract to DeLong.

The bid proposal required the bidder receiving the award to submit a performance bond prior to the actual execution of the contract. Pursuant to this requirement, DeLong contacted defendant Travelers Indemnity Company, who, after carefully examining the plans, special provisions, bond and contract, executed and delivered to plaintiff on June 29, 1962, a performance bond to secure performance by DeLong of its contract.

The contract was executed on June 29, 1962, and was to be completed in two years. It provided for the following dates of completion:

Unit I: Piers 170 through 175 and spans over [9 Or.App. 560] 172, 173 and 174 to be completed by October 31, 1963.

Unit II: Piers 5 through 12, 160 through 167 to be completed by November 30, 1963.

Unit III: Piers 168 and 169 to be completed by January 31, 1964.

Unit IV: Piers 13 through 20 and all other work under the contract to be completed by June 30, 1964.

Pier 169

It is Pier 169, the largest of all the piers, around which much of the factual controversy

Page 1221

in this case centers. This pier was designed to stand upon two seals, the east seal and the west seal. Each one was rectangular, measuring about 45 feet by 90 feet, and was to be placed at or below the river bottom level. The work first involved underwater excavation where each of the pier seals was to be placed. The next step was to drive 528 steel foundation pilings into the river bottom. They were to be equally divided between the two seals. Then came the construction of the cofferdams. These consisted of interlocking sheets of steel extending around the perimeter of each seal area, in effect making two steel boxes approximately 45 by 90 feet. Next was the pouring of the concrete within the cofferdams. This underwater pour utilized the 'tremie' method, a method authorized under the contract.

Generally, the tremie method involves extending one or more pipes to the bottom inside each cofferdam. After a pipe is cleared of water, concrete is poured into a hopper attached to the top of the pipe by a telescoping joint. The initial concrete poured down and [9 Or.App. 561] out the open end of the tremie pipe forms a small mound on the bottom. Thereafter the lower end of the pipe is kept imbedded in the concrete. If the pour is continued at the proper rate and pressure and with proper techniques, the 'live' pile or piles of concrete continuously expand internally, ultimately filling the cofferdam to the desired elevation. The result is a solid block of concrete, the water having affected only the outside layer. This construction process was undertaken by DeLong, but, for reasons discussed below, the concrete in the seals was found to be defective in January 1964, and controversy arose between the plaintiff and DeLong as to its cause. Basically, each claimed




- 4 -

it was the other's fault and duty to absorb the extensive removal and replacement cost.

Subsurface Information

There were a number of delays both before and after the discovery of the defective seals at Pier 169. By way of defense, the defendants assert that not all of the detailed data available to plaintiff was shown on the contract plans. Thus they contend the problems and delays encountered by DeLong during various phases of construction, and particularly with reference to Pier 169, were due to unanticipated foundation conditions, many of which they claim were known to plaintiff but withheld from defendants.

The trial court found contrary to defendants' assertions regarding the alleged lack of data made available by plaintiff. The court's letter opinion states, Inter alia:

'Defendant contends that plans and specifications (supplied by plaintiff), particularly regarding sub surface information, were false and fraudulent and that they were wrongfully induced [9 Or.App. 562] to enter into the contract because of said fraudulent misrepresentation. The Court rejects Defendant's claim in this regard, in that Defendant's employees had all the sub surface information that was available to the Plaintiff a considerable amount of time prior to beginning the work, further the Court finds that sub surface information furnished on the plans was a reasonable representation of the difficulties expected to be encountered beneath the surface as construction progressed.'

There was substantial evidence to support the above conclusion. As the plaintiff points out, the 'sheer physical volume of the original boring logs, with associated laboratory reports, etc., testifies eloquently as to why all this data was not reproduced on the plans.' Furthermore, after examining the contract plans and summary of the boring logs, Mr. Arthur Elliott, bridge engineer for the California Division of Highways, testified that the information thereon

would alert a contractor to the general condition prevailing across the mouth of the Columbia river. He testified:

'* * * (O)bviously (Exhibit 36, a summary of parts of the information in the boring logs available to DeLong) doesn't contain all the information that is contained from the boring logs, but outside of a few minor discrepancies, or

Page 1222

not even discrepancies, differences, it conveys, I think, a correct and reasonable impression of what the bar across the mouth of the Columbia looks like, and I think that it as such, would convey to a contractor a fair representation of what he might be expected to encounter in the construction of this bridge.'

More importantly, however, before submitting their bids, all bidders, incuding DeLong, were advised that further information on the project could be obtained from the division engineer in Salem or the [9 Or.App. 563] resident bridge engineer in Astoria. The name and address of each was furnished. Mr. George Taite, the leader of the team formulating DeLong's bid, although aware of their existence made no effort to obtain the original boring logs.

In accepting the contract, DeLong warranted that it

'* * * has made a careful examination of the plans, specifications, and contract; that he has fully informed himself as to the quality and quantity of materials and the character of the work required; and that he has made a careful examination of the location and condition of the work and the sources of supply for materials.'

Article 2.1.1 of the proposal provided:

'The subsurface material at the site, as shown on the plans, represents the best available estimate of the existing conditions based on explorations made by the Highway Commission. The




- 5 -

Highway Commission does not guarantee that material encountered will conform to that shown on the plans.'

Pile Driving

There was much testimony relating to DeLong's experiences in driving the foundation piling. Despite defendants' numerous assertions to the contrary, it is sufficient here to say we find that there was substantial evidence to support the trial judge's conclusion

'* * * that the extensive testimony and much ado made, regarding sub surface conditions was a make-weight argument by the Defendant in this case in order to divert attention from the real problem that led to the termination of the contract; that is, the final responsibility for the pouring of the bad concrete seals at Pier 169, particularly in light of the fact that all the piling necessary for completion of this project had been driven with no more difficulty, than should have been anticipated [9 Or.App. 564] while driving piling in the estuary of this great river.'

Scour

An additional area of dispute around which much controversy centered concerned the development of 'scour' around the cofferdams at Pier 169. The court points out:

'Defendant makes much of the scour problem which occurred at Pier 169 and the subsequent events relating thereto, although the protection of the cofferdams at Pier 169, under the contract, was basically the responsibility of the Defendant. Plaintiff, for reasons of its own, undertook to abate this scour condition and did stabilize the bottom of the river by use of fascines and large quantities of rock. This necessitated the redriving of a cofferdam and adjustment of the lower level of the concrete seals before pouring could commence.'

It appears from the evidence that the condition known as scour frequently occurs when an obstacle, such as a bridge foundation, is placed in a river. The obstruction changes the flow of water in that vicinity, which in turn

affects the existing stability of the river bed material. Where this occurs, the bottom material is carried away, similar to the effects of erosion on land, leaving holes in the river bed in and around the obstruction.

In designing bridge foundations, one of the foremost considerations is the determination of probable scour, for, if the foundations are designed without due regard for that contingency, the foundations may be undermined, causing the bridge to collapse. Thus, the foundations must be placed sufficiently

Page 1223

deep into the river bed to safeguard against the effects of scour.

[9 Or.App. 565] It is not disputed that severe scouring occurred at Pier 169, and that extensive corrective measures were undertaken at the state's expense. On the morning of September 16, 1963, scour was detected in the area of the recently completed upstream cofferdam. The scour situation progressively worsened and, on September 19, the state sent to Astoria Mr. Glen Paxson, who at the time was one of its special engineering consultants. At the state's insistence, appropriate measures were taken to arrest the scour and build the river bed back to a satisfactory level.

Mr. Hans Wendel, who was DeLong's chief engineer, testified that he anticipated there would be some scour in the area of Pier 169. Furthermore, an Army Corpus of Engineers report concerning conditions relevant to scour potential at the mouth of the Columbia river was available to DeLong as a public document.

Pursuant to the provisions of the contract, DeLong's cofferdam plans were submitted to the state and, after certain suggested revisions, were approved subject to the terms of the contract imposing upon the contractor responsibility for the 'successful use and safety' of the cofferdam




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design details. By the terms of the contract, DeLong also agreed that

'Until final acceptance of the contract the contractor shall be held responsible for any injury or damage to the work or to any part thereof by the action of the elements, or from any cause whatsoever, and he shall make good at his own expense all injuries or damages to any portion of the work before its completion and final acceptance.

'* * *

'The contractor shall accept the compensation, as herein provided in full payment for furnishing all materials, labor, tools and equipment, and for [9 Or.App. 566] performing all work under the contract, also for all loss, damage, or liability arising from the nature of the work, or from the action of the elements, or from any unforeseen difficulties which may be encountered during the prosecution of the work until its final acceptance by the Commission.'

Causes of Bad Concrete

The defendants argue in part that the scour condition was somehow related to the cause of the poor concrete at Pier 169. The court expressly rejected this theory, stating:

'Defendant attempted to relate the scour condition to the ultimate failure of the concrete poured into the two cofferdams constructed at Pier 169, this concrete was to be the seals atop the piling driven at this site, which in turn formed the base for one of the main piers supporting the span across the main river channel.

'The Court rejects the Defendant's theory and accepts the testimony of Plaintiff's experts, relating to the cause of the poor concrete at Pier 169, the basic causes being a slow rate of pour, the failure to use more than one tremie pipe during the period of the pours, and the failure to maintain a tremie pipe in such condition as to exclude excess water during the time of the pour. These factors allowed the concrete to segregate and bulk, which in turn accounted for

the underruns experienced at Pier 169. The pouring of a good seal, of course, was the Defendant's responsibility under the contract, and once it was discovered that the seals were bad, it was the defendant's responsibility to remove and replace said concrete with an acceptable work product. This the Defendant failed and refused to do, and this was adequate grounds for Plaintiff to cancel the Defendant's contract, and acting in the public interest, to proceed with another contractor, for the completion of the substructure work.'

[9 Or.App. 567] In the case of both the upstream and downstream seals, there was found, upon completion of the pours, to be underruns of concrete of about 1,000 cubic yards; that is, each seal with a theoretical volume of

Page 1224

3,000 cubic yards was filled by only 2,000 cubic yards of concrete. The cofferdams were dewatered in late December 1963, and the state completed on January 9, 1964, a coring program on the seals which showed that quantities of river sand were present in the seals and considerable segregation existed between the aggregate and the cement. Both of these conditions were in violation of the Standard Specifications.

Defendants' theory at the trial was that vast quantities of stream bed material somehow worked their way under, over or through the steel cofferdams and into the seal area. These 'adverse hydraulic conditions,' the defendants asserted, 'at least partially' were responsible for the defective pours at Pier 169.

In refuting defendants' theory, the plaintiff called Mr. Glen Paxson, a highly qualified former deputy state highway engineer with over 40 years' experience in bridge construction. He testified that, in his opinion, the underrun in the seal concrete was not caused by the intrusion of materials from outside the cofferdam. Basically,




- 7 -

this was because the only way for sand or other stream bed material to get into the seal area was down the outside of the cofferdam piles, under the tips, and up the inside of the cofferdams. Neither the minimal difference in hydraulic 'head' nor any differences between the weight of materials inside and those outside the cofferdam was sufficient to have forced sand underneath the sheet piles. 'The probability of such a thing happening is so remote that it can be considered as impossible.' This conclusion[9 Or.App. 568] was supported by the testimony of other competent experts called on behalf of the state.

Both seals at Pier 169 were poured through a single tremie pipe. In contrast, the evidence indicated that the seals of comparable size at Pier 170 were poured with at least two and perhaps four tremie pipes. A number of well qualified experts testified on behalf of the state regarding the necessary number of tremie pipes for a pour of the magnitude at Pier 169; each opinion varied somewhat as to how many tremie pipes should properly have been used, but all agreed that one tremie pipe was clearly not enough.

The rate of pour at Pier 169, found by the court to be too slow, averaged 25 to 30 yards per hour at the two seals. The evidence indicated that at the time the contract was awarded the DeLong management contemplated a maximum rate of pour of tremie concrete in the seals of about 70 to 100 yards per hour, and on January 22, 1964, after it was discovered that the seals were defective, DeLong itself acknowledged that the rate of pour at Pier 169 had been about 25 or 29 yards per hour, and that on future tremie pours it should be about 80 yards per hour. In addition to this evidence, there was substantial expert testimony from witnesses that the slow rate of pour was one of the significant factors in producing the defective material in the seals at Pier 169.

Article 2.4.9 of the contract states, Inter alia, 'Concrete shall be placed so as to avoid segregation of the materials.' The same section further requires that '(As) far as practicable, the pipes shall be kept full of concrete during

placing and their lower ends shall be kept buried in the newly placed concrete.'

Upon discovery of the condition of the seals at [9 Or.App. 569] Pier 169, the Commission determined they were unacceptable, and DeLong was advised on January 9 that it would be required to replace the seals at its expense. The last work at Pier 169 was on or about January 16, 1964; pumps were removed by DeLong on January 24 and never returned there. There followed a series of meetings between DeLong and Commission officials.

Following extensive discussions, DeLong, on February 18, 1964, filed in the United States District Court for the District of Oregon a complaint for Declaratory Judgment and injunctive relief against the Oregon State Highway Commission seeking 'to terminate the contract between it and defendant Oregon State Highway Commission and to be excused from further performance thereof' and also seeking 'compensatory

Page 1225

and consequential damages from the defendant Oregon State Highway Commission because of the material breaches thereof by defendant Oregon State Highway Commission.' 2

Toward the end of the week ending February 22, 1964, Mr. Hans Wendel, DeLong's chief engineer, told plaintiff that because the job was in litigation in federal court, DeLong would not be working at any location other than where it was working that week. Work that week did not include any work on Pier 169. Mr. Wendel left the job in late February 1964, and never returned except to pack up and move to New York. The last entry in his diary was on February 21, 1964. DeLong's pile-driving and work barges were permanently removed from the job on about February 27, 1964.

[9 Or.App. 570] On March 31, 1964, the state highway engineer certified to the




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Commission that sufficient cause existed for termination of the contract in that the contractor had violated its provisions in several material respects, including substantial abandonment, as shown by recent, nearly total inactivity, persistent, repeated failure to supply enough workmen for efficient prosecution of the work, failure to correct and replace defective work, persistent disregard of the engineer's instructions to proceed, inability or unwillingness to proceed according to the terms of the contract, as shown in its allegations in the federal court complaint, failure to vigorously prosecute the work, failure to complete Units 1, 2 and 3, and inability to complete Unit 4 by the respective completion dates therefor.

Based thereon, the Commission authorized the termination of the contract. The letter of termination was sent to DeLong and to Travelers Indemnity Company on April 2, 1964. 3 By the terms of the letter, the effective termination date was April 13, 1964. Thereafter the Commission evaluated the work done by DeLong under the contract, determined what remained to be done thereunder and revised the plans and specifications accordingly. On June 24, 1964, the Commission put out for bids its revised proposal for completion of the unfinished work called for by the DeLong contract. Following competitive bidding, a contract [9 Or.App. 571] was awarded on July 13, 1964, to Raymond International, Inc. The Raymond contract was completed on August 2, 1965, 476 days after the effective date of termination.

We hold that the trial court's finding that the contract was breached by DeLong and validly terminated by the plaintiff effective April 13, 1964, was amply supported by the evidence. We turn now to the remaining issues.

LIQUIDATED DAMAGES

The special provisions of the contract relating to Prosecution and Progress include the following:

'Time for Completion of Work and Liquidated Damages:

'Time is of the essence of the contract. The schedule of completion dates set forth in the special provisions titled

Page 1226

'Dates of Completion' are necessary for the orderly completion of the project. Inasmuch as any delay in the prosecution of the work will inconvenience and be expensive to the traveling public, obstruct traffic, interfere with and delay business and commerce, and increase the cost to the State, it is essential that the work be pressed vigorously to completion.

'The contractor shall complete the work called for under the contract in all parts, units and requirements on the calendar dates specified in an accompanying special provision.

'It is agreed by the parties to the contract that in case all the work called for under the contract in each and all parts, units and requirements is not finished or completed on the calendar dates called for in the contract, damage will be sustained by the State of Oregon, and that it is and will be [9 Or.App. 572] impracticable and extremely difficult to ascertain and determine the actual damage which the State will sustain in the event of and by reason of such delays; and it is therefore agreed that the contractor will pay to the State of Oregon as liquidated damages or the State, at its option, may deduct from any moneys due or to become due to the contractor from the State, the sum indicated in the schedule below for each and every calendar day elapsed beyond the calendar date specified for the performance and completion of the work called for in the contract.

"Scedule of Liquidated Damages

-----------------------------------------------

Per Calendar Day




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"Unit of Work Liquidated Damages

--------------------------- ------------------

Any one unit $2,000.00

Any combination of one or

more units 2000.00

'Liquidated damages will be assessed against the unit or combination of any one or more unites (sic), as listed under 'Dates of Completion', having the longest overrun of time in calendar days over the specified completion time.

'* * *

'Payment of liquidated damages shall not release the contractor from obligations in respect to the fulfillment of the entire contract, nor shall the payment of such liquidated damages constitute a waiver of the State's right to collect any additional damages which it may sustain by failure of the contractor to carry out the terms of his contract, it being the intention of the parties that said liquidated damages be full and complete payment only for failure of the contractor to complete the work on time.'

Concerning liquidated damages the court found:

'Claims had been made for liquidated damages and for damages by the parties up to the time of [9 Or.App. 573] the cancellation of the contract. The Court hereby finds that there were offsetting, valid delays, occasioned by both parties up until the termination time.

'* * *

'However, the Plaintiff is entitled to an additional amount other than stated above, in the form of liquidated damages, occasioned by the delay caused by the Defendant, for a period of 476 days at $2,000.00 per day, or the amount of $952,000.00.'

Defendants, in their ninth assignment of error, challenged the above award of liquidated damages for delay, and plaintiff in its first assignment of error on cross-appeal challenges the failure of the trial court to award it liquidated damages for delays occurring prior to its termination of the contract in the further amount of $330,000. The court found that there were 'offsetting, valid delays, occasioned by both parties up until the termination time' and

Page 1227

thus denied liquidated damages for delays prior to termination. 4

We consider first whether plaintiff was entitled to the liquidated damage award for the delay in the completion of work following its termination of the DeLong contract by the state. We recognize initially [9 Or.App. 574] that in law a provision of a contract is not converted from a penalty to liquidated damages simply by so denominating it.

Restatement, Contracts 552--53, § 339 (1932), states in part:

'(1) An agreement, made in advance of breach, fixing the damages therefor, is not enforceable as a contract and does not affect the damages recoverable for the breach, unless

'(a) the amount so fixed is a reasonable forecast of just compensation for the harm that is caused by the breach, and

'(b) the harm that is caused by the breach is one that is incapable or very difficult of accurate estimation.

'* * *

'Comment on Subsection (1):

'* * *

'c. Where the amount of loss or harm that has been caused by a breach is uncertain and difficult of estimation in money, experience has




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shown that the estimate of a court or jury is no more likely to be exact compensation than is the advance estimate of the parties themselves. Further, the enforcement of such agreements saves the time of courts, juries, parties, and witnesses and reduces the expense of litigation. In such cases, if it is not shown that the principle of compensation has been disregarded, the liquidation by the parties is made effective.

'* * *.'

In Secord v. Portland Shopping News, 126 Or. 218, 223--225, 269 P. 228, 229 (1928), the court, after discussing the considerations determinative of the difference between a liquidated damage provision and a penalty, said:

'* * * In determining whether any particular [9 Or.App. 575] stipulation is to be regarded as one fixing a penalty, or whether it really liquidates the damages, the adjudicated cases present us with an abundance of rules to guide our determination. For instance, the situation must be appraised as of the time when the contract was effected, and not as it appears at some other time. Baltimore Bridge Co. v. United R., etc., Co., 125 Md. 208, 93 A. 420. It is well settled that in the determination of the problem the court should consider all of the circumstances which surrounded the parties, together with the case or difficulty of measuring the breach in damages. A comparison of the size of the stipulated sum not only with the value of the subject-matter of the contracts, but also with the probable consequences of the breach as they appeared when the conract was executed may be helpful. 17 C.J., 'Damages,' § 234. Mr. Justice Bean in Salem v. Anson, 40 Or. 339, 67 P. 190, 56 L.R.A. 169, 91 Am.St.Rep. 485, well states another helpful rule in language which has been much quoted:

'* * * When the actual damages in case of a breach of the contract must necessarily be speculative, uncertain, and

Page 1228

incapable of definite ascertainment, the stipulated sum will be regarded as liquidated damages, and may be recovered as such without proof of actual damages, unless the language of the contract shows, or the circumstances under which it was made indicate, a contrary intention of the parties, or it so manifestly exceeds the actual injury suffered as to be unconscionable * * * Where the damages are uncertain and speculative, the presumption ordinarily is that the parties have taken that into consideration in making the contract, and have agreed upon a definite sum to be paid in case of a breach, in order to put the question beyond dispute and controversy and to avoid the difficulty of proving actual damages.'

'* * *

'It is also to be noticed that some of the former [9 Or.App. 576] antipathy to these provisions, which inclined courts at times to construe them as stipulations for a penalty, is modulating. Thus Mr. Justice Clarke, on behalf of the federal Supreme Court in Wise v. United States, 249 U.S. 361, 39 S.Ct. 303, 63 L.Ed. 647, expressed the changed attitude thus:

"The later rule, however, is to look with candor, if not with favor, upon such provisions in contracts when deliberately entered into between prties who have equality of opportunity for understanding and insisting upon their rights, as promoting prompt performance of contracts and because adjusting in advance, and amicably, matters the settlement of which through courts would often involve difficulty, uncertainty, delay and expense."

In Priebe & Sons v. United States, 332 U.S. 407, 411--412, 68 S.Ct. 123, 126, 92 L.Ed. 32 (1947), the United States Supreme Court said:

'Today the law does not look with disfavor upon 'liquidated damages' provisions in contracts. When they are fair and reasonable attempts to fix just compensation for anticipated loss caused by breach of contract, they are enforced. (Citations omitted.) They serve a particularly useful function when damages are uncertain in




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nature or amount or are unmeasurable, as is the case in many government contracts. (Citations omitted.) And the fact that the damages suffered are shown to be less than the damages contracted for is not fatal. These provisions are to be judged as of the time of making the contract. (Citation omitted.)'

See also, 5 Corbin, Contracts 402, 407--409, § 1072 (1964); 5 Williston, Contracts 733--736, § 785 (3d ed. 1961); 35 Ill.L.Rev. 74 (1941); 52 Harv.L.Rev. 160 (1939).

Here the difficulty inherent in determining and proving actual damages for delay prior to completion [9 Or.App. 577] of the bridge is apparent, 5 as for example in determining the net loss of revenue which would have been derived had the bridge been in operation. This is particularly true when the validity of the liquidated damage provision must be determined as of the time the contract was entered into, rather than at the time of completion. Secord v. Portland Shopping News, supra; Priebe & Sons v. United States, supra. That the amount of liquidated damages claimed does not unconscionably exceed the actual injury suffered is seen from the testimony relating to the claimed losses from the ferry operation, absence of toll revenues, and deprivation of the Washington state subsidy.

We think it clear that the challenged provision was correctly viewed as one for liquidated damages, and not as a penalty, 'amercement' or forfeiture.

The defendants rely primarily on the case of Rainier v. Masters, 79 Or. 534, 154 P. 426, 155 P. 1197, L.R.A.1916E, 1175 (1916), in support of their contention that no liquidated damages can be here allowed. In Rainier, the city of Rainier brought an action against the contractor and surety on a bond to secure performance of a sewer

Page 1229

construction contract that stipulated if the required work was not completed by September 14, 1909, the defendants would pay liquidated damages of $10 per day for each day beyond the date specified for completion. These liquidated damages were to run from the date of required completion to the date of actual completion. The complaint alleged that the contractor began performance, but the contract was never completed. At the time of the trial the city had taken no steps toward completion of the project, although more than four years [9 Or.App. 578] had passed since work had ceased upon it. The city sought as its sole claim for damages the enforcement of the $10 per day clause. In rejecting this contention the court said:

'The complaint declares an Abandonment of the contract after the commencement of performance. At what stage of the work this occurred is not stated. The effort of the plaintiff is to apply to such a breach the stipulation for the allowance of $10 a day for delay in completing the undertaking. We note that by the provisions of the agreement itself this Per diem forfeit is not to be applied for an indefinite period in the discretion of the plaintiff. On the contrary, the stipulation is limited to time 'which should elapse after the expired time to date of completion.' In other words, the term for which the amercement is to be allowed is bounded in the beginning by September 15, 1909, and is ended at the completion of the improvement. The pleading fails to disclose such latter date. Indeed, the plaintiff virtually states that there is no such date in that it says the enterprise was never finished. The manifest intention of the parties was, not to apply this clause to general damages, but only to mere delay. The stipulation on that point contemplates a fulfillment of the contract although belated, and not a breach by abandonment. * * *

'* * *

'* * * It was not the intention of the parties, as manifested by their agreement, to create a perpetuity of Per diem forfeiture bounded only by the statute of limitations or the rapacity of the plaintiff. In general, damages are limited to




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compensation to the end that the injured party may be made whole, and it is only where it is difficult or impossible to calculate the actual damage that the previous stipulation of the parties for liquidated damages will be enforced. * * * The complaint does not portray any condition to which the drastic [9 Or.App. 579] remedy of liquidated damages is applicable. It was at least the duty of the pleader to show a completion of the contract, and thus establish the termination of the period of forfeiture. Failing to do so, he has not stated in any event a breach to which can be applied the measure of damages he invokes. * * *' (Emphasis supplied.) 79 Or. at 537--539, 154 P. at 427.

Here, however, unlike Rainier, the plaintiff did proceed to complete the work required under the DeLong contract. Promptly after its termination of the contract, the state, following preparation of the necessary documents, called for bids to complete the work called for in the DeLong contract, and on July 13, 1964, awarded the contract to Raymond International, Inc., for $2,434,926.69. The court's award of general damages in the amount of $1,719,864.19 reflects its findings of the difference between the DeLong contract price and the actual cost to the state of completing the agreed work, with certain adjustments not here relevant.

In Rainier, the complaint alleged 'an abandonment 6 of the contract.' Here, however, not only was the completion of

Page 1230

the work, though by a different contractor, alleged and proved, but extensive evidence received concerning the actual losses of the plaintiff incurred therein, exclusive of the challenged liquidated damages.

Furthermore, in Rainier it is obvious that the court concluded the city had also abandoned the [9 Or.App. 580] project, 7 the exact opposite of the situation here, for it said:

'* * * It was not the intention of the parties, as manifested by their agreement, to create a perpetuity of Per diem forfeiture bounded only by the statute of * * *' 79 Or. at 539, 154 P. at 428.

Here the intention of the parties as set forth in the contract was not only that the project be completed promptly as it was, but that the provision for liquidated damages was inserted to compensate only for delay in that completion. 8

In Comment, Applicability of Liquidated Damages Clause to Delays Where Building Contractor Abandons, 35 Ill.L.Rev. 74, 76 (1941), the writer points out:

'Satisfaction of the fundamental purpose of the liquidated damages clause requires in all kinds of delay a construction of the clause to allow recovery according to the stipulated rate, since all delays operate to defeat the interest of the owner in attaining a timely completion. Holding the clause inapplicable to delays in case of abandonment results in giving the contractor an opportunity to [9 Or.App. 581] avoid his contractual obligations. Such a view not only denies recovery for delays which would appear were the contractor to complete, but even denies recovery for delays which have 'accrued' between the date set for completion and the date of abandonment. Whenever the contractor can foresee his inability to complete on time or when he has passed the completion date, he may determine that his probable liability for delay plus the out-of-pocket expense to himself of completing will equal or exceed the cost of getting the project completed by another. It will then be unprofitable for him to continue and he may abandon the job. * * *'

We believe that the trial court correctly concluded since this project was completed without unreasonable or unnecessary delay that there was not only no abandonment within the rule announced in Rainier, but rather that its correct application to the facts here is fully consistent with the Rainier holding.




- 13 -

In May v. Chicago Insurance Co., supra, the court said:

'As a general rule, the construction of a contract is a question for the court and is treated as a matter of law. * * * In Libby Creek Logging, Inc. v. Johnson, 225 Or. 336, 339, 358 P.2d 491 (1960), we said:

"If the provisions of the contract are plain and unambiguous, it is the function of the court to interpret the contract and declare its legal effect. (Citing cases.)

"If the language of the contract is ambiguous, or if technical words, terms of art, or local phrases are used, evidence showing the meaning or interpretation

Page 1231

of the contract may be admitted. In such event, the jury should determine the intention of the parties. (Citing cases.)" 93 Or.Adv.Sh. at 852--853, 490 P.2d at 153.

[9 Or.App. 582] The provisions of the contract relating to liquidated damages were in our view plain and unambiguous. But whether so viewed, since the trial judge sat here as the trier of fact as well as the determiner of law, we conclude that he correctly determined that the liquidated damages provision was here applicable. Since his finding that the defendants were chargeable with delay aggregating 476 calendar days is supported by substantial evidence, his award of $952,000 as liquidated damages for that delay is affirmed.

In plaintiff's cross-appeal it asserts the trial court erred in not awarding it liquidated damages for the period between breach and termination. The trial court found that there were 'offsetting, valid delays' during this period and concluded that plaintiff was not entitled to liquidated damages for the 165 days claimed as elapsing between breach and termination. It is sufficient without more to point out that plaintiff authorized additional work orders to correct

problems resulting from scour for which it agreed to pay DeLong more than $200,000 in excess of the contract price. We think the trial court's denial of the cross-appeal is supported by substantial evidence.

ATTORNEY FEES

Defendants, in their 12th and 13th assignments of error, assert that the trial court improperly allowed $250,000 in attorneys' fees to plaintiff against the defendant Travelers Indemnity Company.

The general rule is that attorney fees are not recoverable except pursuant to a contract, express or implied, or unless provided for by statute. State v. Jamison, 251 Or. 114, 120, 444 P.2d 15, 444 P.2d 1005 [9 Or.App. 583] (1968); State Land Board v. Sovenko, 202 Or. 571, 574, 277 P.2d 781 (1954); Garrett v. Hunt, 117 Or. 673, 244 P. 82, 245 P. 321 (1926). Here neither the contract nor the performance bond expressly refers to attorney fees. The parties agree that the plaintiff's right, if any, to attorney fees depends upon ORS 743.114(1):

'If settlement is not made within six months from the date proof of loss is filed with an insurer and an action is brought in any court of this state upon any policy of insurance of any kind or nature, and the plaintiff's recovery exceeds the amount of any tender made by the defendant in such action, then the plaintiff shall recover as part of his judgment such additional sum as the court may adjudge to be reasonable as attorney fees.'

The policy behind this statute, as explained in Heis v. Allstate Insurance Co., 248 Or. 636, 436 P.2d 550 (1968), is

'* * * to encourage the settlement of claims and to discourage the unreasonable rejection of claims by insurers. If the insurer, in rejecting a claim or in tendering less than is claimed, relies upon a mistaken theory of its legal liability, the plaintiff is entitled to a reasonable attorney's fee if he recovers more than the tender.' 248 Or. at 643--644, 436 P.2d at 553.




- 14 -

In State v. Claypool, 145 Or. 615, 28 P.2d 882 (1934), the court, in holding that the filing of the complaint was itself a sufficient demand where the contract did not require that a formal proof of loss be filed under ORS 743.114, stated:

'Defendant contends that the allowance to the state of attorney's fees was improper. Section 46--134, Oregon Code 1930, authorizes the allowance of attorney's fees upon all policies of insurance if settlement is not made within six months after date that proof of loss is filed with the company. If [9 Or.App. 584] further provides that, if the defendant tenders any amount into court and no greater amount is recovered in the action, then attorney's fees shall not be allowed. There was no tender made, and there is no provision in the policy requiring proof

Page 1232

of loss as in ordinary fire insurance cases. The commencement of the action is equivalent to demand for payment, whether previously made or not, and this we think renders the statute applicable and entitles the plaintiff to attorney's fees in this action. The complaint was filed on April 11, 1932, but the judgment was not entered until June 7, 1933, more than six months after the commencement of this action. This, we think, brought the case within the intendment of the statute under the doctrine followed and approved in Murray v. Firemen's Ins. Co., 121 Or. 165, 254 P. 817; Goodspeed v. Duby, 131 Or. 275, 283 P. 6; School Dist. v. New Amsterdam Cas. Co., 132 Or. 673, 288 P. 196; Dolan v. Continental Cas. Co., 133 Or. 252, 289 P. 1057.' 145 Or. at 621--622, 28 P.2d at 884.

See also, New York Life Insurance Company v. Lee, 232 F.2d 811 (9th Cir. 1956).

As this action is by plaintiff to, Inter alia, recover on an indemnity insurance policy issued by defendant Travelers, its declartory nature does not prevent ORS 743.114 from becoming

operative. Williams v. Stockman's Life Ins., 250 Or. 160, 172, 441 P.2d 608 (1968); Cf. Hollopeter v. Oreg. Mutual Ins., 255 Or. 73, 464 P.2d 316 (1970); First National Bank v. Malady, 242 Or. 353, 360, 408 P.2d 724 (1966).

The complaint alleges:

'Plaintiff afforded to Travelers, as surety for DeLong, ample and reasonable opportunity to complete the work remaining to be done after said Contract No. 6124 was terminated, but Travelers for more than six months prior to the filing of this suit failed to do so. That plaintiff is entitled to [9 Or.App. 585] recover $250,000.00, all of which is reasonable, as attorney fees from the defendant Travelers.'

We hold that plaintiff sufficiently pleaded its right to recover attorney fees from Travelers pursuant to ORS 743.114. See, Staff Jennings, Inc. v. Fireman's Fund Insurance Company, 218 F.Supp. 112, 114 (D.Or.1962). Additionally we note that plaintiff addressed the notice of termination of April 2, 1964, to DeLong and to Travelers jointly. The notice included the statement:

'This is to further advise that the State will henceforth look to Traveler's Indemnity Company for completion of the contract according to its terms, in accordance with its obligations as surety. If said surety fails to promptly undertake the satisfactory completion of the work, the State will do so, either by means of its own forces or by contract, as the Commission may deem appropriate. In any eventThe State will look to the DeLong Corporation and Traveler's Indemnity Company for recovery of the damages sustained by the State by reason of the contractor's violation of the provisions of the contract.'

Thus, we hold that Travelers had full knowledge of plaintiff's intention to hold it liable for performance of the contract including damages, and that the complaint itself constituted a sufficient proof of loss within ORS 743.114(1).




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Defendant Travelers contends that since there is no specific amount sought in plaintiff's prayer for relief, Travelers was unable to know how much to tender to plaintiff, and thus plaintiff should not be permitted to avail itself of ORS 743.114 by way of the rule laid down in Claypool. This argument is without merit, as paragraphs XI, XII and XIII of this complaint[9 Or.App. 586] all set forth specific amounts of money damages alleged to be owing to plaintiff because of DeLong's breach of contract. There are no provisions in the statutes or in Travelers' bond relating to the specificity with which the plaintiff must set forth its proof of loss. Travelers was entitled to sufficient information to form a reasonable estimate of its liability. The complaint sufficiently advised Travelers of the amounts claimed for breach of the contract.

Page 1233

In Heis v. Allstate Insurance Co., 248 Or. 636, 644--645, 436 P.2d 550, 554 (1968), the court said:

'* * * There are no provisions in the statutes or in the insurance contract relating to the specificity with which the insured must set forth his proof of loss. The insurer is entitled to sufficient information to form a reasonable estimate of its liability. This does not mean that the insured's claim is barred if the proof of loss originally filed does not contain sufficient information to make this estimate. If the proof of loss is ambiguous, the insurer should make a reasonable effort to resolve the ambiguity. Defendant's own policy indicates that it may be necessary for it to investigate a claim for the purpose of testing its validity. Thus, the policy provides that the insured 'shall after such request from Allstate execute authorization to enable it to obtain medical reports and copies of records.'

'If defendant's contention is that plaintiff's proof of loss was so uncertain that defendant was unable to determine the character of plaintiff's claim, then defendant should have requested plaintiff to make her claim more definite and

certain. If defendant's contention is that the expenses incurred were adequately described in the proof of loss but inadequately segregated then, as we have explained above, defendant was mistaken, as was the trial court, with respect to its liability, and [9 Or.App. 587] consequently the proof of loss was not inadequate since it presented a claim which entitled plaintiff to recover.'

Furthermore, Travelers does not here contend that it at any time tendered to plaintiff any amount whatsoever in response to the allegations of the complaint.

Accordingly we conclude as more than six months passed between the commencement of this action and final judgment, the plaintiff is entitled to recover reasonable attorney fees from defendant Travelers. State v. Claypool, supra, 145 Or. at 622, 28 P.2d 882.

Since there was no contractual or statutory authority permitting recovery of reasonable attorney fees from defendant DeLong, none are recoverable. State v. Jamison, supra. We find no difficulty in the fact that, as a consequence of differing liabilities regarding attorney fees, the two defendants are obligated to plaintiff in different amounts. Esselstyn v. Casteel, 205 Or. 344, 369--370, 286 P.2d 665, 288 P.2d 214, 288 P.2d 215 (1955). The assignments of error do not challenge the amount of the award for attorney fees. We do not therefore consider it.

REMAINING ASSIGNMENTS OF ERROR

Assignments of error two through five encompass challenges to the accuracy of approximately 50 evidentiary rulings. The second assignment challenges the court's denial of a motion to strike certain testimony of Glen S. Paxson. Mr. Paxson, a registered civil engineer, was employed by the plaintiff for over 43 years. He served in steadily advancing capacities including that of state bridge engineer until in 1961 he became the deputy state highway engineer, which position he occupied during the time this contract was [9 Or.App. 588] entered into. He retired January 1, 1963, and thereafter




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served the plaintiff in an advisory capacity in part in connection with the Astoria bridge. Assignment of error three, part seven, challenges the admissibility of Exhibits 400 and 403. Since the former depends in part upon the latter, we consider them together.

During the trial Robert Pool testified on behalf of the state. He was a registered professional engineer employed by plaintiff as an assistant resident engineer at the job site throughout the project. He was present as the representative of the project engineer, Mr. Ellison, during both the pouring and the dewatering of the seals at Pier 169. Exhibits 400 and 403 were identified and introduced during his testimony. These exhibits were intended to reflect the slope of the concrete as it was being poured within both the upstream and downstream

Page 1234

seals at Pier 169. Attached to each exhibit was a series of sheets reflecting the changing elevations of the concrete as it was poured. These measurements were made periodically by a team of four engineers throughout each pour. Two of these men were employed by DeLong and two by plaintiff. Mr. Pool actually participated in the process.

The two exhibits in effect were profiles of the seal pours at Pier 169. From the periodic recordings thus obtained and attached as back up for each exhibit, there was prepared a summary of the recorded data in the form of a profile extending the recorded data to show as accurately as was reasonably possible the progress of the concrete pour taking place more than 50 feet below the surface of a rapidly flowing, great and murky river.

[9 Or.App. 589] The defendants objected during Mr. Pool's testimony to the admission of Exhibits 400 and 403 on grounds of 'materiality and relevance,' but stipulated as to their authenticity. At that time counsel stated:

'* * * I will stipulate now I have no objections to the authenticity.

'* * *

'MR. RHOTEN (counsel for plaintiff): I expect them to show the contours of the concrete at various times during the course of the pier--the course of pouring the seals.

'MR. RAND (counsel for DeLong): Your Honor, if Mr. Paxson testifies to such a thing, and he is a proper witness to so testify, and he testified he had something to do with it, and then these are offered, they might fit in the context of his testimony. A foundation may be laid for it, and they might be connected up.'

Subsequently, Mr. Paxson, over objection, testified, based in part upon Exhibits 400 and 403, that the seals at Pier 169 were defective. In expressing his opinion concerning why those seals were defective, Mr. Paxson relied in part upon those exhibits. This constitutes the chief basis of defendant's claim that the testimony of Mr. Paxson should have been stricken.

At the conclusion of plaintiff's case-in-chief, defendants moved to strike Exhibits 400 and 403 as 'irrelevant and immaterial' and 'in no way connected with the issues in plaintiff's case in chief.' The motion also sought to strike Mr. Paxson's testimony because he considered Exhibits 400 and 403 in arriving at his conclusions concerning the seals. Both motions were denied.

The rulings were correct. The challenged exhibits[9 Or.App. 590] were relevant to the establishment of the rate of pour of the seals and to compliance by DeLong with the provisions of the contract concerning the pouring of the seals. The exhibits were properly identified and were made by qualified personnel of both parties acting together in the regular course of the work at or about the time of the conditions noted. The court correctly concluded that the sources of information, method and time of preparation justified their admission. ORS 41.690.




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We note that a number of the asserted errors, as in Exhibits 400 and 403, involve the introduction into evidence of summaries made from other writings, records or documents. It is difficult to imagine any case where summaries or other graphic representations of relevant material would be of greater aid to the court than in the case at bar, involving as it did an immense volume of both oral and documentary evidence. ORS 41.640(1)(e) provides:

'There shall be no evidence of the contents of a writing, other than the writing itself, except:

'* * *

'(e) When the originals consist of numerous accounts, or other documents, which cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole.'

In Note and Comment, Evidence--Best Evidence Rule--The Law in Oregon, 41

Page 1235

Or.L.Rev. 138 (1963), the author states at 148:

'OR. REV. STAT. sec. 41.640(1)(e) provides that, where the evidence is detailed and its examination in court would result in 'great loss of time' and where only 'the general result of the whole' is sought, other evidence of the contents of [9 Or.App. 591] the writings may be received by the court. Such was the common-law rule. * * *'

The Oregon Lawyer's Trial Book, Summaries of Records § 13.7 (1967), summarizes the rule:

'Secondary evidence is admissible when the originals consist of numerous accounts or other documents which cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole. ORS 41.640(1)(e).

'Summaries are permitted when the originals are voluminous or complicated and the summary is the general result of the whole. McCORMICK ON EVIDENCE, 411 (1954). * * *'

See, Smith v. Abel, 211 Or. 571, 316 P.2d 793 (1957); Hubble v. Hubble, 130 Or. 177, 279 P. 550 (1929); Scott v. Astoria Railroad Co., 43 Or. 26, 72 P. 594, 99 Am.St.R. 710, 62 L.R.A. 543 (1903); McCormick, Evidence 411, § 199 (1954). When, as here, the challenged exhibits are taken from other evidence, material or documents available to both parties for examination and are consistent with the purposes of the statute, they are clearly admissible. Our attention is directed to no instance where the trial judge abused his discretion in the receipt of such material.

It would greatly prolong this opinion to examine here each of the remaining challenges to the court's rulings on evidence. Our examination of each satisfies us that they are without merit.

In the seventh assignment of error defendants contend the findings of the trial court do not comply with ORS 17.431. Portions of those findings, deemed relevant to this opinion, have been previously quoted. Defendants assert generally they contain 'only intermingled conclusions of law, of which only some were [9 Or.App. 592] supported by vague and ambiguous findings of fact.' 9 We note that defendants filed no motion as required by ORS 17.431(1) for special findings of fact prior to commencement of trial. See, Collins v. Lantz, Vickery, 244 Or. 62, 64, n. 1, 415 P.2d 763 (1966); Ewauna Box Co. v. Weyerhaeuser, 198 Or. 360, 361, 255 P.2d 121 (1953). They now contend that because the plaintiff did, they were not required to. We disagree. The purpose of the statute is to advise the trial court of the demands of each party in advance ov trial. In a long and complicated trial involving a myriad of fact issues, 10 few of which are likely ultimately to prove decisive, the burden placed upon the trial court by the statute is a heavy one. A party seeking its application must himself comply with it.




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Additionally, defendants in their final assignment of error challenge the court's overruling of their objections to its findings and conclusions and its denial of their request for voluminous special findings of fact and conclusions of law. (See, n. 10.) They contend the court in

Page 1236

its letter opinion, subsequently adopted by it as its findings of fact and conclusions of [9 Or.App. 593] law, did not expressly rule on each of more than 200 specific findings of fact requested between them.

In Howard v. Klamath County, 188 Or. 205, 215, 215 P.2d 362, 366 (1950), the Supreme Court said:

'The provision(s) of O.C.L.A. § 5--502 (now, in amended form, ORS 17.431) authorize any party litigant to object to findings made by the trial court and to request other different or additional findings, but notwithstanding the request of litigant for special findings, it rests in the discretion of the trial court to determine whether the findings shall be general or special. Larsen v. Martin, supra. If the trial court elects to make special findings, it is not bound to make them upon every matter requested by a litigant:

"* * * special finding is a 'statement of the ultimate facts on which the law of the case must determine the rights of the parties; a finding of the propositions of fact which the evidence establishes, and not the evidence on which those ultimate facts are supposed to rest.' (Citing cases) A special finding of facts, as said in the case last cited, 'consists of a statement of the ultimate conclusions of the trial court upon issues of fact raised by the pleadings.' * * *' Larsen v. Martin, supra.

'The objection commonly urged is that the findings do not support the judgment. In the case at bar, however, they exactly support the judgment and we think that findings were made

upon all of the material issues. * * *' (Emphasis supplied.)

See also, Leo v. Heller, 255 Or. 390, 392, 467 P.2d 439 (1970).

We think the trial court made findings concerning every material fact necessary to its determination of the issues before it and to support its [9 Or.App. 594] conclusions of law based thereon. The law requires no more. These findings are amply supported by the evidence.

Discussion of the remaining assignments of error, whether on the appeal or on the cross-appeal, would add only prolixity to this opinion. We conclude that they are without merit.

The judgment is affirmed.

---------------

1 The trial itself extended for more than six months, producing a transcript in excess of 9,000 pages and over 900 exhibits.

2 This case was subsequently dismissed on the ground of lack of jurisdiction. DeLong Corporation v. Oregon State Highway Com'n, 233 F.Supp. 7 (D.Or.1964), affirmed 343 F.2d 911 (9th Cir.), cert. denied 382 U.S. 877, 86 S.Ct. 161, 15 L.Ed.2d 119 (1965).

3 The parties had agreed, under the terms of the contract, that, upon the engineer's certificate that sufficient cause existed, the Commission could terminate the contractor's employment for various reasons, including persistent or repeated refusal to supply enough workmen for efficient prosecution of the work, persistent disregard of the engineer's instructions, or other substantial violation of any provision of the contract. It was further agreed that, in addition, the Commission could cancel the contract for any willful failure or refusal of the contractor to faithfully perform the contract according to its terms and conditions.

4 In its cross-appeal the state also contends, alternatively to its claim for liquidated damages, that its actual damage resulting only from the delay in completion was $1,393,341.24. In its cross-complaint the state alleged that during the 15-month delay it sustained the following losses:




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"Loss on Ferry Operations (Schedule A-4) $435,283.24

Loss on Bridge Toll Operations (Net) 708,058.00

Loss of Washington State Subsidy 250,000.00 "

Evidence was received in support of each. The trial court, however, by reason of its finding of 'offsetting, valid delays,' found it unnecessary to determine what, if any, of the claimed actual losses from delay were established. The state concedes that it is entitled only to one or the other.

5 See n. 4.

6 5 Williston, Contracts 733, 734, § 785 (3d ed. 1961):

'If the contract is abandoned, the agreed damages are, of course, not recoverable, since mutual abandonment of the contract is tantamount to a tacit recision. In speaking of abandonment, however, courts sometimes use the words 'abandoned the contract' when in reality they mean that the contractor has abandoned work on the project.'

7 See Comment, Applicability of Liquidated Damages Clause to Delays Where Building Contractor Abandons, 35 Ill.L.Rev. 74, 76, n. 9 (1941):

'City of Rainier v. Masters, 79 Ore. 534, 154 Pac. 426 (1916) (damages for delay denied, the owner having

taken no steps toward completion at the time of trial which was four years after the abandonment); Moses v. Antuono, 56 Fla. 499, 47 So. (925) 926 (1908); Mason v. Consolidated Co. (Continental Supply Co.), 99 Okla., 32, 225 Pac. 381 (1924). * * * Courts properly have refused to permit recovery for delay when the construction is never completed but it does not follow that the clauses should not be applied where the work ultimately is completed within a reasonable time. In the latter instance the exact amount of delay can be measured and the possibility of the contractor's Ad infinitum liability is removed.'

8 See provisions of contract, supra.

9 In Wells v. Davis, 258 Or. 93, 480 P.2d 699 (1971), the Supreme Court said:

'Findings of fact can assume any form the trial court desires as long as the court's intent to accord to its statements the character of findings of fact can be determined. In State Highway Comm. ex rel. Pantovich Const. Co. v. Brassfield, 228 Or. 145, 149, 363 P.2d 1075 (1961), we stated that a letter from the trial court to counsel could constitute findings of fact if the trial court had indicated that was its intention.'

10 Here defendants filed objections to the court's findings and moved to have the court adopt special findings of fact and conclusions of law submitted by them pursuant to ORS 17.431(3). DeLong's requested findings of fact alone are 194 in number and occupy 35 pages in the abstract. Travelers sought a dozen additional findings. All were denied.





APPENDIX K—ABRAHAM V. T. HENRY CONSTR. INC. Abraham v. T. Henry Constr. Inc., 350 Or. 29, 249 P.3d 534 (Or., 2011)

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350 Or. 29 249 P.3d 534

Richard ABRAHAM and Janice Abraham, husband and wife, as trustees for the Richard D. Abraham and Janice M. Abraham Trust, Respondents on Review,

v. T. HENRY CONSTRUCTION, INC., an Oregon corporation; Stelmen Plastering, Inc., an Oregon

Corporation; Northwest Gutter Service, Inc., an Oregon corporation; Milgard Manufacturing, Inc., a Washington corporation; Steve Pfenning Construction, Inc., an Oregon corporation; David

Farwell, an individual, dba David Farwell Masonry and David Oregon Farwell; One Cut Carpentry, LLC, fka One Cut Carpentry, Inc., aka Herold's Carpentry; and Maddox Enterprise,

Inc., an Oregon corporation, Defendants,andKeith A. Lucas, an individual, dba Keith Lucas Development Properties, Petitioner on Review,andKevin G. Mayo, an individual, dba KGM

Construction, Petitioner on Review.Keith A. Lucas, dba Keith Lucas Development Properties, Third–Party Plaintiff,

v. Energy Products, Inc., an Oregon corporation, dba NW Builders Wholesale; Ronald L. Hardy, dba

Hardy Plumbing & Heating; JB Insulation, Inc., an Oregon corporation; Kirk's Construction Unlimited, an Oregon corporation; Milwaukie Plumbing Co., an Oregon corporation, dba MP Plumbing Co.; Tom Pacheco, fka Tom D. Pacheco Masonry; and Mel Wielrich, Third–Party

Defendants. (CC CV06060031; CA A136228; SC S058073 (Control)

S058101). Supreme Court of Oregon.

Argued and Submitted Nov. 8, 2010.Decided March 10, 2011.Reconsideration Denied May 5, 2011.

[249 P.3d 535]

On review from the Court of Appeals.*Matthew J. Kalmanson, Hoffman, Hart & Wagner, LLP, Portland, argued the cause for petitioners on review and filed the briefs

[249 P.3d 536]

for petitioner on review Keith A. Lucas. With him on the briefs was Janet M. Schroer. Kenneth L. Walhood, Blunck & Walhood, LLC, West Linn, filed the briefs for petitioner on review Kevin G. Mayo.Maureen Leonard, Portland, argued the cause and filed the brief for respondents on review. With her on the brief were Robert K. Udziela, Portland, and Lisa T. Hunt, Portland.Cody Hoesly, Larkins Vacura LLP, Portland, and Travis Eiva, Corson & Johnson Law Firm, Eugene, filed the brief for amicus curiae Oregon Trial Lawyers Association.Jon Chandler, Salem, filed the brief for amici curiae Oregon Home Builders Association and The National Association of Home Builders.Before DE MUNIZ, Chief

Justice, and DURHAM, BALMER, KISTLER, WALTERS, and LINDER, Justices.**BALMER, J.

[350 Or. 33] This case requires us to address an issue left open in Harris v. Suniga, 344 Or. 301, 313, 180 P.3d 12 (2008): Whether a claim for property damage arising from construction defects may lie in tort, in addition to contract, when the homeowner and builder are in a contractual relationship. Plaintiffs hired defendants1 to build their house. Plaintiffs eventually discovered extensive water damage to the house. Plaintiffs then brought this action for breach of contract and negligence, alleging that the damage was caused by defendants' faulty work and failure to comply with the Oregon Building Code. Defendants moved for summary judgment on the grounds that the contract claim was barred by the statute of limitations and that plaintiffs could not bring a negligence claim because plaintiffs did not have a “special relationship” with defendants that implicated a standard of care independent of the contract. The trial court granted defendants' motions. On



Abraham v. T. Henry Constr. Inc., 350 Or. 29, 249 P.3d 534 (Or., 2011)

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appeal, the Court of Appeals held that plaintiffs' contract claim was barred by the statute of limitations but that their negligence claim could go forward because the building code provided a standard of care independent of the terms of the contract. Abraham v. T. Henry Construction, Inc., 230 Or.App. 564, 217 P.3d 212 (2009). We affirm the decision of the Court of Appeals, although we do so on somewhat different grounds.

We take the facts from the Court of Appeals opinion and the summary judgment record. Plaintiffs hired defendant Keith Lucas to be general contractor for the completion of their house, after substantial work had been done by other contractors. Plaintiffs signed a contract with Lucas that required him to perform all work “in a workmanship like manner and in compliance with all building codes and other applicable laws.” Plaintiffs also contracted with defendant Kevin Mayo to do the framing for the house.2 Plaintiffs' house was substantially complete by January 1998. More than six [350 Or. 34] years later, plaintiffs discovered extensive water damage, including rotting sheathing and framing, which they claim resulted from defects in defendants' work.3

Plaintiffs filed this action alleging breach of contract and negligence. Plaintiffs' negligence claim presented three overlapping grounds for relief. Plaintiffs claimed that

[249 P.3d 537]

defendants were liable (1) under common law negligence for causing reasonably foreseeable harm to plaintiffs' property; (2) under a heightened standard of care created by the “special relationship” between plaintiffs and defendants, which defendants had failed to meet; and (3) under a theory of negligence per se for violating the building code. Plaintiffs sought money damages for the physical damage to the house, as well as for its diminution in value. Defendants moved for summary judgment, arguing that plaintiffs' contract claim was barred by the six-year statute of limitations contained in ORS 12.080(1). Regarding each of plaintiffs'

negligence theories, defendants argued that a “special relationship”—such as the one between a doctor and a patient or an attorney and a client—was required to bring a tort claim and that plaintiffs had failed to demonstrate that such a relationship existed. In a letter opinion, the trial court held that plaintiffs' contract claim was barred by the statute of limitations. The court also held that plaintiffs' negligence claim was barred by Jones v. Emerald Pacific Homes, Inc., 188 Or.App. 471, 71 P.3d 574, rev. den., 336 Or. 125, 79 P.3d 882 (2003), where the Court of Appeals, on similar facts, required a “special relationship” between the contracting parties for a plaintiff to bring a negligence claim and determined that such a relationship did not exist between a homeowner and a building contractor.

Plaintiffs appealed, and the Court of Appeals affirmed the trial court's judgment on the contract claim and reversed on the negligence claim.4 First, the court surveyed [350 Or. 35] the law governing tort claims between contracting parties and determined that plaintiffs could not bring a common law negligence action without establishing a standard of care independent of the terms of the contract. That standard of care could arise from a “special relationship” between the parties or it could be expressed in a statute or administrative rule. Abraham, 230 Or.App. at 569, 217 P.3d 212. The court stated that, when a contract imposes only the general obligation to take reasonable care to avoid foreseeable risks, that standard of care does not impose a tort duty independent of the contract and therefore cannot be the basis for a negligence claim. Id. at 568, 217 P.3d 212 n2 (citing Jones, 188 Or.App. at 477, 71 P.3d 574).

The court then examined whether plaintiffs had shown that they were in a “special relationship” with defendants that established a standard of care independent of the contract. The court noted that parties are in a “special relationship” when one party delegates to the other the authority to make decisions for her benefit, such as a client's relationship with her attorney. The court determined that plaintiffs had not established that they had delegated responsibility to defendants to make independent




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decisions on behalf of plaintiffs and in plaintiffs' interest. Rather, plaintiffs had entered into an arm's-length transaction with defendants in which each party acted for its own benefit. Id. at 572, 217 P.3d 212. Accordingly, the Court of Appeals agreed with the trial court that plaintiffs and defendants were not in the kind of “special relationship” that imposed on defendants a heightened duty, the breach of which could be the basis for a tort action.

The Court of Appeals, however, did agree with plaintiffs that a statute or administrative rule could establish a standard of care independent of the contract and that plaintiffs' allegations that defendants had failed to comply with the building code, thereby causing damage to plaintiffs' property, were sufficient to state a negligence claim under that theory.5 Id. at 573, 217 P.3d 212. The court also held that plaintiffs had [350 Or. 36] demonstrated that there was a genuine issue of material fact by providing an affidavit from their counsel stating that she had retained experts

[249 P.3d 538]

who would testify in support of the foregoing allegations. The Court of Appeals therefore reversed summary judgment on plaintiffs' tort claim and remanded the case to the trial court.

On review, defendants argue that the Court of Appeals erred by holding that the building code created a standard of care independent of the contract between the parties.6 In defendants' view, a party to a contract may bring a tort claim arising out of the breach of that contract only when the parties are in a “special relationship” that implicates a standard of care independent of the terms of the contract. For the reasons set out below, we conclude that neither a special relationship nor a statutory standard of care, such as the building code, is necessary to bring a negligence claim here. In our view, plaintiffs stated a common law negligence claim based on defendants' alleged failure to exercise reasonable care to avoid foreseeable harm to plaintiffs' property. That negligence claim is not foreclosed by their contract with defendants, because the

terms of the contract do not purport to alter or eliminate defendants' liability for the property damage plaintiffs claim to have suffered.

This case requires us to examine the circumstances in which harm to a person's property, caused by another, may be the basis for a contract claim or a tort claim—or both. Contract obligations are “ ‘based on the manifested intention of the parties to a bargaining transaction,’ ” whereas tort obligations are “ ‘imposed by law—apart from and independent of promises made and therefore apart from the manifested intention of the parties—to avoid injury to others.’ ” Conway v. Pacific University, 324 Or. 231, 237, 924 P.2d 818 (1996) (quoting Prosser and Keeton on the Law of Torts, § 92, 655–56 (W. Page Keeton, ed., 5th ed 1984) (emphasis in Conway )). Because tort liability is imposed by common law negligence [350 Or. 37] principles, that responsibility exists unless altered or eliminated by a contract or some other source of law. In Fazzolari v. Portland School Dist. No. 1J, 303 Or. 1, 734 P.2d 1326 (1987), this court made that point with respect to common law negligence:

“[U]nless the parties invoke a status, a relationship, or a particular standard of conduct that creates, defines, or limits the defendant's duty, the issue of liability for harm actually resulting from defendant's conduct properly depends on whether that conduct unreasonably created a foreseeable risk to a protected interest of the kind of harm that befell the plaintiff.”

Id. at 17, 734 P.2d 1326. Thus, Fazzolari lays out a framework to address whether a common law negligence claim is legally cognizable even when there is a contractual relationship between the parties. In answering that question, we first consider whether plaintiffs alleged that defendants unreasonably created a foreseeable risk of harm to a protected interest, resulting in injury to plaintiffs. If so, we must determine whether the contract between the parties altered or eliminated defendants' common law duty to avoid harming plaintiffs. If it did not, then the




- 4 -

contract does not bar plaintiffs from bringing a negligence action against defendants.

Plaintiffs assert that contractors are subject to the common law negligence standard of care. See Harris, 344 Or. at 307, 180 P.3d 12 (“[A] person whose negligent conduct unreasonably creates a foreseeable risk of harm to others and causes injury to another ordinarily is liable in damages for that injury.”). In Harris, the defendant contractor had built an apartment building for a third party, which the plaintiff later purchased. The plaintiff discovered extensive water damage caused by the defendant's faulty work and brought a negligence claim. This court concluded that physical injury to a building caused by construction defects was property damage, rather than a purely economic loss, and thus actionable in negligence. Id. at 312, 180 P.3d 12.

Defendants do not dispute that plaintiffs' alleged injury is property damage and not a purely economic loss. Defendants, however,

[249 P.3d 539]

assert that Harris has no bearing on the present case because the parties in that case were not in [350 Or. 38] a contractual relationship. Although we agree that one difference between Harris and this case is plaintiffs' contract with defendants, that difference simply means that Harris is not dispositive; it does not make Harris irrelevant. Harris provides at least some support for plaintiffs' argument, because in that case this court recognized a negligence claim against a builder for the same type of injury alleged by plaintiffs—damage to property resulting from construction defects. Because Harris recognized the same sort of negligence claim that plaintiffs now allege, under Fazzolari, the question here is whether plaintiffs' contract with defendants “creates, defines, or limits” that negligence claim.

The contract's reference to performing the work “in a workmanship like manner and in compliance with all building codes and other applicable laws” simply reiterated the common

law negligence standard that would have applied to defendants' work in the absence of a contract. It did not “create” or “define” any duty defendants did not already have. The question then is whether that reference “limited” plaintiffs' claims against defendants.

Nothing in this court's cases suggests that, by entering into a contract, a party necessarily waives tort claims against another party to the contract. See Estey v. MacKenzie Engineering Inc., 324 Or. 372, 376, 927 P.2d 86 (1996) (“ ‘[A] contract will not be construed to provide immunity from the consequences of a party's own negligence unless that intention is clearly and unequivocally expressed.’ ”) (quoting Transamerica Ins. Co. v. U.S. Nat'l Bank, 276 Or. 945, 951, 558 P.2d 328 (1976)). Indeed, this court has long recognized that tort and contract remedies may coexist. See Ashmun v. Nichols, 92 Or. 223, 235, 180 P. 510 (1919) (so stating); Newman v. Tualatin Development Co. Inc., 287 Or. 47, 49, 597 P.2d 800 (1979) (certifying class action against contractor by plaintiffs alleging contract and tort claims arising from construction defects). In Georgetown Realty v. The Home Ins. Co., 313 Or. 97, 831 P.2d 7 (1992), this court summarized the case law discussing the choice between tort and contract remedies:

“When the relationship involved is between contracting parties, and the gravamen of the complaint is that one [350 Or. 39] party caused damage to the other by negligently performing its obligations under the contract, then, and even though the relationship between the parties arises out of the contract, the injured party may bring a claim for negligence if the other party is subject to a standard of care independent of the terms of the contract. If the plaintiff's claim is based solely on a breach of a provision in the contract, which itself spells out the party's obligation, then the remedy normally will be only in contract, with contract measures of damages and contract statutes of limitation. That is so whether the breach of contract was negligent, intentional, or otherwise.”

Id. at 106, 831 P.2d 7 (emphasis added).




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The parties disagree as to whether Georgetown allows common law negligence principles to provide the “independent standard of care” that must be identified for one party to bring a tort claim against the other, when the parties are in a contractual relationship. In defendants' view, Georgetown requires a “special relationship” to exist between contracting parties before the negligent performance of contract obligations can be the basis for a tort claim. According to defendants, it is the nature of the relationship between the parties—such as the responsibility of one party to act for the other's benefit—that implicates an independent standard of care. Plaintiffs respond that Georgetown requires only that there be some applicable standard of care independent of the terms of the contract, and they argue that such a standard can derive from a “special relationship” or from some other source of law, including the common law duty to use reasonable care to avoid injury to others.

Defendants read Georgetown too broadly. Georgetown was a negligence action by an insured against its insurance carrier seeking economic damages that the insured had sustained because of the carrier's failure to use reasonable care in defending the insured. Because the plaintiff was seeking economic

[249 P.3d 540]

damages, it was required to demonstrate a “special relationship” in which the defendant agreed to act in the plaintiff's fiduciary interest. Id. at 110–11, 831 P.2d 7. However, Georgetown's general statements about the intersection of contract and tort claims, quoted above, do not turn on whether a special relationship exists, but rather require only [350 Or. 40] a standard of care that is independent of the terms of the contract. See id. at 110, 831 P.2d 7 (“[T]he pivotal question * * * is whether the allegedly negligent party is subject to a standard of care independent of the terms of the contract.”). That standard could be “independent” of the contract either because a “special relationship” imposes a heightened standard of care (as in Georgetown ) or because

the common law, statutes, or administrative rules impose liability regardless of the contractual relationship between the parties. See Boyer v. Salomon Smith Barney, 344 Or. 583, 595, 188 P.3d 233 (2008) (“[O]utside source[s] of law” such as “industry standards, statutes, or regulations, could * * * provide a basis in law for liability” in a negligence action.). Furthermore, this court's case law is clear that economic losses, such as the ones suffered by the plaintiff in Georgetown, are recoverable in negligence only if the defendant is subject to a heightened standard of care, such as one arising out of a special relationship. See, e.g., Onita Pacific Corp. v. Trustees of Bronson, 315 Or. 149, 160–61, 843 P.2d 890 (1992) (so holding). For physical damage to real property, however, “this court's cases generally permit a property owner to recover in negligence.” Harris, 344 Or. at 310–11, 180 P.3d 12.

For those reasons, we agree with plaintiffs that Georgetown and earlier cases support the conclusion that common law negligence principles apply—notwithstanding a contractual relationship—as long as the property damage for which the plaintiff seeks recovery was a reasonably foreseeable result of the defendant's conduct. Thus, a negligence claim for personal injury or property damage that would exist in the absence of a contract will continue to exist unless the parties define their respective obligations and remedies in the contract to limit or foreclose such a claim. Parties may limit tort remedies by defining their obligations in such a way that the commonlaw standard of care has been supplanted, see Fazzolari, 303 Or. at 17, 734 P.2d 1326 (so stating), or, in some circumstances, by contractually limiting or specifying available remedies. See K–Lines v. Roberts Motor Co., 273 Or. 242, 248, 541 P.2d 1378 (1975) (illustrating proposition).

Defendants argue that this approach undermines the distinction between contract and tort and would permit [350 Or. 41] every breach of contract to be brought as a tort claim. Defendants are incorrect. An example will help demonstrate the difference between actions taken in the performance of a contract that can




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be the basis for a contract claim only, and those that may also provide a basis for a tort claim. If an individual and a contractor enter into a contract to build a house, which provides that the contractor will install only copper pipe, but the contractor installs PVC pipe instead (assuming both kinds of pipe comply with the building code and the use of either would be consistent with the standard of care expected of contractors), that failure would be a breach of contract only.7 That is so because the contract defined the contractor's obligation to use a particular material (and no other), which the contractor then failed to do. See Georgetown, 313 Or. at 106, 831 P.2d 7 (stating principle).8 If the failure to install the copper pipe caused a reduction in the value of the house, the plaintiff would be able to recover that amount in an action for breach of contract. That would be a claim that, as

[249 P.3d 541]

this court stated in Georgetown, “is based solely on a breach of a provision in the contract[.]” 313 Or. at 106, 831 P.2d 7 (emphasis added).

On the other hand, if the contractor installed the PVC pipe in a defective manner and those pipes therefore leaked, causing property damage to the house, the homeowner would have claims in both contract and tort. The homeowner could recover in contract both for the failure to install copper pipe and for the failure to perform the contract in a reasonably skillful manner. See Cabal v. Donnelly, 302 Or. 115, 121–22, 727 P.2d 111 (1986) (illustrating contract claim). The homeowner also would have a tort claim for property damage to the house caused by the leaking pipes if the homeowner could prove that the contractor's failure to meet the standard of care caused the property damage. See id. (“ ‘We see no reason to preclude a [home buyer] from claiming [350 Or. 42] damages [from the home builder] in contract and in tort.’ ”) (quoting Woodward v. Chirco Construction Co., 141 Ariz. 514, 515–16, 687 P.2d 1269, 1271 (1984)). In those circumstances, the obligation to install copper instead of PVC pipe is purely contractual; the

manner of installing the pipe, however, implicates both contract and tort because of the foreseeable risk of property damage that can result from improperly installed pipes.

We now return to the terms of the contract here to determine whether plaintiffs' claim sounded in common law negligence and, if so, whether the parties' contract altered or eliminated defendants' common law obligation to avoid reasonably foreseeable harm to plaintiffs' property or modified the remedies available to plaintiffs.

The contract here provides: “All work shall be completed in a workmanship like manner and in compliance with all building codes and other applicable laws.” The Court of Appeals apparently viewed that promise as implicitly incorporating the common law standard of care into the contract. In rejecting plaintiffs' argument that common law negligence principles provide an “independent standard of care,” the court stated, “When a contract expressly or implicitly incorporates the general ‘duty’ to take reasonable measures to avoid foreseeable risks, that standard of care is not considered to impose an independent tort duty.” Abraham, 230 Or.App. at 568, 217 P.3d 212 n2. That determination, however, is inconsistent with this court's clear statement that if a contract “merely incorporates by reference or by implication a general standard of skill and care to which the defendant would be bound independent of the contract, and the alleged breach would also be a breach of this noncontractual duty,” then a claim for negligence will lie. Securities–Intermountain v. Sunset Fuel, 289 Or. 243, 259, 611 P.2d 1158 (1980).

As noted, in the absence of a contractual relationship, defendants here would be subject to a common law negligence claim by plaintiffs. See Harris, 344 Or. at 312, 180 P.3d 12 (contractor liable in negligence to nonprivity owner for property damage caused by construction defects). By merely reciting the obligation to build plaintiffs' house in a reasonably skilled manner and in accordance




- 7 -

with the building code—and, by [350 Or. 43] implication, in such a way as to avoid foreseeable harm to plaintiff—defendants did nothing to supplant the common law standard of care. Nor did the terms of the contract purport to limit the type or amount of plaintiffs' damages See Estey, 324 Or. at 376, 927 P.2d 86 (tort remedies not waived absent express intent). Commonlaw negligence principles remain an applicable standard of care, independent of the terms of the contract.

For the foregoing reasons, we conclude that plaintiffs' allegations of property damage against defendants state a claim for negligence.

The decision of the Court of Appeals is affirmed. The judgment of the circuit court is reversed, and the case is remanded to the circuit court for further proceedings.

--------

Notes:

FN* Appeal from Clackamas County Circuit Court, Robert D. Herndon, Judge. 230 Or.App. 564, 217 P.3d 212 (2009).

FN** Gillette, J., retired December 31, 2010, and did not participate in the decision of this case. Landau, J., did not participate in the consideration or decision of this case.

1. Plaintiffs brought this action as trustees of a trust that owns the house. Plaintiffs named 11 defendants—other contractors and subcontractors—but only defendants Lucas and Mayo are parties to this appeal.

2. Plaintiffs' contract with Mayo is not in the record. The parties, however, have treated that contract as containing the same terms as the Lucas contract, at least as relevant to the issues on appeal.

3. The statute of limitations for contract actions is six years. ORS 12.080(1). Tort claims arising out of the construction of a house must

be brought within two years of the date that the cause of action accrues, but, in any event, within 10 years of the house being substantially complete. ORS 12.110; ORS 12.135. Tort claims ordinarily accrue when the plaintiff discovers or should have discovered the injury. Berry v. Branner, 245 Or. 307, 311–12, 421 P.2d 996 (1966).

4. Plaintiffs ask this court to review the Court of Appeals decision that plaintiffs' contract claims are barred by the statute of limitations. We decline to do so.

5. Plaintiffs characterized their claim based on defendants' failure to comply with applicable building codes as “negligence per se.” As the Court of Appeals correctly noted, however, negligence per se is not a separate claim for relief, but is simply shorthand for a negligence claim in which the standard of care is expressed by a statute or rule. See Shahtout v. Emco Garbage Co., 298 Or. 598, 601, 695 P.2d 897 (1985) (so stating).

6. Defendant Lucas also argues that the Court of Appeals erred in holding that the affidavit submitted by plaintiffs' counsel was sufficient to establish a genuine issue of material fact and therefore preclude summary judgment. We reject that argument without discussion.

7. In Securities–Intermountain v. Sunset Fuel, 289 Or. 243, 259 n. 9, 611 P.2d 1158 (1980), this court identified other situations in which a breach of contract would not give rise to tort liability, even in the context of medical malpractice, because the breach did not “fall[ ] short of generally applicable professional standards of skill and care.”

8. Whether the contractor's failure to install the contractually specified pipe was intentional or was the result of negligence, the action would, in any event, be for breach of contract. See Georgetown, 313 Or. at 106, 831 P.2d 7 (so stating).



RESERVED FOR HANDOUT—MATERIALS FOR THIS PRESENTATION WERE NOT

SUBMITTED IN TIME FOR PUBLICATION

Chapter 3

Small Business Administration (SBA) Financingcasey MoltruM

Vice President, Commercial Banking OfficerColumbia Bank

Vancouver, Washington

Chapter 3—Small Business Administration (SBA) Financing


Chapter 4

Residential Due Diligence: Helping Clients Avoid “The Money Pit”

BenjaMin leedy

Stoll BernePortland, Oregon

Contents

I. The Role of the Attorney in Residential Due Diligence . . . . . . . . . . . . . . . . . . . . . . 4–1

II. The Division of Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1

III. The Due Diligence Mindset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1

IV. Physical Condition and Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1A. Home Inspection Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1B. Soils/Geotechnical Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1C. Environmental Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–1D. Lead-Based Paint Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2E. Mold Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2F. Well Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2G. Sewer and Septic Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2H. Pest and Dry Rot Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–2I. Radon Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3J. Defective Construction Products and Materials . . . . . . . . . . . . . . . . . . . . . . 4–3

V. Title and Survey Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3A. Title Exception Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3B. Survey Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3

VI. Neighborhood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3A. School Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3B. Future Development Activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3C. Neighborhood Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3D. Traffic/Commute Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–3E. Crime Maps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4F. Sex Offenders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4

VII. Insurance/Natural Hazards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4A. Homeowners’ Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4B. Floods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4C. Earthquakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4D. Wildfires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4

VIII. Zoning and Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4A. Zoning Map Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4B. Certificate of Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4C. Building Permits/Notice of Code Violations . . . . . . . . . . . . . . . . . . . . . . . . 4–4

IX. Financial Projection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–4

Chapter 4—Residential Due Diligence: Helping Clients Avoid “The Money Pit”


X. Homeowners’ Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–5A. Review of HOA Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–5B. HOA Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–5

Residential Due Diligence Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4–7

Contents (continued)



I. THE ROLE OF THE ATTORNEY IN RESIDENTIAL DUE DILIGENCE

A. Differences between conducting due diligence review on commercial and residential properties.

1. Consider the knowledge and experience of the client. Be prepared to educate.

2. Different considerations—buying an asset compared to buying a home.

B. On residential transactions, the attorney will almost always be asked to weigh in on a discreet due diligence issue, as opposed to a general representation on the transaction.

II. THE DIVISION OF LABOR

A. Use a due diligence checklist to illustrate the scope of potentially necessary or desirable diligence items.

B. Determine who will do what.

C. Buyers will almost always choose to do less due diligence than they could, so make certain the client recognizes that they are making this decision.

III. THE DUE DILIGENCE MINDSET

A. Explain the significance of an “AS IS” transaction to the client.

B. Emphasize the limitations of the Seller’s Property Disclosure Statement.

1. Inherent issues with enforcing even a meritorious claim.

2. Recognize the different circumstances of the seller and the impact that could have on his/her responses.

C. Disabuse the client of the “Nordstrom Buyer Mentality.”

IV. PHYSICAL CONDITION AND ENVIRONMENTAL

A. Home Inspection Report

1. The Home Inspection Report is the single most important diligence item concerning the physical condition of the home. It will provide the buyer with detailed information about the home’s condition, its systems and fixtures.

2. Before hiring an inspector, the buyer should check with the CCB to determine the inspector’s current license status and whether there are any past or pending claims against the inspector. This can be done by visiting https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/ccb_index.htm.

3. The buyer must carefully consider the limitations of the Home Inspection Report and consider what the report covers and does not cover.

B. Soils/Geotechnical Report

The specific characteristics of the property will dictate whether obtaining a soils report is reasonable or desirable.

C. Environmental Issues

1. The most common environmental issue for residential properties is underground storage tanks.

a. Information about home heating oil tanks and the problems associated with them can be found at http://www.deq.state.or.us/lq/tanks/hot/homeowners.htm.

b. Oil storage tank inspection, decommissioning, and cleanup requires a special license from DEQ. A list of providers can be found at http://www.deq.state.or.us/lq/pubs/docs/tanks/hot/LicensedServiceProviders.pdf.


http://www.deq.state.or.us/lq/tanks/hot/homeowners.htm

http://www.deq.state.or.us/lq/pubs/docs/tanks/hot/LicensedServiceProviders.pdf

http://www.deq.state.or.us/lq/pubs/docs/tanks/hot/LicensedServiceProviders.pdf



2. Although obtaining an environmental site assessment for a residential transaction would be unusual, it may be worth considering in certain circumstances—like if the home is close to industrial property, a gas station, or a dry cleaner.

a. Food for thought—”Summary Report: Land Contamination and Residential Properties Summit,” available at http://edrnet.com/community/blogs/environmental-consultants/latest-news-for-environmental-consultants/2012/08/requirements-for-environmental-screening-on-residential-properties-outlined-in-recent-report.

b. Information regarding superfund sites, including their locations, can be found at http://www.epa.gov/superfund/sites/ and http://public.health.oregon.gov/HealthyEnvironments/TrackingAssessment/EnvironmentalHealthAssessment/Pages/sites.aspx.

D. Lead-Based Paint Report

1. Homes built before 1978 are subject to the Residential Lead-Based Paint Disclosure Program administered by the EPA and HUD. The Act requires sellers to provide the buyer with a lead-based paint disclosure and pamphlet entitled “Protect Your Family from Lead in Your Home.” The pamphlet is available at https://www.cpsc.gov//PageFiles/121956/426.pdf.

2. For more information and to locate companies certified and licensed to conduct lead-based paint testing or perform abatement, see http://public.health.oregon.gov/HealthyEnvironments/HealthyNeighborhoods/HealthyHomes/LeadPoisoning/InspectionAbatementProfessionals/Pages/certlist.aspx.

E. Mold Inspection

Buyers concerned about potentially harmful molds should arrange for inspection by a qualified professional. Information on moisture intrusion and mold problems can be found at http://www.epa.gov/mold/index.html.

F. Well Tests

1. If domestic water for the property is supplied by a private well, the seller is required by state law to test the well for total coliform bacteria, nitrates, and arsenic. The seller must report the results of the tests to the Oregon Health Department and the buyer. Buyers may also want to have the well tested for other potential contaminants. More information on this state law requirement can be found at http://public.health.oregon.gov/HealthyEnvironments/DrinkingWater/Monitoring/Pages/dwtfaq.aspx.

2. Buyer may also want to obtain a well flow test to determine as best as possible whether the well provides adequate water for the buyer’s needs.

G. Sewer and Septic Inspection

Whether the property is connected to a city sewer, septic system, or other on-site wastewater treatment system is important information. Information about on-site wastewater treatment systems, and licensed installers and pumpers, can be found on the DEQ website at http://www.deq.state.or.us/wq/onsite/onsite.htm.

H. Pest and Dry Rot Inspection

A pest and dry rot inspection may or may not be included in the Home Inspection Report. Pest control operators who do inspections and treatment are licensed by the Oregon Department of Agriculture. Buyers can check on licensing of pest control operators and applicators online at http://oda.state.or.us/dbs/search.lasso#pesticide.

http://edrnet.com/community/blogs/environmental-consultants/latest-news-for-environmental-consultants/2012/08/requirements-for-environmental-screening-on-residential-properties-outlined-in-recent-report



http://www.epa.gov/superfund/sites/

http://www.epa.gov/superfund/sites/

http://public.health.oregon.gov/HealthyEnvironments/TrackingAssessment/EnvironmentalHealthAssessment/Pages/sites.aspx

http://public.health.oregon.gov/HealthyEnvironments/TrackingAssessment/EnvironmentalHealthAssessment/Pages/sites.aspx

https://www.cpsc.gov/PageFiles/121956/426.pdf

http://public.health.oregon.gov/HealthyEnvironments/HealthyNeighborhoods/HealthyHomes/LeadPoisoning/InspectionAbatementProfessionals/Pages/certlist.aspx



http://www.epa.gov/mold/index.html

http://www.epa.gov/mold/index.html

http://public.health.oregon.gov/HealthyEnvironments/DrinkingWater/Monitoring/Pages/dwtfaq.aspx

http://public.health.oregon.gov/HealthyEnvironments/DrinkingWater/Monitoring/Pages/dwtfaq.aspx

http://www.deq.state.or.us/wq/onsite/onsite.htm

http://www.deq.state.or.us/wq/onsite/onsite.htm



I. Radon Test

Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Additional information regarding radon and radon testing is available Oregon Department of Human Services’ website at http://oregon.gov/DHS/ph/rps/radon/index.shtml.

J. Defective Construction Products and Materials

Some materials used in home construction are, or have been, subject to a recall, class action suit, settlement, or litigation. These materials are typically, but not limited to, modern engineered construction materials used for siding, roofing, insulation, or other building purposes. The buyer should confirm whether an inspection for such products is within the scope of the home inspection ordered by the buyer.

V. TITLE AND SURVEY REVIEW

A. Title Exception Review

A careful review of the documents underlying the title exceptions listed on the preliminary title report obtained by the buyer may be one of the areas most likely for attorney assistance to be requested on a residential transaction. This review should focus on (1) confirming access to the property, (2) the location and nature of any easements encumbering the property, and (3) any unique exceptions raised on the title report.

B. Survey Review

Generally a buyer would not obtain a survey in connection with a residential transaction, but in certain circumstances it may be appropriate.

VI. NEIGHBORHOOD

A. School Review

1. If the buyer has school-aged children, the quality of the schools in the school district may be a critical factor in the desirability of the property. For information about Oregon schools from the Oregon Department of Education, see www.ode.state.or.us. School information and ratings have been compiled by The Oregonian at www.schools.oregonlive.com/performance.

2. Similarly, the buyer should make inquiries concerning whether any schools in the school district are being considered for closure or whether changes to school boundaries are under consideration.

B. Future Development Activity

Buyers concerned about potential development in the surrounding area should check with governmental authorities to determine if any building projects are pending in the area. Building permits, zoning applications, and other planning and development actions are a matter of public record.

C. Neighborhood Activity

Buyers concerned about neighborhood activities like concerts in the park, farmer’s markets, sporting events, fairs, etc., should check with government authorities on the nature and frequency of such activities in the neighborhood.

D. Traffic/Commute Investigation

Buyers concerned about their commutes to work should further investigate the issue. The flow of traffic when they visit the property for a walkthrough or their inspection may not be representative.

http://oregon.gov/DHS/ph/rps/radon/index.shtml

http://www.ode.state.or.us

http://www.schools.oregonlive.com/performance



E. Crime Maps

Many Oregon cities make neighborhood crime information available online via crime maps. See www.portlandmaps.com, www.crimereports.com, www.raidsonline.com, etc. Crime maps typically will show police reports from the previous 12 months. Buyers concerned about whether the property or neighboring properties have ever been the site of serious criminal activity should contact their local police department.

F. Sex Offenders

Information concerning registered sex offenders is available at www.sexoffenders.oregon.gov.

VII. INSURANCE/NATURAL HAZARDS

A. Homeowners’ Insurance

The cost of homeowners’ insurance, or even a home’s insurability, may be impacted by the insurance claims history for that home. Most insurance companies use a database service called the Comprehensive Loss Underwriting Exchange (CLUE) to track claims made. Depending on the content of the CLUE report, and the insurance company’s policy, home insurance may prove more difficult or expensive to get than expected. Buyers should arrange for homeowners’ insurance early in the home buying process.

B. Floods

FEMA Flood Maps can be found online at www.msc.fema.gov.

C. Earthquakes

Information regarding earthquake risks can be found at www.oregongeology.org/sub/hazvu and www.earthquake.usgs.gov/earthquakes/states/oregon/hazards.php.

D. Wildfires

Information regarding wildfire risk in Oregon can be found at http://www.oregon.gov/ODF/FIRE/fire.shtml and http://www.oregon.gov/odf/fire/docs/prev/06car.pdf.

VIII. ZONING AND GOVERNMENTAL APPROVALS

A. Zoning Map Review

A review of the zoning map covering the property, as well as the zoning ordinance, may offer important information about the permissible uses of property in the area.

B. Certificate of Occupancy

Certain jurisdictions, Portland for example, may issue certificates of occupancy for residential properties. Obtaining a copy will enable the buyer to confirm the final inspection approvals issued for the property.

C. Building Permits/Notice of Code Violations

Buyers concerned about recent building activity or code violations at the property should check with governmental authorities on the status of any recent or pending permits or the existence of any code violations.

IX. FINANCIAL PROJECTION

Buyers should confirm the anticipated amount of monthly property expenses like mortgage payment, insurance, taxes, utilities, and HOA dues. If the property is subject to a property tax deferral, the buyer should confirm the continued eligibility of the property for that deferral.

http://www.portlandmaps.com

http://www.crimereports.com

http://www.raidsonline.com

http://www.sexoffenders.oregon.gov

http://www.msc.fema.gov

http://www.oregongeology.org/sub/hazvu

http://www.earthquake.usgs.gov/earthquakes/states/oregon/hazards.php

http://www.oregon.gov/ODF/FIRE/fire.shtml

http://www.oregon.gov/ODF/FIRE/fire.shtml

http://www.oregon.gov/odf/fire/docs/prev/06car.pdf



X. HOMEOWNERS’ ASSOCIATION

A. Review of HOA Documents

1. It will be critical to learn about the buyer and their intended use of the home.

a. Will the buyer use the property as a home office?

b. Does the buyer have a boat or an RV?

c. Does the buyer have pets?

d. Is the buyer planning to rent the property in the future?

e. Is the buyer planning a remodel?

2. When reviewing the governance provisions of the bylaws and CC&Rs, consider the specific circumstances of the HOA.

a. Has turnover occurred?

b. How big is the HOA?

B. HOA Financial Condition

Analyze the financial condition of the HOA.





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Chapter 5

Legal and Financial Options for Clients at Risk of Foreclosure1

BenjaMin d. knauPP

Garland Griffiths Knaupp, AttorneysHillsboro, Oregon

1 Copyright © 2013 Benjamin D. Knaupp, J.D.

Contents

I. Nondefault Options for Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1

II. Loan Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1A. The HAMP Federal Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–1B. Private Loan Modifications Outside of HAMP . . . . . . . . . . . . . . . . . . . . . . . 5–2

III. Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–2A. Short Sale Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–2B. Short Sale Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–2C. Federal Short Sale Incentive Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–3

IV. Deed in Lieu of Foreclosure Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–3A. Legal Definition of Deed in Lieu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–3B. Federal Incentive Programs for Deed in Lieu. . . . . . . . . . . . . . . . . . . . . . . . 5–3

Sample Estoppel Deed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5–5

Chapter 5—Legal and Financial Options for Clients at Risk of Foreclosure




I. NONDEFAULT OPTIONS FOR BORROWERS

Borrowers in Oregon who are at risk of foreclosure (but who have not yet defaulted on their loan) generally have three options.

1. Sell the Property. If the property has equity, the borrower can try to sell the property and save his/her equity before he/she defaults and risks losing his/her equity.

2. Refinance the Loan. If the borrower has a high–interest rate loan (such as a second) or a short-term loan (such as a 15-year term loan) they could avoid foreclosure by refinancing their loan to a lower interest rate and longer term. Many borrowers at risk of foreclosure have income problems and cannot qualify for a refinance. The other primary problem with a traditional refinance is the decline in property values since 2008. Borrowers who have no equity have only two options for a refinance: (a) a private loan from noninstitutional lenders such as family members; or (b) the federal Home Affordable Refinance Program (HARP).

HARP has not been widely successful and has significant limitations, including:

F The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae;

F The loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009;

F The current loan-to-value (LTV) ratio must be greater than 80%; and

F Not all loan servicers participate in HARP.

Because HARP is an incentive program, servicers who do not want to participate cannot be forced to do so.

For more details, visit http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx.

3. Apply for a Loan Modification. Some borrowers at risk of a foreclosure may qualify for a loan modification under HAMP before they have defaulted on their loan payments, if they can prove that default is “imminent” or “reasonably foreseeable.” However, in practice, many servicers have found it easy to avoid granting modifications for borrowers prior to default. Servicers who fail to follow the HAMP program “guidelines” and grant modifications to qualifying borrowers are subject to regulatory sanctions. Borrower efforts to bring private legal actions against servicers for failure to offer borrowers loan modifications have failed to gain traction in the courts.

II. LOAN MODIFICATIONS

A. The HAMP Federal Program

In February 2009, the Obama Administration introduced the Making Home Affordable Program, a plan to stabilize the housing market and help struggling homeowners get relief and avoid foreclosure. In March 2009, the Treasury Department (Treasury) issued uniform guidance for loan modifications across the mortgage industry and subsequently updated and expanded that guidance in a series of policy announcements.

Most loan servicers have signed participation agreements with the federal government to participate in the federal Home Affordable Modification Program (HAMP).

HAMP is slightly different depending on who owns and services a borrower’s loan. The differences are related to the regulator with authority over the particular lender/servicer. Most loan modification programs are regulated as follows.

http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx

http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx



1. Loans Owned by the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). Fannie Mae and Freddie Mac are government-sponsored enterprises (GSE) and are regulated by the Federal Housing Finance Agency (FHFA). Under the FHFA’s direction, the GSEs issue their own loan modification guidelines.

2. Loans Owned by Non-GSE Investors. These are loans that are owned by commercial banks or by trustees of mortgage backed securities. By signing Servicer Participation Agreements with the Treasury Department, non-GSE investors are required to follow the “guidelines” issued by the Treasury in implementing the HAMP program. These guidelines are found in the MHA Handbook, found online at https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp.

3. Loans Guaranteed by the Federal Housing Administration (FHA), the Veterans Administration (VA), or the Rural Housing Service (USDA Loans). All three federal guarantee programs have similar programs to HAMP but their own specific regulations applicable to the servicers of the loans.

4. Loans Owned by the 12 Federal Home Loan Banks. These are similar to GSEs and are also regulated by the Federal Housing Finance Agency (FHFA).

B. Private Loan Modifications Outside of HAMP

Small credit unions and small banks that did not sign servicer participation agreements to officially participate in the HAMP program may offer loan modification options that may be similar to HAMP. These may be referred to as “in-house” modifications or “loss mitigation” programs. In my experience, small credit unions are not willing to grant significant loan modifications to their members.

III. SHORT SALES

A. Short Sale Laws

There is no definition of a “short sale” in Oregon statutes. Therefore, the specific details, such as the legal effect, transaction requirements, rights, or duties of the respective parties to a short sale, are determined by the general common law of contracts. In 2011 a new statute was enacted specifically relating to short sales, Oregon House Bill 2916, effective June 23, 2011.

1. Section 1(f) defined a short sale as follows: “Short sale” means a sale of residential property that is subject to foreclosure under ORS 86.705 to 86.795 or ORS chapter 88 for an amount that is less than the remaining amount due on the loan that the residential property secures.”

2. Section (2) provides that a lender may not “bring an action or otherwise seek repayment” for the deficiency balance following a short sale if the lender forgives the deficiency and files a Form 1099-C Cancellation of Debt with the IRS. However, nothing in the new law requires deficiency forgiveness or prevents lenders from seeking to collect the deficiency.

Practice tiP: Unless the lender provides a borrower with a written waiver of its right to collect the deficiency of the loan, the borrower remains obligated after a short sale has concluded, until such time as the lender files a 1099-C with the IRS. Because there is no guarantee or obligation that the debt will be forgiven, lawyers must always advise borrowers of the risk of a collection action in the absence of a proper, legal, and enforceable written waiver and release in advance of closing the sale.

B. Short Sale Fraud

Short sale fraud is considered by state or federal authorities to include a wide range of acts that may include:

1. Any conspiracy, agreement, or arrangement that wrongfully cheats a lender or lienholder out of proceeds of the sale that they would have received;

https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp



2. Any false statements by any party involved in a short-sale transaction that fraudulently induces a lender or lienholder to release the debtor from a debt that the lender had a right to collect.

C. Federal Short Sale Incentive Programs

The Home Affordable Foreclosure Alternatives (HAFA) program was instituted as part of HAMP to help homeowners avoid foreclosures and offers incentives to borrowers, servicers, and investors who utilize a short sale to avoid foreclosures. Borrower qualifications for the HAFA program include:

1. The borrower is generally HAMP-eligible;

2. The borrower does not qualify for a trial period loan modification plan due to insufficient income, or the borrower did not successfully complete a trial period plan;

3. The borrower has missed at least two consecutive payments during a HAMP modification; or

4. The borrower has requested a short sale.

The advantage of the HAFA short sale for borrowers is that if a borrower qualifies for the HAFA short sale, the servicer may not require a cash contribution or a promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

The HAFA program has been somewhat successful, but for reasons I do not understand, it has been ignored by many servicers, even as they have agreed to short sales outside HAFA program.

IV. DEED IN LIEU OF FORECLOSURE ARRANGEMENTS

A. Legal Definition of Deed in Lieu

There is no statutory definition in Oregon law of a deed in lieu of foreclosure. Current HAMP guidelines require that if the borrower makes a good faith effort to sell the property but is not successful, a servicer should then consider accepting a deed in lieu of foreclosure (DIL). With a DIL, the borrower voluntarily transfers ownership of the property to the servicer—provided the title is free and clear of mortgages, liens, and encumbrances. It is customarily labeled an “Estoppel Deed” in which the borrower transfers ownership of the property to the servicer and provides that the title is free and clear of mortgages, liens and encumbrances.

See attached sample Estoppel Deed.

Many borrowers bought homes with “80/20” mortgages or cashed out their equity with a home equity line of credit loan (“HELOC”). Borrowers with two mortgages are ineligible for a DIL because of the junior lien problem. Unless they are able to pay off the second mortgage, they cannot pass clear title to either lender using a DIL.

The DIL is not favored by major loan servicers because of the risk of unknown liens; especially tax liens. Usually a DIL will be written with reservations and language to preserve the trust deed lien and prevent a merger of title with the lien, so that the servicer can go back and conduct a foreclosure sale if there are liens or clouds on title that are found after the DIL is accepted.

B. Federal Incentive Programs for Deed in Lieu

Some borrowers have received incentive payments from their servicer in exchange for a DIL, but they are quite rare.





SAMPLE ESTOPPEL DEED







Chapter 6

The Quiet Revolution Goes West: The Oregon Planning Program 1961–2011

edward j. sullivan

Garvey Schubert BarerPortland, Oregon

Contents

I. Introduction and Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–1

II. Evolution of the Oregon Planning System—Circumstances, Personalities, and Luck . . . . . 6–1A. Pre-Planning Economic, Social, and Political History . . . . . . . . . . . . . . . . . . . 6–1B. In Principio Erat Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–1C. Some Political and Social Peculiarities of Oregon . . . . . . . . . . . . . . . . . . . . . 6–2D. The Origins of the Current Oregon Planning System . . . . . . . . . . . . . . . . . . . 6–2E. The Road to SB 100. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–2F. “That Magic Year” (1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–2G. The System Completed (1974–1979) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–3

III. Crises and Conflicts (1979–2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–3A. The Effect of a Statewide Planning System . . . . . . . . . . . . . . . . . . . . . . . . . 6–3B. Life After Nirvana . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–3C. The Rajneeshpuram Controversy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–3D. Metro and Regional Planning in the Portland Area . . . . . . . . . . . . . . . . . . . . 6–3E. Particular Planning Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6–4

IV. Conclusion—How’s That Planning Thingie Working for You, Oregon?. . . . . . . . . . . . . 6–4

Chapter 6—The Quiet Revolution Goes West: The Oregon Planning Program 1961–2011




I. INTRODUCTION AND BACKGROUND

A. Oregon’s peculiar political, social, and economic history provided fertile ground for land use planning.

B. Individual political leaders influential in the planning choices added to the mix.

C. Article demonstrates the fortunate constellation of circumstance and leadership causing formulation of current state planning program—not easily replicated elsewhere.

II. EVOLUTION OF THE OREGON PLANNING SYSTEM—CIRCUMSTANCES, PERSONALITIES, AND LUCK

A. Pre-Planning Economic, Social, and Political History

1. Eden at the end of the Oregon Trail.

2. Effect of the Gold Rush (1849).

3. Natural resource dependence.

4. Admission to Union as “free state” (1859) but large pro-slavery element—No slavery but no “free negroes.”

5. Initiative, primaries, referendum, and recall (1902–1908)

6. The Ku Klux Klan, the School Bill, and Society of Sisters v. Pierce (1925)—homogenous population, populism, and prejudice.

B. In Principio Erat Zoning

1. Portland zoning ordinance (1918).

2. First state enabling legislation for cities (1919).

3. Portland zoning ordinance of 1924 upheld in Kroner v. Portland (1925).

4. Counties authorized to plan and zone (1947, 1963).

5. Creation of access subject to local government approval (1955).



C. Some Political and Social Peculiarities of Oregon

1. Prohibition of discrimination in public accommodations (1953).

2. Cleanup of the Willamette River and the Greenway (1967).

3. The Beach Bill (1967) and Thornton v. Hay (1971).

4. The Bottle Bill and Forest Practices Act (1971).

5. Public records and public meetings legislation (1973).

D. The Origins of the Current Oregon Planning System

1. Exclusive farm zones and the farm tax system (1961, 1963).

2. Senate Bill 10 (1969)—All local governments must plan and zone.

3. Oregon Coastal Conservation and Development Commission (1971).

E. The Road to SB 100

1. Interim committees and the A-95 process.

2. Project foresight and the Lawrence Halprin publication, Willamette Valley: Choices for the Future.

3. Other literary influences—Silent Spring, Design with Nature, Model Land Development Code Draft, Quiet Revolution.

4. Agriculture and environmental forces join together.

5. The failure of the National Land Use Planning Act.

F. “That Magic Year” (1973)

1. The McCall speech on planning.

2. SB 100—Cities oppose, counties support.

3. SB 101.



4. Fasano v. Board of County Commissioners—Quasi-judicial decisions and comprehensive plan supremacy for counties.

G. The System Completed (1974–1979)

1. Baker v. Milwaukie (1974)—Comprehensive plan supremacy for cities.

2. The Statewide Planning Goals—1974–1975.

3. “Coordination” and acknowledgment of plans (1976–1986).

4. The wave of initiatives (1976, 1978, and 1982).

5. The Land Use Board of Appeals (1979).

III. CRISES AND CONFLICTS (1979–2011)

A. The Effect of a Statewide Planning System

1. Lobbyists and pressure groups.

2. 1000 Friends and Oregonians in Action.

3. Bare-knuckles fighting—vetoes, administrative rules, and politics.

B. Life After Nirvana

1. Acknowledgments complete in 1986.

2. Post-acknowledgment amendments and periodic review.

3. The continuing problem of funding planning.

4. The continuing issues over rural land use and regulation.

C. The Rajneeshpuram Controversy

D. Metro and Regional Planning in the Portland Area

1. Functional plans and the regional urban growth boundary.

2. The road to Damascus.



3. Urban and rural reserves.

E. Particular Planning Controversies

1. The Columbia River Gorge Commission (1986).

2. Statewide minimum lot sizes for farm and forest lands—Tradeoff for additional dwellings.

3. Destination resorts (1993–) and the Metolius controversy (2009).

4. Regional problem solving (1995–).

5. The failure of periodic review.

6. Payment for regulation—Measures 7 (2000), 37 (2004), and 49 (2007).

7. The “Big Look” Task Force (2005–2007).

IV. CONCLUSION—HOW’S THAT PLANNING THINGIE WORKING FOR YOU, OREGON?





Chapter 7

Property Line Disputes: Practical Adviceisa anne taylor

Jaques Sharp Sherrerd FitzSimons & OstryeHood River, Oregon

Contents

Practical Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

Answer the Phone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

Meet with the Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–1

Gather Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2

Identify Routes to Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2

Document Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–2

“Boundary by Agreement” vs. “Property Line Adjustment” . . . . . . . . . . . . . . . . . . . . . . . 7–3

Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7–6

Chapter 7—Property Line Disputes: Practical Advice



Real Estate and Land Use Fall Forum: Residential Real Estate and Other Timely Topics 7–1Property Line Disputes: Practical Approaches [email protected] 1

Some advice about serving the client with a property line dispute or encroachment.

Isa Anne Silver Columbia River Gorge [email protected]

Practical Approach

• Human nature + property law = “extraordinary amount of litigation” • This presentation designed for inexperienced, mostly rural perspective • OSB CLE “Real Estate Disputes” Chapter 9 informative, aged, litigation-oriented • Finding resolution is more art, formalizing resolution more science

Answer the Phone

• Most common fact pattern: active dispute with neighbor about a line, or prospective purchase survey reveals encroachment

• Protect client, protect your self Identify deadlines and necessary documents

− adverse possession, closing, contingencies, maps, deeds, photos Control expectations for cost and outcome

− $10,000-15,000 to litigate

Meet with the Client

• Prepare with light legal research to identify relevant facts • Remember why they called you in the first place • Give fair warning: only two possible results One, spend lots of money to keep what you thought you already bought, or Two, end lots of money to lose what you thought you bought

− Third option? Make an agreement and pay minimum necessary to legally implement the agreement

• Identify client’s goals, resources, relationships, attitude, and style • Create a working map • Document everything in engagement letter, require retainer



Gather Facts

• Resources: realtors, planners, deeds, surveys, clients, neighbors, GIS, Google Earth

Identify Routes to Remedies

• Accept for now • Litigate

• Adverse possession codified at ORS 105.620 (1989) • See CLE for other judicial remedies • $$$

• Negotiate • Mediate Easement for encroachment? “Boundary by agreement” a.k.a. “boundary by acquiescence” a.k.a “boundary by

practical location” • CLE may be misleading/out of date when it implies mere deed transfer

sufficient • Case law • Consider legal lot status, title insurance, mortgagees

Document Resolution

• Deeds: ORS Ch. 93 • Easements: ORS Ch. 93, OSB CLE, local recorder



“Boundary By Agreement” vs. “Property Line Adjustment”

Client presents these facts:

Friendly rural neighbors discover by survey that established fence between their 10-acre parcels is slightly diagonal to surveyed property line, such that each is in possession of a pie slice of each other’s deeded property. Surveyor suggests that they simply agree to change the boundary to follow the fence. All they need to do is exchange quit claim deeds for the pie slices. Property owner asks you to prepare the deeds.

You think:

Wait a minute. Is it legal to change legal boundaries by deeds alone? You consult ORS 92.010, and it says:

“Lawfully established unit of land” [i.e. “legal lot”] means: (A) A lot or parcel created pursuant to ORS 92.010 to 92.192; or (B) Another unit of land created:

(i) In compliance with all applicable planning, zoning and subdivision or partition ordinances and regulations; or (ii) By deed or land sales contract, if there were no applicable planning, zoning or subdivision or partition ordinances or regulations.

If neighbors move boundaries of lot/parcel by deed is it still “legally established?” Maybe not. Does it matter?



You ask the RELU list serve:

Some surveyors have suggested that where adjacent rural property owners mutually agree to relocate their boundary line, to the location of a long-standing fence for example, they can do so by a quit claim deed without using a county property line adjustment process. Apparently, there is a range of opinions amongst county surveyors on this issue, and I agree with only some of them. Do you have an opinion or considerations to share?

The learned and generous list serve lawyers respond:

Check the “legal lot of record” requirement [i.e. land use ordinances that require proving that lot is legal parcel before accepting development application]. That’s usually where you get caught. It’s illegal to convey a lot that hasn’t been blessed by the local jurisdiction.

. . . See ORS 92.010, et seq., as they describe a “lawfully established unit of land.” I’ve had this discussion with surveyors too. I think they’re practicing law without a license. Any reconfiguration of a lot or parcel that moves the property lines themselves should be approved by the county. Servitudes slide under the radar, though. Any chance you can make the change by easement?

ED, Bend

You need to check the local jurisdictions' code. In all the BLAs I have worked on, a PLA approval is required.

DC, Beaverton

I agree that you need to check with the local authority. However, I have done 2 BLAs that did not require local approval. So in my experience the answer varies.

KR, Portland



I think it depends on the circumstances. . . . I think a property line adjustment is the only possible method of changing a boundary which is certain. . . . I think a boundary line agreement may, without benefit of a land use approval, be entirely appropriate. I view it as erasing uncertainty as to the location of a boundary line . . . if the outcome is critical and there is doubt as to what the codes permit, talk to the local planners first.

CM, Newport

If the parties agree that there was an acquisition by adverse possession before a county regulation required county approval, then it might fly. But, I would ask whether a title company would insure it. Otherwise, you need to follow procedures.

ET, Lake Oswego

Ask your local title company if they would insure title without going through the LLA process – I doubt it.

EC, Portland

Do you have permission from the mortgagee? Have fun obtaining that.

GS, Hood River



Conclusions

• Like with legal personal names, property boundaries

evolve over time. • Like divorces, property line disputes can reveal the worst

in people. Unchecked, disputes can be expensive to litigate and ultimately unproductive.

~~~

• You have the opportunity (obligation?) to help client find

most efficient solution. What does client really need?

• Whether the parties locate the boundary by agreement, or it is determined after a judicial action, must process in accordance with local property line adjustment process (including application fee).





Chapter 8

Monetary Exactions in Oregon Post-Koontz v. St. Johns River Water Management District

jeffrey G. condit

Miller Nash LLPPortland, Oregon

Contents

I. Introduction and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1

II. Nollan and Dolan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1A. The Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1B. The Reasoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1

III. Development of Supreme Court Case Law Relating to Non–Real Property Exactions . . . . 8–1A. Ehrlich . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–1B. Del Monte Dunes and Lingle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2C. Eastern Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2

IV. Oregon Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2A. Clark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2B. Rogers Machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–2

V. Koontz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–3A. The Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–3B. The Regulatory Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–3C. The Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–3D. The District Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–3E. The Lower Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–4F. The Supreme Court’s Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–4G. The Reasoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–4

VI. Exactions Post-Koontz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–6A. Real Property Exactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–6B. Discretionary Conditions Requiring Payment or Expenditure of Money . . . . . . . . 8–6C. Systems Development Charges/Impact Fees . . . . . . . . . . . . . . . . . . . . . . . . 8–6D. Application Fees, Building Permit Fees, Utility Charges, Property Taxes . . . . . . . . 8–6E. The Elevated Importance of ORS 197.796 . . . . . . . . . . . . . . . . . . . . . . . . . . 8–6

Chapter 8—Monetary Exactions in Oregon Post-Koontz v. St. Johns River Water Management District




I. INTRODUCTION AND HISTORY

The Supreme Court decisions in Nollan v. California Coastal Commission1 and Dolan v. City of Tigard2 determined that the Fifth Amendment to the United States Constitution (the “Takings Clause”) requires heightened scrutiny for land use permit decisions that condition approval on an exaction of property. From the day Dolan was handed down in 1994, a hotly contested issue has been whether the Nollan/Dolan analysis applied to exactions other than conveyance of real property, e.g., fees or construction requirements. At first, it seemed that the answer was “yes,” then it seemed more and more likely that the answer was “no.” On June 25, 2013, the United States Supreme Court, in a 5-to-4 decision, finally decided the question in the affirmative in the case of Koontz v. St. John’s River Water Management District.3

II. NOLLAN AND DOLAN

A. The Test

Nollan/Dolan established the following test for determining whether an exaction complies with the Takings Clause.

1. There must be a nexus between the land use approval sought by the applicant and the purpose behind the underlying permit criteria;

2. The condition must relate to the burdens created by the development;

3. The condition must be “roughly proportional” to the burdens created by the development based on an individualized determination, but no precise mathematical formula is required; and

4. Local government has the burden of demonstrating that the test has been met and must make an “individualized determination,” i.e., based upon the impacts of the particular application before the local government.

B. The Reasoning

The Supreme Court’s justification for the heightened scrutiny adopted in Nollan and Dolan was essentially twofold. First, the Court noted in both cases that exactions of the easements authorized physical invasions that would otherwise be “per se” takings, or takings that the government would otherwise have to obtain through exercise of the power of eminent domain. Nollan, 483 US at 831–34; Dolan, 512 US 383–84. The Court therefore held that an exaction of property as a condition of approval would be a taking, unless the condition serves the same legitimate police-power purpose as the underlying regulation of the property. Nollan, 483 US at 836–37. Second, Dolan and Nollan relied on case law establishing the doctrine of unconstitutional conditions, which requires a reasonable relationship between the government benefit being granted and the condition being imposed. Nollan, 483 US 838–39 (citing to numerous cases); Dolan, 512 US at 385–86. The Court expressed concern that without such a constitutional check, government might use its ad-hoc permitting power for an “out-and-out plan of extortion.” Nollan, 483 US at 837 (internal quotation omitted).

III. DEVELOPMENT OF SUPREME COURT CASE LAW RELATING TO NON–REAL PROPERTY EXACTIONS

A. Ehrlich

The Nollan/Dolan analysis raised the question as to whether the Court intended to limit the heightened Nollan/Dolan scrutiny to exactions that would otherwise be physical invasions—e.g., easements, rights-of-way, other real property interests involving access to or use of the property by the public—or whether the Court intended to redefine the “reasonable relationship” requirement

1 483 US 825, 107 S Ct 3141, 97 L Ed2d 677 (1987).2 512 US 374, 114 S Ct 2309, 129 L Ed2d 304 (1994).3 ___ US ___, 133 S Ct 2586, 186 L.Ed.2d 697 (2013).



underpinning the doctrine of unconstitutional conditions along Nollan/Dolan lines. The confusion was heightened because, on the same day as Dolan was decided, the Supreme Court remanded Ehrlich v. City of Culver City,4 which involved the exaction of fees, for reconsideration in light of Dolan.

B. Del Monte Dunes and Lingle

In City of Monterey v. Del Monte Dunes, Ltd.,5 the Supreme Court concluded that Nollan/Dolan did not apply to denials of development that did not involve an exaction of property. In Lingle v. Chevron U.S.A. Inc.,6 the Court relied on Del Monte Dunes to hold that the Nollan/Dolan test only applies in the “special context of exactions.”

C. Eastern Enterprises

Eastern Enterprises v. Apfel7 wasn’t a land use case but involved a challenge to a federal statute that required coal mining companies to contribute to a fund for health benefits for miners who had left the industry long before. The plaintiff contended that the statute violated due process and was an unconstitutional taking, citing Nollan/Dolan. This was a double-plurality decision with Justice Kennedy in the center. In a concurring opinion, he agreed with the four more conservative justices that the statute violated the due process clause but agreed with the four more liberal justices that is was not a taking under the Takings Clause. His interpretation was that the Takings Clause applies only to takings of a specific property interest and that demand for payment of a fee “does not operate upon or alter an identified property interest.” Both he and Justice Breyer, writing for the liberal wing, noted, however, that money can be “property” subject to the Takings Clause under certain circumstances. See, e.g., Webb’s Fabulous Pharmacies, Inc. v. Beckwith8 (involving the right to interest on identified funds owned by the plaintiff), and Brown v. Legal Found.9 (interest earned on client funds deposited in IOLTA (interest on lawyers’ trust accounts)).

Most land use lawyers (including me) thought that Eastern Enterprises sent a pretty clear signal that Nollan/Dolan did not apply to monetary exactions. How wrong we were.

IV. OREGON CASE LAW

A. Clark

In Clark v. City of Albany,10 the Court of Appeals concluded that monetary exactions and requirements to construct public improvements on public property were subject to Nollan/Dolan’s heightened scrutiny.

B. Rogers Machinery

In Rogers Mach., Inc. v. Wash. County11 (“Rogers Machinery”), the Court of Appeals concluded that Nollan/Dolan did not apply to Washington County’s traffic-impact fee imposed pursuant to a legislatively adopted ordinance. The court noted a substantial split of opinion about whether Dolan’s heightened scrutiny applies to nonpossessory exactions such as impact fees. The court stated, however, that “[w]ith near uniformity, lower courts applying Dolan to monetary exactions have done so only when the exaction has been imposed through an adjudicatory process; they have expressly declined

4 512 US 1231, 114 S Ct 2731, 129 L Ed2d 854 (1994).5 526 US 687, 119 S Ct 1624, 143 L Ed2d 882 (1999).6 544 US 528, 125 S Ct 2074, 161 L Ed2d 876 (2005).7 524 US 498, 118 S Ct 2131, 141 L Ed 2d 451 (1998).8 449 US 155, 101 S Ct 446, 66 L Ed2d 358 (1980).9 538 US 216, 123 S Ct 1406, 155 L Ed2d 376 (2003).10 137 Or App 293, 904 P2d 185 (1995).11 181 Or App 369, 45 P3d 966 (2002).



to use Dolan’s heightened scrutiny in testing development or impact fees imposed on broad classes of property pursuant to legislatively adopted fee schemes.” The court found that an impact fee required by ordinance “that leaves no meaningful discretion either in the imposition or in the calculation of the fee” is not subject to the Dolan test, because such a fee did not implicate the concern in Nollan/Dolan about governmental bodies utilizing the discretionary permitting authority to extort unreasonable ad hoc concessions. The court reached the same conclusion about system development charges in Homebuilders Ass’n of Metro. Portland v. Tualatin Hills Park & Rec. Dist.12 (system development charge requiring park fee calculated by legislatively adopted formula is not subject to Dolan).

The Rogers Machinery court reserved its judgment on whether an ad hoc charge could be subject to Nollan/Dolan but noted that its conclusion in Clark that such charges were subject to Nollan/Dolan might have to be reexamined in light of Del Monte Dunes.

V. KOONTZ

A. The Facts

In 1972, petitioner Coy Koontz purchased an undeveloped 14.9-acre tract of land east of Orlando. The property was substantially constrained by a drainage ditch, a 100-foot wide area kept clear for high voltage power lines, major highways, and other construction on nearby parcels, which effectively isolated the northern section of petitioner’s property from any other undeveloped land. The northern portion of the property was mostly well-drained and suitable for development. The record was uncontested that the entire property was significantly degraded from a natural resources/wetland habitat standpoint by this development.

B. The Regulatory Scheme

The Water Resources Act divides the state into five water management districts and authorized each district to regulate “construction that connects to, draws water from, drains water into, or is placed in or across the waters in the state.” Under the Act, a landowner wishing to undertake such construction must obtain a Management and Storage of Surface Water (MSSW) permit from the district, which may impose “such reasonable conditions” on the permit as are “necessary to assure” that construction will “not be harmful to the water resources of the district.” In addition, the State Wetlands Protection Act makes it illegal for anyone to “dredge or fill in, on, or over surface waters” without a Wetlands Resource Management (WRM) permit. Under this act, permit applicants are required to provide “reasonable assurance” that proposed construction on wetlands is “not contrary to the public interest,” as defined by an enumerated list of criteria. The act requires that permit applicants wishing to build on wetlands offset the resulting environmental damage by creating, enhancing, or preserving wetlands elsewhere.

C. The Application

Petitioner decided to develop the 3.7-acre northern section of his property and applied to the St. Johns River Water Management District for MSSW and WRM permits. Petitioner proposed to raise the elevation of the northernmost section of his land to make it suitable for a building, grade the land from the southern edge of the building site down to the elevation of the high-voltage electrical lines, and install a dry-bed pond for retaining and gradually releasing stormwater runoff from the building and its parking lot. To mitigate the environmental effects of his proposal, petitioner offered to foreclose any possible future development of the approximately 11-acre southern section of his land by deeding to the district a conservation easement on that portion of his property.

D. The District Decision

The district did not find the proposed mitigation sufficient and informed petitioner that it would approve construction only if he agreed to one of two concessions. First, the district proposed

12 185 Or App 729, 737, 62 P3d 404 (2003).



that petitioner reduce the size of his development to 1 acre and deed to the district a conservation easement on the remaining 13.9 acres. To reduce the development area, the district suggested that petitioner could eliminate the dry-bed pond from his proposal and instead install a more costly subsurface stormwater management system beneath the building site. The district also suggested that petitioner install retaining walls rather than gradually sloping the land from the building site down to the elevation of the rest of his property to the south.

In the alternative, the district told petitioner that he could proceed with the development as proposed, building on 3.7 acres and deeding a conservation easement to the government on the remainder of the property if he also agreed to hire contractors to make improvements to district-owned land several miles away. Specifically, petitioner could pay to replace culverts on one parcel or fill in ditches on another. Either of those projects would have enhanced approximately 50 acres of district-owned wetlands.

E. The Lower Courts

Petitioner filed suit in state court. One of the claims was under a Florida statute that allows owners to recover “monetary damages” if a state agency’s action is “an unreasonable exercise of the state’s police power constituting a taking without just compensation.”

The trial court found the district’s actions unlawful because they failed the requirements of Nollan/Dolan. The District Court of Appeals affirmed, but the state Supreme Court reversed on two grounds. First, it held that petitioner’s claim failed because, unlike in Nollan or Dolan, the district denied the application. Second, the state Supreme Court held that a demand for money cannot give rise to a claim under Nollan/Dolan.

F. The Supreme Court’s Decision

If you represent government, you know it’s going to be a bad day when an opinion starts out with: “Our decisions in Nollan v. California Coastal Comm’n, 483 U. S. 825 (1987), and Dolan v. City of Tigard, 512 U. S. 374 (1994), provide important protection against the misuse of the power of land-use regulation.”

The Court reversed and remanded the Florida Supreme Court’s decision, holding:

1. A government condition requiring the dedication of property must satisfy Nollan/Dolan scrutiny even when the government denies the application based upon an applicant’s refusal to agree to such a condition; and

2. The government’s demand for property from a land use permit applicant must satisfy the Nollan/Dolan requirements even when its demand is for money.

Justice Alito wrote the majority opinion, joined by Scalia, Thomas, Roberts, and Kennedy. Justice Kagan wrote the dissenting opinion, joined by Ginsberg, Sotomayor, and Breyer. Interestingly, the dissent agreed with the majority with regard to the first ruling—that Nollan/Dolan applied to a permit denial when the applicant refused to comply with a condition that violated Nollan/Dolan. The dissent sharply disagreed with the second holding.

G. The Reasoning

The Court relied on its “unconstitutional conditions” case law for its conclusion that a permit denial for refusal to agree to a condition subject to Nollan/Dolan is subject to review under those cases to determine whether the condition is constitutional. These cases basically stand for the proposition



that the government “may not deny a benefit to a person on a basis that infringes his constitutionally protected interests.”13

Both the majority and the dissent, however, noted a couple of fine but important distinctions: A denial based upon a refusal to accept a condition does not violate Nollan/Dolan and therefore does not implicate the unconstitutional conditions doctrine if at least one of the proffered alternative conditions complies with Nollan/Dolan (in Koontz, the lower court had concluded that neither alternative offered by the water district complied with Nollan/Dolan). Second, the remedy for a denial is invalidation of the condition or remand of the denial, not just compensation under the Takings Clause, because a denial does not actually “take” any property. The Koontz Court noted that the petitioner did have a potential remedy under Florida law (as noted above) and so remanded the decision to the Florida Supreme Court. The dissent agreed that it was a matter of state law that should be remanded but openly speculated as to whether the petitioner was entitled to any remedy.

In order to reach its second conclusion—that Nollan/Dolan applies to monetary exactions—the majority had to distinguish Eastern Enterprises without overruling it (and thereby risking Justice Kennedy’s crucial fifth vote). The Court concluded that a monetary exaction imposed as condition of a land use approval regarding a particular property does “operate upon an identified property interest” within the meaning of Eastern Enterprises:

Unlike the financial obligation in Eastern Enterprises, the demand for money at issue here did “operate upon . . . an identified property interest” by directing the owner of a particular piece of property to make a monetary payment. Id. at 540 (opinion of KENNEDY, J.). In this case, unlike Eastern Enterprises, the monetary obligation burdened petitioner’s ownership of a specific parcel of land. In that sense, this case bears resemblance to our cases holding that the government must pay just compensation when it takes a lien—a right to receive money that is secured by a particular piece of property. [Citations omitted.] The fulcrum this case turns on is the direct link between the government’s demand and a specific parcel of real property. [Footnote omitted.] Because of that direct link, this case implicates the central concern of Nollan and Dolan: the risk that the government may use its substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, thereby diminishing without justification the value of the property.

This holding produced an interesting—and, unfortunately, probably prophetic—colloquy between the majority and the dissent over the breadth of the decision: Does it extend to any monetary exaction imposed on use of property, such as taxes, permit fees, sewer and water fees, and other charges? In response to the dissent’s argument that there was no principled way to distinguish taxes and fees from exactions under the majority decision, the majority sweepingly declared: “It is beyond dispute that ‘[t]axes and user fees . . . are not “takings.”’ [Citations omitted.] This case therefore does not affect the ability of governments to impose property taxes, user fees, and similar laws and regulations that may impose financial burdens on property owners.”

13 Citing to Perry v. Sindermann, 408 US 593, 597 (1972) (college cannot deny contract renewal because professor is outspoken critic of the administration); Frost & Frost Trucking Co. v. Railroad Comm’n of Cal., 271 US 583, 592–593 (1926) (invalidating regulation that required the petitioner to give up a constitutional right “as a condition precedent to the enjoyment of a privilege”); Southern Pacific Co. v. Denton, 146 US 202, 207 (1892) (invalidating statute “requiring the corporation, as a condition precedent to obtaining a permit to do business within the State, to surrender a right and privilege secured to it by the Constitution”). See also Flower Mound, 135 S.W.3d, at 639 (“The government cannot sidestep constitutional protections merely by rephrasing its decision from ‘only if’ to ‘not unless’”).



As the dissent noted, however, the majority opinion does not include “even a word about how to make the distinction that will now determine whether a given fee is subject to heightened scrutiny.” Hence the dilemma for practitioners as we move into the post-Koontz world of land use regulation.

VI. EXACTIONS POST-KOONTZ

A. Real Property Exactions

Exactions requiring conveyance of interest in real property (fee title, easements, rights-of-way) continue to be subject to Nollan/Dolan. One argument I have gotten from public bodies in the past is the cost of construction of a public improvement on the conveyed property should not be included as part of the “rough proportionality” analysis. Koontz makes it clear that it is the entire exaction that must be roughly proportional to the impacts of the development.

B. Discretionary Conditions Requiring Payment or Expenditure of Money

Discretionary conditions imposed on a case-by-case basis that require construction of a public improvement or direct payment of money are now subject to Nollan/Dolan scrutiny.

An interesting question is whether Nollan/Dolan applies to conditions requiring a more expensive method of construction on private property.

C. Systems Development Charges/Impact Fees

SDCs and Impact fees fall into the undefined grey area between a monetary exaction subject to Nollan/Dolan and a tax or a user fee not so subject. I believe there is a good argument that they are more akin to an exempt user fee than an exaction, for the following reasons.

1. Such fees are imposed legislatively and are nondiscretionary. Therefore, as the Rogers Machinery court noted, imposition of such fees does not provide the same opportunity for “out and out” extortion as a discretionary fee or condition. The concept of Nollan/Dolan as a curb on the abuse of such discretion is the primary consideration in Koontz, as it was in Nollan/Dolan.

2. Such fees are frequently imposed not as conditions of a land use application but as building permit, occupancy, or connection requirements. This may or may not be a close enough relationship to the property to “operate on an identified property interest.”

3. As noted in Rogers Machinery, the circuits that had extended Nollan/Dolan to monetary exactions prior to Koontz have done so only where the exaction was imposed through an adjudicatory process.

D. Application Fees, Building Permit Fees, Utility Charges, Property Taxes

Probably not subject to Nollan/Dolan except perhaps for user fees that bear no relation to the cost of the service.

E. The Elevated Importance of ORS 197.796

Now that many more conditions of approval will be subject to Nollan/Dolan, it is important to remember this statute. ORS 197.796 allows property owners to accept a condition of approval and still file an action for damages challenging the condition following approval within 180 days of the date of the decision but only if the applicant raises an objection to the condition during the local land use proceedings with sufficient specificity to allow the government to respond. The statute also requires the government to bear the burden of proof to demonstrate that the condition is compliant with the Takings Clause.





Chapter 9

LUBA: Preparing the Record and Motion Practicetod a. BasshaM

Land Use Board of AppealsSalem, Oregon

laurie e. craGhead

Deschutes County Legal CounselBend, Oregon

alan M. soreM

Saalfeld Griggs PCSalem, Oregon

Contents

I. Initial Application—Applicant Attorney’s Role in Confirming Record Contains Evidence Satisfying Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–1A. General Role of the Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–1B. What Is the Record? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–1C. Completeness Review: The First Local Government Analysis of the Record . . . . . . 9–1D. Practical Discussion—File Management . . . . . . . . . . . . . . . . . . . . . . . . . . 9–2

II. Local Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–2A. Attorney’s Obligation to Raise Assignments of Error and Prevent Waiver Claims . . . . 9–2B. Evidence and Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–2

III. Local Government Preparation of Record. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–4A. Record Submittal Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–4B. What Is the Record? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–5C. Record Objections Deadline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–5D. Basis for Objections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–5E. Record Contents Inadequate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–6F. Record Format Inadequate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–6G. Record Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–7

IV. LUBA Motions and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–8A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–8B. Summary of LUBA Appeal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–8C. Technical Violation Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–9D. What Stops the Clock?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–9E. General Motion Practice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–9F. Motion to Dismiss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–10G. Settling the Record. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–10H. Motion to Extend Deadlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–10I. Motion for Stay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–11J. Motion to Take Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–11K. Motion for Reply Briefs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–11L. Motion for Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–12

V. Costs and Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9–12

Appendix—2013 Rule Amendments Draft 3, August 28 . . . . . . . . . . . . . . . . . . . . . . . . 9–13

Chapter 9—LUBA: Preparing the Record and Motion Practice




I. INITIAL APPLICATION—APPLICANT ATTORNEY’S ROLE IN CONFIRMING RECORD CONTAINS EVIDENCE SATISFYING CRITERIA

A. General Role of the Attorney

1. Identify the applicable criteria (code, state laws and administrative rules, comprehensive plan goals and policies, statewide planning goals).

2. Identify items necessary for a complete application.

3. Review the application team’s evidence to ensure the materials to be submitted satisfy the applicable criteria. An applicant (or proponent) has the burden of proving, with a preponderance of evidence, that the applicable approval standards are met. Fasano v. Board of County Comm’rs, 264 Or 574, 586, 507 P2d 23 (1973), overruled on other grounds, 288 Or 585 (1980).

B. What Is the Record?

(See part III., below.)

1. ORS 661-010-0025(1)(b) requires that the record that a local government transmits to LUBA must include “[a]ll written testimony and all exhibits, maps, documents or other written materials specifically incorporated into the record or placed before, and not rejected by, the final decision maker, during the course of the proceedings before the final decision maker.”

2. Check local procedural rules as well, as they may supplement the definition of the record. Montgomery v. City of Dunes City, 59 Or LUBA 519 (2009).

C. Completeness Review: The First Local Government Analysis of the Record

1. A county or city must inform an applicant for a permit, zone change, or limited land use decision in writing within 30 days of application submittal of exactly what information is missing. ORS 215.427(2), 227.178(2).

2. If a local government requests more information, the application is deemed complete on the date that the applicant:

a. Provides all of the information,

b. Provides some of the information and informs the jurisdiction that no more will be forthcoming, or

c. Informs the jurisdiction that no information will be provided. ORS 215.427(2), 227.178(2).

3. See Caster v. City of Silverton, LUBA No. 2007-033, 54 Or LUBA 441, 450 (2007) (discussing the distinction between standard for being deemed complete and proving all criteria by a preponderance of evidence).

4. The application is void on the 181st day after it is filed if the applicant fails to respond. ORS 215.427(4), 227.178(4).

5. ORS 215.427(5), 227.178—unless the local government and applicant are involved in mediation, the decision must occur within 120/150 days of being deemed complete. Applicant may grant extensions up to 215 days. If no approval is granted by 335/365 days and the parties are not in mediation, the applicant waives his or her right to request a mandamus.

6. A similar process for determining completeness of an expedited land use division application is set forth in ORS 197.365. However, deadline for completeness review under ORS 197.365(1)(a) is 21 days.



D. Practical Discussion—File Management

1. What are the local government’s rules for submitting evidence and arguments into the record (codified rules and standard practices)? Are electronic copies accepted?

2. Record logs: Local planning departments often keep a record log inventorying the submissions into the local record. Attorneys who represent parties that might appeal should keep an independent record log of all applicant, opposition, and government submissions into the record.

3. Practitioners should consider submitting formal record requests for all unprotected communications between the local government staff and officials if there is a concern that some communications will not be voluntarily included into the record. Communications between constituents and elected officials often raise procedural issues.

II. LOCAL APPEAL

A. Attorney’s Obligation to Raise Assignments of Error and Prevent Waiver Claims

1. Applicable statute—ORS 197.763, Conduct of local quasi-judicial land use hearings; notice requirements; hearing procedures.

The following procedures shall govern the conduct of quasi-judicial land use hearings conducted before a local governing body, planning commission, hearings body or hearings officer on application for a land use decision and shall be incorporated into the comprehensive plan and land use regulations:

(1) An issue which may be the basis for an appeal to the Land Use Board of Appeals shall be raised not later than the close of the record at or following the final evidentiary hearing on the proposal before the local government. Such issues shall be raised and accompanied by statements or evidence sufficient to afford the governing body, planning commission, hearings body or hearings officer, and the parties an adequate opportunity to respond to each issue.

2. Miles v. City of Florence, 190 Or App 500, 79 P3d 382 (2003), holds that a disputed issue must be raised on appeal before the final local decision maker in order for that issue to be preserved for appeal to LUBA.

3. Olstedt v. Clatsop County, 62 Or LUBA 131, 139–40 (2012), holds that when one party obtains a desired result from a hearings officer, it has no reason to appeal locally, and in such situations it is not required to raise an issue on which it did not prevail during the local appeal of the opposing party in order to preserve the issue for appeal to LUBA.

4. Southeast Neighbors Neighborhood Association v. City of Eugene, ___ Or LUBA ___ (LUBA No. 2013-004, July 12, 2013), holds that the prevailing party at the lowest level of local approval who cross-appeals to a higher local decision maker (e.g., a planning commission) does have an obligation at least to alert the higher-level decision maker to an issue where it did not prevail at the first level, in order to preserve the issue for appeal to LUBA.

B. Evidence and Argument

1. Applicable statute—ORS 197.763.

(4) (a) All documents or evidence relied upon by the applicant shall be submitted to the local government and be made available to the public.

(b) Any staff report used at the hearing shall be available at least seven days prior to the hearing. If additional documents or evidence are provided by any party, the local government may allow a continuance or leave the record open to allow the parties a reasonable opportunity to respond. Any continuance or extension of the record requested



by an applicant shall result in a corresponding extension of the time limitations of ORS 215.427 or 227.178 and ORS 215.429 or 227.179.

(6) (a) Prior to the conclusion of the initial evidentiary hearing, any participant may request an opportunity to present additional evidence, arguments or testimony regarding the application. The local hearings authority shall grant such request by continuing the public hearing pursuant to paragraph (b) of this subsection or leaving the record open for additional written evidence, arguments or testimony pursuant to paragraph (c) of this subsection.

(b) If the hearings authority grants a continuance, the hearing shall be continued to a date, time and place certain at least seven days from the date of the initial evidentiary hearing. An opportunity shall be provided at the continued hearing for persons to present and rebut new evidence, arguments or testimony. If new written evidence is submitted at the continued hearing, any person may request, prior to the conclusion of the continued hearing, that the record be left open for at least seven days to submit additional written evidence, arguments or testimony for the purpose of responding to the new written evidence.

(c) If the hearings authority leaves the record open for additional written evidence, arguments or testimony, the record shall be left open for at least seven days. Any participant may file a written request with the local government for an opportunity to respond to new evidence submitted during the period the record was left open. If such a request is filed, the hearings authority shall reopen the record pursuant to subsection (7) of this section.

(d) A continuance or extension granted pursuant to this section shall be subject to the limitations of ORS 215.427 or 227.178 and ORS 215.429 or 227.179, unless the continuance or extension is requested or agreed to by the applicant.

(e) Unless waived by the applicant, the local government shall allow the applicant at least seven days after the record is closed to all other parties to submit final written arguments in support of the application. The applicant’s final submittal shall be considered part of the record, but shall not include any new evidence. This seven-day period shall not be subject to the limitations of ORS 215.427 or 227.178 and ORS 215.429 or 227.179.

(7) When a local governing body, planning commission, hearings body or hearings officer reopens a record to admit new evidence, arguments or testimony, any person may raise new issues which relate to the new evidence, arguments, testimony or criteria for decision-making which apply to the matter at issue.

(9) For purposes of this section:

(a) “Argument” means assertions and analysis regarding the satisfaction or violation of legal standards or policy believed relevant by the proponent to a decision. “Argument” does not include facts.

(b) “Evidence” means facts, documents, data or other information offered to demonstrate compliance or noncompliance with the standards believed by the proponent to be relevant to the decision.

2. Ploeg v. Tillamook County, 50 Or LUBA 608, 617 (2005), holds that a local government errs in accepting new evidence into the record after the close of the public hearing and relying on that evidence in its findings, without giving petitioners and others an opportunity to respond to that new evidence.



3. Setniker v. Polk County, 63 Or LUBA 38 (2011), holds that an applicant’s final written argument rebuts evidence submitted by opponents evidence by discussing information about the local government’s evidence already in the record, that rebuttal does not introduce “new evidence” into the record contrary to ORS 197.763(6)(e).

4. Walker v. City of Beaverton, 18 Or LUBA 712 (1990), holds that petitioners must object to procedural errors, if possible, and show their substantial rights were violated. See also ORS 197.835(7)(a)(B). The fundamental question is would petitioner’s participation have been substantially different or more complete but for the procedural error?

III. LOCAL GOVERNMENT PREPARATION OF RECORD

A. Record Submittal Deadline

A land use permit/decision applicant or an opponent of a land use application has 21 days from the date a local government’s1 land use decision becomes final to file a notice of intent to appeal (“NITA”) with the Land Use Board of Appeals (“LUBA”). ORS 197.8300(9), OAR 661-010-0015(1). If the petitioner sends the NITA to LUBA by registered or certified mail, the NITA is deemed filed on the date of mailing. OAR 661-010-0015(2). Otherwise, the filing date is the date LUBA receives the NITA. Id. The petitioner must also serve the governing body with the NITA. OAR 661-010-0025(2).

The date of the filing of the NITA is important because all subsequent deadlines are triggered by that filing date, including the deadline for the local government to submit the record of the local government land use proceedings. Once a petitioner files the NITA, LUBA will send a notice to the local government that the local government has 21 days from the NITA filing date in which to submit an original or certified copy of the record of all the proceedings at the local government related to the application. OAR 661-010-0021(6), ORS 197.830(10)(a). Only the local government can submit the record. Jackman v. City of Tillamook, 28 Or LUBA 749 (1994).

Twenty-one days, however, is an extremely short time for submitting most records if they are more than a couple of reams’ worth of documents, i.e., more than 500 pages. Therefore, upon receipt of a NITA, it is not uncommon for a local government to file with LUBA a motion for an extension of time (“MOET”) for a six-week extension of time to submit the record.

Although neither the statutes nor the state administrative rules provide for any penalty for missing that 21-day deadline, should a party object to the extension of time, LUBA will require that the objection be in writing. Latham v. Deschutes County, LUBA No. 2011-078, WL 4686423 (September 9, 2011). The objecting party should state what harm that party will suffer if the submittal of the record is delayed. Catholic Diocese of Baker v. Crook County, 59 Or LUBA 530, 531 (2009). If the objecting party cannot demonstrate a significant harm, LUBA will grant the extension over the objection of that party.

Likewise, LUBA will also require details of why the local government believes it needs more time to file the record. Kulin v. Deschutes County, LUBA No. 2008-099, 2008 WL 3249723 (June 30, 2008). Kuhn v. Deschutes County, LUBA No. 2008-080, 2008 WL 3249712 (July 3, 2008).2 Those details should include such information as to the number of pages and the number and availability of staff to prepare the record. Id. In the Kulin case, however, LUBA recognized that a party had no remedy at LUBA for a delayed filing of the record and that filing a circuit court proceeding to attempt to compel the submission of the record would take weeks anyway. Therefore, LUBA granted the county’s extension request over the objection of the petitioner, although LUBA granted only three weeks when the county requested six. Id.

1 State agency land use proceedings and decisions are also subject to the LUBA rules. For convenience of this presentation, however, except where specifically noted, the use of the term “local government” includes “state agency.”

2 In Kuhn, LUBA indicated that it would grant a six-week extension over a party’s objection.



Per OAR 661-010-0026(6), once the record objections are filed, all other deadlines are suspended until LUBA issues an order settling the record. Although a party may have filed precautionary or formal record objections before the 14-day objection period deadline, a party may not add to those objections after that objection period has passed unless the local government submits a supplemental record. Mintz v. Washington County, 34 Or LUBA 781 (1998). Likewise, once LUBA issues an order settling the record, a local government may not submit a supplemental record without an explanation as to why the additional items could not have been provided in the normal course. Terra v. City of Newport, 36 Or LUBA 754 (1999).

B. What Is the Record?

A local government may want to request an extension for submitting the record because of all of the items required to be in the record. The record is to include the final decision of the local government and “[a]ll written testimony and all exhibits, maps, documents or other written materials specifically incorporated into the record or placed before, and not rejected by, the final decision maker, during the course of the proceedings before the final decision maker.” OAR 661-010-0025(1).

The proceedings prior to those before the final decision may be extensive. Placing all the documents from prior proceedings before the final decision maker, however, aids in reducing the need for parties to submit repetitive evidence. That does not always work, however, and often parties resubmit prior evidence and testimony resulting in the local government having to prepare a large record on appeal to LUBA.

C. Record Objections Deadline

Once the record is submitted to LUBA, the other parties have 14 days in which to file objections to the record. OAR 661-010-0026(2). Before doing that, however, the objecting parties have an obligation to consult with the respondent’s legal counsel regarding any possible objections. OAR 661-010-0026(1). If the party and the local government continue to attempt to resolve the record issues but the objection filing deadline is looming, a party may file a precautionary record objection “to advise LUBA that the objecting party is continuing to work with the governing body’s legal counsel to resolve the objections.” OAR 661-010-0026(2), Home Builders Association v. City of Eugene, 58 Or LUBA 688 (2009), Hoffman v. Deschutes County, 60 Or LUBA 451, 452 (2009) (LUBA commended the parties for the parties working to cooperatively resolve the precautionary record objections.). Although a party may file precautionary record objections, the form for those objections is the same as for formal objections in that the basis for the claim must be specified. Home Builders Association, supra.

D. Basis for Objections

If a party still wants to file a record objection after consulting with the respondent’s legal counsel, OAR 661-010-0026(2) provides four bases for a party’s objection:

(a) The local government included documents in the record that were never actually placed before the decision maker;

(b) The local government failed to include documents in the record that were placed before the decision maker;

(c) The meeting minutes are not accurate;

(d) The record is not in the correct format required by OAR 661-010-0025(4).

The party objecting to the record has the burden of proof in demonstrating that the record is deficient in any of the above ways. Curl v. City of Bend, 56 Or LUBA 794 (2008).

That burden does not include having to prove a lack of an ulterior motive of delaying the briefing schedule per OAR 661-010-0026(6). “It is certainly one of the worst kept secrets at LUBA that filing record objections extends the deadline for briefing.” Roberts v. Clatsop County, 43 Or LUBA 617,



620 (2002). Therefore, even if the party filing the objections has that as an ulterior motive, each case will have to be evaluated as to whether or not that is the sole purpose for the submission of the objections. Id. at 621.

E. Record Contents Inadequate

For bases (a) and (b), documents are placed before the decision maker if they were physically placed before the decision maker, they were constructively submitted to the decision maker through some other means, or local regulations require the documents be given to the decision maker. ONRC v. City of Oregon City, 28 Or LUBA 775, 778 (1994). Whether or not the documents are material to the issues on appeal is irrelevant. Any item placed before the decision maker should be included in the record. Manning v. Marion County, 44 Or LUBA 816, 817 (2003).

Merely placing documents on the local government’s website, referencing document in another document, or merely having the documents in a file somewhere in the government offices, however, does not mean the documents were placed before the final decision maker. The exception would be if the local government specifically expresses its intent for those documents to be part of the record or the staff directs the decision maker to those documents. Graser-Lindsey v. City of Oregon City, 58 Or LUBA 703 (2009). Terrace Lakes Homeowners Assoc. v. City of Salem, 29 Or LUBA 601 (1995).

Additionally, if a document was submitted after the deadline dictated by the decision maker for acceptance of additional written submissions and staff does not place the document before the decision maker, the document will be considered rejected even if the decision maker does not specifically say so. Kane v. City of Beaverton, 49 Or LUBA 712 (2005). Furthermore, just because a party asks that a decision maker review or include a specific document does not make that document part of the record if that party or some other does not actually place the document before the decision maker. McKenzie v. Multnomah County, 30 Or LUBA 461 (1996). Moreover, unless a party can provide evidence other than a belief that certain documents or pages of documents were submitted to the decision maker, if the local government states that the documents or pages were not included, LUBA will accept that statement. Curl v. City of Bend, 55 Or LUBA 719 (2008).

Although LUBA is strict in requiring that all documents placed before the decision maker be included in the record, it is not so strict with inadequacies in meeting minutes that are required per OAR 661-010-0025(1)(c). The objector must explain how inadequate or incorrect meeting minutes are material to the appeal. OAR 661-010-0026(3). With today’s digital recordings of meetings, proving how inadequate meeting minutes are material would seem to be a difficult hurdle in light of the ease with which a party can listen to the audio recordings. This is also true in light of the fact that public meetings law requires a recording or minutes, not both, of public meetings. ORS 192.650(1). Thus, not all local governments will have both.

F. Record Format Inadequate

In regard to the objections based on OAR 661-10-0026(2)(c) and (d), violations of those provisions are technical violations, and an objecting party must demonstrate how that party’s substantial rights are affected before LUBA will delay the appeal and require the local government to correct the violation. Lange-Luttig v. City of Beaverton, 38 Or LUBA 909 (2000), Burness v. Douglas County, 61 Or LUBA 530 (2010). Additionally, LUBA will allow deviations from strict adherence to the record format dictated in OAR 661-010-0025(4) if it will make the record more usable for the parties and to avoid extreme hardship on the local government. Walker v. Deschutes County, 54 Or LUBA 752 (2007), Burness v. Douglas County, 61 Or LUBA 530 (2010).

Although LUBA does not always require strict adherence to the format requirements, LUBA has required fairly strict adherence to some of the formatting requirements. For example, OAR 661-010-0025(4)(a)(A) and (C) require the record to be in a suitable folder or folders with each volume



properly marked as to which case the record belongs to and with the left side securely fastened. LUBA requires that not only LUBA’s copy of the record but also the record copies provided to the other parties adhere to these requirements. Thus, the local government cannot just give a stack of papers to the other parties without them being securely fastened in a binder. Curl v. City of Bend, 56 Or LUBA 794 (2008).

A record must also have a table of contents as required by OAR 661-010-0025(4)(a)(B), even if the record is only two pages.3 In that table of contents, each “item” and each attachment to each item must be separately listed. The attachments, however, do not have to be in the inverse chronological order as required by OAR 661-010-0025(4)(a)(E) for each item. The attachments are to be in the order in which they are attached to the item. Prior to that rule requirement in 2010, LUBA allowed local governments to arrange the record in that fashion anyway because it would make the record more usable to the parties than if the local government strictly adhered to inverse chronological order requirement. Devin Oil Co., Inc. v. Morrow County, 62 Or LUBA 484 (2010).

Although each item and its attachments are to be listed in the table of contents, oversized exhibits such as large maps, media recordings, or difficult-to-duplicate documents are listed at the end of the table of contents. This is a recent rule change. Previously, LUBA would allow listing oversized exhibits at the end of the table of contents or in date order.

Oversized or difficult-to-duplicate documents include large documents and color documents such as photos, charts, or color maps. What is considered large, however, is something over 11 inches by 17 inches. Walker v. Deschutes County, 54 Or LUBA 752 (2007). If there are color documents, LUBA wants at least black and white copies of those color documents submitted with the record that is filed with LUBA and provided to the other parties. Oien v. City of Beaverton, 45 Or LUBA 722 (2003). All other oversized or difficult-to-duplicate items do not have to be submitted until oral argument. OAR 661-010-0025(2).

One of the oversized items that may be included in the record might be the incorporation of a LUBA record from a prior LUBA appeal. If the decision being appealed is the a local government decision made as a result of LUBA having remanded the prior decision, the record of the prior decision is part of the record of the new decision’s appeal. East Lancaster Neigh. Assoc. v. City of Salem, 29 Or LUBA 554 (1995). If the decision on appeal is not the revised decision after a LUBA remand, it should be noted that LUBA does not retain copies of appeal records once those appeal proceedings have concluded. Thus, not only must a table of contents note the incorporation of the prior record but LUBA must be provided with another copy of that prior appeal record. OAR 661-010-0025(4)(b), Brodersen v. City of Ashland, 62 Or LUBA 496 (2010). If the parties in those prior LUBA appeal proceedings are the same as in the current appeal, the local government does not have to provide a copy of that prior record to those parties. Waibel v. Crook County, 39 Or LUBA 758, 749 (2000).

G. Record Settlement

Once a party files record objections with LUBA, the local government has 14 days in which to respond to the objections “or advise the Board in writing of the status of the parties’ efforts to resolve the record objection.” OAR 661-010-0026(4). Hoffman, supra. That response is much like a response to a request for production in a court action. The local government responds to each objection stating whether or not the local government agrees with the objection and, thus, whether the local government intends to provide the missing item or revise the format of the record. LUBA will then issue an order stating whether an objection is denied or the local government must supplement or revise the record in accordance with the objection.

3 Deschutes County recently submitted a two-page record that was the same document attached to the NITA as the alleged land use decision and was required to prepare a table of contents.



If the local government agrees to or LUBA orders the insertion of additional documents or the resubmission of more clear copies of documents, the local government will submit a supplemental record that must also follow the formatting rules for the initial record submitted. OAR 661-010-0025(4)(a), Foland v. Jackson County, 60 Or LUBA 472 (2010) (local government must submit a supplemental record if pages in the initial record submittal are illegible). If the objections were based on the format of the table of contents and the local government agrees to or LUBA orders the revision of the table contents, the local government will submit a clearly marked revised table of content.

Once the parties have agreed to the contents and format of the record and no further objections are filed based on any new submissions by the local government, LUBA will issue an order settling the record. The briefing periods are then calculated from that order date.

IV. LUBA MOTIONS AND ORDERS

A. Introduction

Motion practice before LUBA is governed largely by LUBA’s administrative rules, promulgated at OAR 661-010-0005 to OAR 661-010-0075. The rules are officially maintained on the Secretary of State’s webpage at http://arcweb.sos.state.or.us/pages/rules/oars_600/oar_661/661_010.html. Links to LUBA’s former and current rules are located on LUBA’s website at http://www.oregon.gov/luba. LUBA’s website includes other useful resources, such as copies of slip opinions and published orders dating back to the 1980s, headnotes arranged under a topical index, frequently asked questions, and pleading samples.

The current rules were adopted in 2010 but as of the date of this writing will likely be amended sometime in November 2013. The proposed amendments are found on LUBA’s website, with deleted language struck through and added language in bold and underlined. Some of those proposed amendments are discussed below. Most 2013 amendments are housekeeping in nature.

B. Summary of LUBA Appeal Process

The rule organization tracks (somewhat) the typical course of a LUBA appeal.

F An appeal is commenced by filing a notice of intent to appeal (NITA), subject to deadlines and other requirements set out in the rules at OAR 661-010-0015.

F Sometimes the NITA is accompanied by a motion to stay the underlying decision. OAR 661-010-0068.

F Motions to intervene must be filed and the local record transmitted within 21 days of filing the NITA (OAR 661-010-0025, OAR 661-010-0050).

F Objections to the record must be filed within 14 days of transmitting the local record to LUBA.

F The petition for review must be filed within 21 days of transmitting the local record (if no objections are filed) or within 21 days of the date LUBA issues an order resolving objections. OAR 661-010-0030.

F The response brief is due 21 days later. OAR 661-010-0035.

F Reply briefs may be filed within seven days of filing of the response brief. OAR 661-010-0039.

F Finally, LUBA conducts oral argument and several weeks later issues its final opinion and order, hopefully within the statutory deadline of 77 days from the date the record is settled (plus a seven-day grace period, if the parties consent). The typical review process takes four to six months.

http://arcweb.sos.state.or.us/pages/rules/oars_600/oar_661/661_010.html

http://www.oregon.gov/luba



C. Technical Violation Rule

Although parties must comply with LUBA’s rules, noncompliance does not necessarily result in rejection of the pleading at issue or some other penalty. OAR 661-010-0005 provides that “technical violations” of LUBA’s rules that do not affect the substantial rights of parties shall not interfere with LUBA’s review, with two exceptions: failure to file the NITA or the petition for review on time (both violations result in automatic dismissal of the appeal). More minor rule violations (e.g., failure to file a response to a motion on time, failure to timely serve a party, etc.) aren’t likely to result in rejection of a pleading or other remedial measures unless LUBA concludes that not giving effect to the rule would substantially delay the appeal or deprive another party of notice, opportunity to participate, or a full and fair hearing.

D. What Stops the Clock?

The clock is almost always ticking at LUBA, and deadlines must be monitored and complied with to make it all work and to avoid unpleasant consequences. Only two filings automatically stop the clock: (1) filing of a record objection (OAR 661-010-0026(6)) and (2) filing a motion to take evidence (OAR 661-010-0045(9)). LUBA can suspend or modify deadlines on its own motion or on the stipulation of parties, but with the two exceptions cited above the filing of a motion or other pleading does not stop the clock. OAR 661-010-0065(4). For example, filing a motion to dismiss does automatically suspend deadlines, so if you want LUBA to put everything else on hold to consider a jurisdictional challenge, gain the other parties’ stipulation or request that LUBA so order, if LUBA does not do so on its own motion.

E. General Motion Practice

A request for LUBA to issue an order or provide relief must be put in the form of a motion, served on all other parties. OAR 661-010-0065. Exhibit 3 to LUBA’s rules is an example of a motion to intervene. If a party seeks to challenge the failure of an opposing party to comply with LUBA’s rules, the challenge must be made by motion, filed within 14 days of the date the party obtains knowledge of the alleged failure. The exception is motions to dismiss for lack of jurisdiction, which can be filed at any time (but ideally would be filed closer to the beginning of the appeal than later). The opposing party has 14 days to file a response to the motion.

Practice tiP: Due to the “technical violations” rule at OAR 661-010-0005, file a motion challenging the failure of a party to comply with LUBA’s rules only if the rule violation delays or prejudices your substantial rights in the review proceeding.

LUBA’s rules do not provide for replies to responses to motions (or rebuttals, surreplies etc.), but LUBA’s practice is consider such replies if and only if they are confined to addressing new or unanticipated matters raised in the response. Replies that simply elaborate on the motion or respond point by point to the response are generally ignored.

Practice tiP: One sure way to annoy LUBA members is to file an endless series of replies and rebuttals in an attempt to get the last word in. File a reply to a response only if it addresses something novel raised in the response. Similarly, consider whether it is necessary to file a motion to strike a reply pleading that simply tries to get the last word in. Odds are that LUBA will simply ignore such a reply pleading, even absent a motion to strike.

Motions are submitted without oral argument. A party may request a telephone conference on the motion, and LUBA may schedule one on its own, but generally LUBA does not conduct telephone conferences on motions.



F. Motion to Dismiss

LUBA is a creature of statute with limited jurisdiction. Jurisdiction may be challenged on numerous bases: untimely appeal, lack of standing, failure to exhaust local appeals, the challenged decision is not a land use decision or limited land use decision or is not a final decision, etc.

Challenges to jurisdiction may be raised at any time, but best practice is to raise challenges by motion at the first available opportunity, typically near the beginning of the appeal. Sometimes the basis for the challenge may not become clear until the record is filed or the petition for review is filed, or the record must be filed in order for petitioner to respond or for LUBA to resolve the motion, sometimes the case with issues of standing. The least option is to wait to challenge jurisdiction until the response brief is filed. LUBA on its own motion may raise jurisdictional issues. The parties cannot stipulate to jurisdiction over a decision that is in fact outside LUBA’s jurisdiction.

The petitioner has the ultimate burden of establishing jurisdiction and must do so in the petition for review, even absent a challenge.

G. Settling the Record

See part III., above.

H. Motion to Extend Deadlines

Frequently a party wants to extend a deadline, which is doable but has some traps to avoid. No power on earth, not even LUBA, can extend the deadline to file the NITA. OAR 661-010-0067(1). Extending the deadline for filing the petition for review requires the written consent of all parties, although written consent can include facsimile signatures, and LUBA can extend the deadline on its own motion to allow time to rule on a motion to dismiss. OAR 661-010-0067(2).

Written consent to extend the deadline for filing record objections automatically extends the deadline for filing the petition for review, unless the consenting parties provide otherwise.

All other time limits can be extended by written or oral (2013 rule change) consent of the parties. OAR 661-010-0067(3).

The motion for extension must state the reasons for the request and be filed within the time for performing the extended action. A 2013 rule change requires a motion for extension not accompanied by written consent to state whether all other parties have consented orally. OAR 661-010-0067(4).

Practice tiP: Failure to obtain consent of all parties (except to extend the deadline for filing the petition for review) is not generally fatal to the request, but the motion should document efforts to obtain all parties’ consent and explain why those efforts did not succeed.

Extension of one deadline generally extends all other deadlines, including issuance of the final opinion, by the amount of time equal to the agreed extension. OAR 661-010-0067(5).

note: Oral argument has no deadline under the rules, so you don’t typically need to file a motion to change the date or time of oral argument. You do, however, have to try to obtain the consent of other parties and work with LUBA staff to identify an alternate date/time. Best practice is to call LUBA staff for alternative dates and times, then call the other parties to obtain oral consents, then get back to LUBA staff, who will change the date/time and send out new notices. A motion is necessary only if other parties do not consent, in which case you should have a pretty good reason for why LUBA should change the scheduled date/time of oral argument over the objections of the other parties. A changed oral argument date extends the deadline to issue the final opinion by an equivalent amount.



I. Motion for Stay

Unless stayed, the underlying decision is effective and can authorize development while the decision is on appeal. The only way to stop development under the decision is to obtain an order from LUBA staying the decision, pursuant to ORS 197.820(4) and OAR 661-010-0068. The motion must include a number of elements, in particular a demonstration of colorable claim of error (typically an easy hurdle) and a demonstration of how the movant will suffer irreparable injury if the stay is not granted (a very high hurdle). The types of circumstances that demonstrate irreparable injury tend to involve development that destroys or injures unique historical or natural resources or similar interests that cannot be practicably restored or adequately compensated once lost.

Importantly, the motion must include a suggested expedited briefing schedule if the stay is granted. The respondent has 14 days to respond to the motion, but on rare occasions when the bulldozers are about to knock down the old historical building, LUBA will expedite briefing on the motion and possibly even issue a temporary stay pending a response. If the stay is granted, the movant must post an undertaking of $5,000 for a quasi-judicial decision. In practice, a cashier’s check or certified check in the required amount will substitute for an undertaking.

J. Motion to Take Evidence

LUBA’s evidentiary review is generally confined to the local record, but in limited circumstances LUBA can consider evidence outside the record: in cases of disputed factual allegations in the parties’ briefs concerning unconstitutionality of the decision, standing, ex parte contacts, actions to avoid the requirement to issue the local decision within 120 or 150 days the application becomes complete, or other procedural irregularities not shown in the record that would warrant reversal or remand. OAR 661-010-0045. At its discretion, LUBA can also take evidence to resolve disputes regarding the content of the record, requests for stays, attorney fees, or actual damages resulting from stays.

Most motions to take evidence are typically filed around the time the response brief is filed, because that is usually the first time there arise “disputed factual allegations in the parties’ briefs.” Motions filed before the petition for review is submitted may be rejected as premature, unless the issue concerns jurisdiction, the content of the record, or a similar matter that does not go to the merits of the appeal. The motion must be supported by affidavits or documentation setting forth the disputed extra-record facts the movant wants to establish and must explain how the facts fit within the permissible bases for the motion and how those facts, if established, will affect the outcome of the review. If the dispute concerns only the legal conclusions to be drawn from undisputed facts, LUBA will generally deny the motion. The movants may request depositions or subpoena authority for testimony or evidence not available to them, but in practice LUBA rarely grants requests for depositions or subpoena authority and prefers to resolve motions to take evidence based on affidavits and the pleadings.

Because motions to take evidence stop the clock and are generally disruptive of the review schedule, in a few limited circumstances LUBA will consider material outside the record without requiring the parties to file a motion under OAR 661-010-0045. LUBA will generally consider documents outside the record material to a jurisdictional issue, even absent a motion to take evidence. Similarly, if the parties agree or otherwise do not dispute, LUBA will consider for limited purposes documents outside the record that are attached to a brief. For example, LUBA will consider a document rejected by the local decision maker for the limited purpose of resolving an assignment of error alleging that the decision maker erred in rejecting the document.

K. Motion for Reply Briefs

With the permission of LUBA, a party may file a reply brief, no more than five pages in length, if the brief is confined solely to “new matters” raised in a response brief, state agency brief, or amicus brief. The motion to file the reply brief must accompany the proposed brief and should state the reasons



warranting the reply brief. The motion and brief must be filed within seven days of the date the response brief was filed. Due to the timing of oral argument, this sometimes means that the reply brief is filed only a few days before oral argument. In this circumstance, best practice is to ensure that the reply brief is actually delivered to the Board and other parties no later than two days prior to oral argument.

“New matters” typically include arguments raised in the response brief that do not go to the stated merits of an assignment of error, but rather argue that the assignment of error should fail regardless of its merits, based on facts or affirmative defenses not raised in the assignment of error. Waiver is a classic example of a “new matter,” but others include jurisdiction, scope of review, evidence that “clearly supports” an inadequate finding, etc.

A reply brief that simply elaborates on the petition for review or replies to responses on the merits of an assignment of error will be rejected. A reply brief that attempts to raise new assignments of error or new grounds for reversal or remand will be rejected.

L. Motion for Transfer

If a jurisdictional challenge is raised that the challenged decision is not a land use or limited land use decision subject to LUBA’s jurisdiction, a party may file a motion to transfer the appeal to circuit court. OAR 661-010-0075(11). The request must be filed within 14 days of the date the jurisdictional issue is raised, either in the response brief, in a motion, or on LUBA’s own motion. Don’t wait too long file the motion to transfer; once LUBA dismisses the appeal, it has no authority to reconsider or change its disposition. See Maguire v. Clackamas County, 250 Or App 146, 279 P3d 314 (2012) (rule requiring motion to transfer does not exceed LUBA’s authority; LUBA raised the jurisdictional issue on its own motion by requesting additional briefing on jurisdiction at oral argument).

V. COSTS AND ATTORNEY FEES

Upon motion, LUBA awards the cost of the filing fee to the prevailing parties, including the fee to intervene (2013 rule change), to be paid by the losing parties. OAR 661-010-0075(1)(b). The prevailing local government may also request the cost of copying the record, not to exceed the deposit for costs. Under three limited circumstances, LUBA may award attorney fees to a prevailing party. OAR 661-010-0075(1)(e).

Practice tiP: Motions for attorney fees are always hotly disputed and tend to disproportionately consume LUBA’s scarce resources. File a motion for attorney fees only if the circumstances truly warrant one.



APPENDIX—2013 RULE AMENDMENTS DRAFT 3, AUGUST 28

661-010-0021

Withdrawal of Decision for Reconsideration

(1) If a local government or state agency, pursuant to ORS 197.830(13)(b), withdraws a decision for the purposes of reconsideration, it shall file a notice of withdrawal with the Board on or before the date the record is due or, on appeal of a decision under ORS 197.610 to 197.625, the local government shall file a notice of withdrawal prior to the filing of the respondent’s brief. A copy of the decision on reconsideration shall be filed with the Board within 90 days after the filing of the notice of withdrawal or within such other time as the Board may allow.

(2) The filing of a notice of withdrawal under section (1) of this rule shall suspend proceedings on the appeal until a decision on reconsideration is filed with the Board, or the time designated therefor expires, unless otherwise ordered by the Board. If no decision on reconsideration is filed within the time designated therefor, the Board shall issue an order restarting the appeal.

(3) A copy of the decision on reconsideration under section (1) of this rule shall be filed with the Board within 7 days after the local government or state agency issues the decision on reconsideration and copies of the decision on reconsideration shall be served on all parties. The first page of the decision on reconsideration, or an accompanying transmittal letter, shall indicate the title and case number of the pending appeal before the Board.

(4) Petitioner(s) may seek review of the decision on reconsideration as provided in section (5) of this rule. Any other person may file a notice of intent to appeal the decision on reconsideration as provided in OAR 661-010-0015. If such an appeal is filed, and a petitioner files an amended notice of intent to appeal or refiles the original notice of intent to appeal as provided in section (5) of this rule, any party may move to consolidate the appeals challenging the decision on reconsideration as provided in OAR 661-010-0055.

(5) After the filing of a decision on reconsideration:

(a) If the petitioner wishes review by the Board of the decision on reconsideration:

(A) Except as provided in paragraph (B) of this subsection, the petitioner shall file an amended notice of intent to appeal together with two copies within 21 days after the decision on reconsideration is received by the Board.

(B) In the event the local government or state agency affirms its decision or modifies its decision with only minor revisions, the petitioner may refile the original notice of intent to appeal, with the date of the decision on reconsideration indicated thereon, together with two copies within 21 days after the decision on reconsideration is received by the Board.

(b) Refiling of the original notice of intent to appeal or filing of an amended notice of intent to appeal is accomplished by delivery of the Notice to the Board, or receipt of the Notice by the



Board, on or before the due date. Filing or refiling may also be accomplished by mailing on or before the due date by first-class, certified or registered mail.

(c) An amended notice of intent to appeal or a refiled notice of intent to appeal under paragraphs (A) and (B) of subsection 5(a) of this rule shall conform with the requirements of OAR 661-010-0015(3) and shall be served on the following:

(A) All parties to the appeal suspended pursuant to section (2) of this rule;

(B) The applicant, if any (and if other than the petitioner). If an applicant was represented by an attorney before the governing body, then the name, address and telephone number of the applicant’s attorney shall also be included;

(C) Any other person to whom written notice of the original or reconsidered land use decision or limited land use decision was mailed as shown on the governing body’s records. The telephone number may be omitted for any such person.

(d) No additional filing fee or deposit for costs shall be required to refile the original notice of intent to appeal or file an amended notice of intent to appeal under subsection (5)(a) of this rule.

(e) If no amended notice of intent to appeal is filed or no original notice of intent to appeal is refiled, as provided in subsection (5)(a) and (b) of this rule, the appeal will be dismissed.

(f) Parties who have already intervened in the appeal need not file new motions to intervene when an amended notice of intent to appeal is filed or the original notice of intent to appeal is refiled.

(6) The local government or state agency shall, within 21 days after service of the amended notice of intent to appeal or refiled original notice of intent to appeal under subsection (5)(a) of this rule, transmit to the Board a certified copy of the record of the proceeding under review in accordance with OAR 661-010-0025. The record submitted by the local government or state agency in an appeal of a decision on reconsideration shall include the record of the original decision and the decision on reconsideration.

Stat. Auth.: ORS 183.545 & 197.820(4) Stats. Implemented: ORS 197.830(13)(b) Hist.: LUBA 1-1992, f. & cert. ef. 1-21-92; LUBA 2-1992, f. & cert. ef. 3-19-92; LUBA 1-1994, f. & cert. ef. 6-22-94; LUBA 1-1998, f. 2-12-98, cert. ef. 3-1-98; LUBA 1-2001, f. 10-15-01, cert. ef. 1-1-02; LUBA 1-2010, f. 6-30-10, cert. ef. 7-1-10



661-010-0025

Record

(1) Contents of Record: Unless the Board otherwise orders, or the parties otherwise agree in writing, the record shall include at least the following:

(a) The final decision including any findings of fact and conclusions of law.

(b) All written testimony and all exhibits, maps, documents or other written materials specifically incorporated into the record or placed before, and not rejected by, the final decision maker, during the course of the proceedings before the final decision maker.

(c) Minutes and tape, CD, DVD or other media recordings of the meetings conducted by the final decision maker as required by law, or incorporated into the record by the final decision maker. A verbatim transcript of media recordings shall not be required, but if a transcript has been prepared by the governing body, it shall be included. If a verbatim transcript is included in the record, the media recordings from which that transcript was prepared need not be included in the record, unless the accuracy of the transcript is challenged.

(d) Notices of proposed action, public hearing and adoption of a final decision, if any, published, posted or mailed during the course of the land use proceeding, including affidavits of publication, posting or mailing. Such notices shall include any notices concerning amendments to acknowledged comprehensive plans or land use regulations given pursuant to ORS 197.610(1) or 197.615(1) and (2).

(2) Transmittal of Record:

(a) The governing body shall, within 21 days after service of the Notice on the governing body, transmit to the Board a certified paper copy of the record of the proceeding under review. The governing body may, however, retain any large maps, media recordings, or difficult-to-duplicate documents and items until the date of oral argument. Where documents are retained until the date of oral argument, those retained documents shall be identified in the table of contents, as provided in OAR 661-010-0025(4)(B).Transmittal of the record is accomplished by delivery of the record to the Board, or by receipt of the record by the Board, on or before the due date.

(b) As an alternative to transmitting a certified paper copy of the record, a local government may transmit the record to the Board in electronic form. Transmittal of an electronic copy is accomplished by delivery of two complete copies of the record on optical disks, with documents recorded in a PDF format, preferably searchable. A local government may transmit the record in electronic form, and also retain items until oral argument as described in OAR 661-010-0025(2)(a). A local government may not recover copying costs under OAR 661-010-0075(1)(b)(B) for electronic copies of the record transmitted to the Board.



(3) Service of Record:

(a) Contemporaneously with transmittal, the governing body shall serve a paper copy of the record, exclusive of large maps, media recordings, and difficult-to-duplicate documents and items, on the petitioner or the lead petitioner, if one is designated. The governing body shall also serve a paper copy of the record on any other party, including intervenors-petitioner, requesting a copy provided such other party reimburses the governing body for the reasonable expense incurred in copying the record. The governing body shall also serve a copy of any media recording included in the record, or any recording from which a transcript included in the record was prepared, on any party requesting such a copy, provided such party reimburses the governing body for the reasonable expense incurred in copying the recording.

(b) By prior agreement of the party to be served, service of the record as described in OAR 661-010-0025(3)(a) may be in an electronic format instead of a paper copy. If copies of the record are served on the parties in electronic format only, the local government may not recover copying costs under OAR 661-010-0075(1)(b)(B) for such electronic copies of the record.

(4) Specifications of Record:

(a) The record, including any supplements or amendments, shall:

(A) Be filed in a suitable folder; the cover shall bear the title of the case as it appears in the Notice or in the Board’s order consolidating multiple appeals, and the Board’s numerical designation for the case, and shall indicate the numerical designation given the land use decision or limited land use decision by the governing body; if the record consists of multiple volumes, the cover shall indicate the page numbers contained in each volume;

(B) Begin with a table of contents, listing each item contained therein, and the page of the record where the item begins (see Exhibit 2).

(i) Where an listed item listed in the table of contents includes attached exhibits, the exhibits shall be separately listed as an exhibit to the item. Where the exhibit is also a document that is being retained under OAR 661-010-0025(2), the exhibit shall also be listed at the end of the table of contents as provided in subsection (ii) below.

(ii) WhereEach large maps, media recordings, or other items or documents are retained by the governing body under section (2) of this rule, those retained items shall be separately listed at the end of the table of contents;

(C) Be securely fastened on the left side;

(D) Have pages numbered consecutively, with the page number at the bottom outside corner of each page;

(E) Be arranged in inverse chronological order, with the most recent item first. Exhibits attached to a record item shall be included according to the numerical or alphabetical order in



which they are attached, not the date of the exhibits. Upon motion of the governing body, the Board may allow the record to be organized differently.

(b) Where the record includes the record of a prior appeal to this Board, the table of contents shall specify the LUBA number of the prior appeal, and indicate that the record of the prior appeal is incorporated into the record of the current appeal.

(c) A record that does not substantially conform to the preceding requirements may be rejected by the Board.

(5) If no record objection is filed and the governing body transmits an amendment to the record, the date the amendment is received by the Board shall be considered the date the record is received for the purpose of computing time limits as required by these rules.

[ED. NOTE: Exhibits referenced are available from the agency.]



661-010-0030

Petition for Review

(1) Filing and Service of Petition: The petition for review together with four copies shall be filed with the Board within 21 days after the date the record is received or settled by the Board. See OAR 661 010-0025(2) and 661-010-0026(6). The petition shall also be served on the governing body and any party who has filed a motion to intervene. Failure to file a petition for review within the time required by this section, and any extensions of that time under OAR 661-010-0045(9) or 661-010-0067(2), shall result in dismissal of the appeal and forfeiture of the filing fee and deposit for costs to the governing body. See OAR 661 010 0075(1)(c).

(2) Specifications of Petition: The petition for review shall:

(a) Begin with a table of contents;

(b) Not exceed 50 pages, exclusive of appendices, unless permission for a longer petition is given by the Board;

(c) Have blue front and back covers of at least 65-pound weight paper. The front cover page shall state the full title of the proceeding, and the names, addresses and telephone numbers of all parties unrepresented by an attorney. If a party is represented by an attorney, the name, address and telephone number of the attorney shall be substituted for the party. If there is more than one petitioner, the cover page shall specify which petitioner(s) are filing the petition. An intervenor shall be designated as either petitioner or respondent in accordance with OAR 661-010-0050;

(d) Be typewritten or word-processed in proportionately spaced font such as Times New Roman no smaller than 1412 point both for text and 10 point for footnotes;

(e) Be double spaced, except that quotations and footnotes may be single-spaced with double space above and below each paragraph of quotation;

(f) Have text printed on only one side of the page; however, text may be printed on both sides of the page if the paper is sufficiently opaque to prevent material on one side from showing through, and the petition is bound along the left-hand margin so that the pages lie flat when open;

(g) Be printed on 8 1/2 by 11 inch paper, with numbers for each line of text;

(h) Have inside margins of 1 1/4 inches, outside margins of 1 inch, top and bottom margins of 3/4 inch; and

(i) Be signed on the last page by the author. In cases where multiple unrepresented petitioners or intervenors-petitioner file a single petition for review, the petition for review shall be signed by all petitioners or intervenors-petitioner who wish to join the petition for review.



(3) If the Board determines that the petition for review fails to conform with the requirements of section (2) of this rule, it shall notify the author, and a brief conforming with the requirements of section (2) shall be filed within three (3) days of notification by the Board. The Board may refuse to consider a brief that does not substantially conform to the requirements of this rule.

(4) Contents of Petition: The petition for review shall:

(a) State the facts that establish petitioner’s standing;

(b) Present a clear and concise statement of the case, in the following order, with separate section headings:

(A) The nature of the land use decision or limited land use decision and the relief sought by petitioner;

(B) A summary of the arguments appearing under the assignments of error in the body of the petition;

(C) A summary of the material facts. The summary shall be in narrative form with citations to the pages of the record where the facts alleged can be found. Where there is a map in the record that helps illustrate the material facts, the petitioner shall include a copy of that map in the summary of the material facts or attach it as an appendix to the petition.

(c) State why the challenged decision is a land use decision or a limited land use decision subject to the Board’s jurisdiction;

(d) Set forth each assignment of error under a separate heading. Each assignment of error must demonstrate that the issue raised in the assignment of error was preserved during the proceedings below, if preservation is required. Each assignment of error must state the applicable standard of review. Where several assignments of error present essentially the same legal questions, the argument in support of those assignments of error shall be combined;

(e) Contain a copy of the challenged decision, including any adopted findings of fact and conclusions of law; and

(f) Contain a copy of any comprehensive plan provision, ordinance or other provision of local law cited in the petition, unless the provision is quoted verbatim in the petition.

(5) The petition for review may include appendices containing verbatim transcripts of relevant portions of media recordings that are part of the record.

(6) Amended Petition: A petition for review which fails to comply with section (4) of this rule may, with permission of the Board, be amended. The Board shall determine whether to allow an amended petition for review to be filed in accordance with OAR 66l-010-0005.



(7) Cross Petition: Any respondent or intervenor-respondent who desires seeks reversal or remand of an aspect of the decision on appeal regardless of the outcome under the petition for review may file a cross petition for review that includes one or more assignments of error. A respondent or intervenor-respondent who seeks reversal or remand of an aspect of the decision on appeal only if the decision on appeal is reversed or remanded under the petition for review may file a cross petition for review that includes contingent cross-assignments of error, clearly labeled as such. The cover page shall identify the petition as a cross petition and the party filing the cross petition. The cross petition shall be filed within the time required for filing the petition for review and must comply in all respects with the requirements of this rule governing the petition for review, except that a notice of intent to appeal need not have been filed by such party.

Stat. Auth.: ORS 183.545 & 197.820(4) Stats. Implemented: ORS 197.830(11), (12) & (13)(a) Hist.: LUBA 1-1979(Temp), f. & ef. 11-1-79; LUBA 2-1980, f. & ef. 4-29-80; LUBA 1-1983, f. & ef. 10-3-83; LUBA 1-1987, f. & ef. 12-30-87; LUBA 1-1992, f. & cert. ef. 1-21-92; LUBA 2-1992, f. & cert. ef. 3-19-92; LUBA 1-1994, f. & cert. ef. 6-22-94; LUBA 1-1998, f. 2-12-98, cert. ef. 3-1-98; LUBA 1-2001, f. 10-15-01, cert. ef. 1-1-02; LUBA 1-2010, f. 6-30-10, cert. ef. 7-1-10



661-010-0050

Intervention

(1) Standing to Intervene: The applicant and any person who appeared before the local government, special district or state agency may intervene in a review proceeding before the Board. Status as an intervenor is recognized when a motion to intervene is filed, but the Board may deny that status at any time.

(2) Motion to Intervene: A motion to intervene shall be filed within 21 days of the date the notice of intent to appeal is filed pursuant to OAR 661-010-0015, or the amended notice of intent to appeal is filed or original notice of intent to appeal is refiled pursuant to OAR 661-010-0021. When two or more intervenors join in a motion to intervene and are unrepresented by an attorney, a lead intervenor shall be designated as the contact person for the purpose of receiving documents from the Board and other parties. The motion to intervene (see Exhibit 3) shall:

(a) List the names, addresses, and telephone numbers of all persons moving to intervene. If an attorney represents the intervenor(s), the attorney’s name, address and telephone number shall be substituted for that of the intervenor(s);

(b) State whether the party is intervening on the side of the petitioner or the respondent;

(c) State the facts which show the party is entitled to intervene, supporting the statement with affidavits or other proof;

(d) On the last page, be signed by each intervenor, or the attorney representing that intervenor, on whose behalf the motion to intervene is filed;

(e) Be served upon the Board and all parties.

(3) Filing Fee: A motion to intervene shall be accompanied by a filing fee of $100 for each appeal in which intervention is sought, payable to the Land Use Board of Appeals. Where multiple parties file a single joint motion to intervene, only one fee per appeal is required. If a motion to intervene is received without payment of the filing fee or a check providing the filing fee is returned for insufficient funds, the intervenor will be given an opportunity to submit the required fee. If the filing fee is not paid within the time set by the Board, the Board shall deny the motion to intervene. Cash shall not be accepted.

(4) Intervention in an appeal that is consolidated with other appeals does not allow the intervenor to appear as a party with respect to those appeals in which the intervenor has not filed a timely motion to intervene.

(5) Parties who have already intervened in an appeal need not file new motions to intervene when an amended notice of intent to appeal is filed or the original notice of intent to appeal is refiled pursuant to OAR 661-010-0021.



(6) Intervenor’s Brief:

(a) If intervention is sought as a petitioner, the brief shall be filed within the time limit for filing the petition for review, and shall satisfy the requirements for a petition for review in OAR 661-010-0030.

(b) If intervention is sought as a respondent, the brief shall be filed within the time for filing a respondent’s brief and shall satisfy the requirements for a respondent’s brief in OAR 661-010-0035.

[ED. NOTE: Exhibits referenced are available from the agency.]



661-010-0067

Extensions of Time

(1) In no event shall the time limit for the filing of the notice of intent to appeal be extended.

(2) Except as provided in this section and OAR 661-010-0045(9), in no event shall the time limit for the filing of the petition for review be extended without the written consent of all parties. Written consent may include facsimile signatures. The Board may, on a motion of a party or its own motion, extend the deadline for filing the petition for review to allow time to rule on a motion to dismiss. Written consent to extend the deadline for filing record objections shall automatically extend the deadline for filing the petition for review for the same number of days granted to extend the deadline for filing record objections, unless the consenting parties expressly provide otherwise.

(3) All other time limits may be extended upon oral or written consent of all parties, the Board’s motion or motion of a party. Written consent may include facsimile signatures.

(4) A motion for extension of time shall state the reasons for granting the extension and must be filed with the Board within the time required for performance of the act for which an extension of time is requested. A motion for extension of time that is not accompanied by a written consent by all parties to the requested extension shall state whether all parties to the appeal have agreed to the motion for extension of time, orally or otherwise.

(5) Any written or oral agreement by the parties allowing an extension of time shall automatically extend the time for subsequent filings, as well as the issuance of the Board’s final order by an amount of time equal to the extension agreed to by the parties.

(6) In the event the Board extends the deadline for issuance of its final order without consent of the parties, it shall enter the findings required by ORS 197.840.



661-010-0071

Reversal or Remand of Land Use Decisions

(1) The Board shall reverse a land use decision when:

(a) The governing body exceeded its jurisdiction;

(b) The decision is unconstitutional; or

(c) The decision violates a provision of applicable law and is prohibited as a matter of law.

(2) The Board shall remand a land use decision for further proceedings when:

(a) The findings are insufficient to support the decision, except as provided in ORS 197.835(11)(b);

(b) The decision is not supported by substantial evidence in the whole record;

(c) The decision is flawed by procedural errors that prejudice the substantial rights of the petitioner(s); or

(d) The decision improperly construes the applicable law, but is not prohibited as a matter of law. ; or

(e) All parties stipulate in writing to remand.

Stat. Auth.: ORS 183.545 & ORS 197.820(4) Stats. Implemented: ORS 197.835 Hist.: LUBA 1-1987, f. & ef. 12-30-87; LUBA 1-1998, f. 2-12-98, cert. ef. 3-1-98

661-010-0073

Reversal or Remand of Limited Land Use Decisions

(1) The Board shall reverse a limited land use decision when:

(a) The governing body exceeded its jurisdiction;

(b) The decision is unconstitutional; or

(c) The decision violates a provision of applicable law and is prohibited as a matter of law.

(2) The Board shall remand a limited land use decision for further proceedings when:



(a) The findings are insufficient to support the decision, except as provided in ORS 197.835(11)(b);

(b) The decision is not supported by substantial evidence in the record. The existence of evidence in the record supporting a different decision shall not be grounds for reversal or remand if there is evidence in the record to support the final decision;

(c) The local government committed a procedural error which prejudiced the substantial rights of the petitioner(s); or

(d) The decision improperly construes the applicable law, but is not prohibited as a matter of law. ; or

(e) All parties stipulate in writing to remand.

Stat. Auth.: ORS 183.545 & ORS 197.820(4) Stats. Implemented: ORS 197.828 & ORS 197.835 Hist.: LUBA 1-1992, f. & cert. ef. 1-21-92; LUBA 2-1992, f. & cert. ef. 3-19-92; LUBA 1-1998, f. 2-12-98, cert. ef. 3-1-98



661-010-0075

Miscellaneous Provisions

(1) Cost Bill and Attorney Fees

(a) Time for Filing: The prevailing party may file a cost bill or a motion for attorney fees, or both, no later than 14 days after the final order is issued. The prevailing party shall serve a copy of any such cost bill or motion for attorney fees on all parties.

(b) Recoverable Costs: Costs may be recovered only for the items set forth in this subsection.

(A) If the petitioner is the prevailing party, the petitioner may be awarded the cost of the filing fee.

(B) If the governing body is the prevailing party, the governing body may be awarded copying costs for the required number of copies of the record, at 25 cents per page, whether or not the governing body actively participated in the review.

(C) Costs awarded to the governing body pursuant to this section shall be paid from the deposit required by OAR 661-010-0015(4) and shall not exceed the amount of that deposit.

(D) If an intervenor under OAR 661-010-0050 or a state agency under OAR 661-010-0038 is the prevailing party, the intervenor or state agency may be awarded the cost of the fee to intervene or to file a state agency brief.

* * * * * *

(9) Address and Hours of the Board: The Board’s address is 775 Summer Street NE, Suite 330, Salem Oregon, 97301-1283. The telephone number is (503) 373-1265. The Board’s office shall be open from 8:00 a.m. to 12:00 p.m., and 1:00 p.m. to 5:00 p.m. Monday through Friday.





Chapter 10

Constitutional Protection Against Government Abuse—Presentation Slides

Bradley w. andersen

Landerholm PSVancouver, Washington

Chapter 10—Constitutional Protection Against Government Abuse—Presentation Slides




11/1/2013

1

Constitutional Protection Against Government Abuse

Public’s Expectations City’s Treatment

FOLLOW THE LAWFollow City Attorney’s Advice

DISREGARD THE LAWIgnore City Attorney’s Advice

• Equal treatment

• Open government

• Forthright with information

• Impartial and unbiased

• Certainty

• Fair process

• Protect Rights

• Favoritism

• Closed-door meetings

• Dishonesty

• Biased and unfair

• Extraordinary delays

• No due process

• Abuse of power



11/1/2013

2

Claims

1. Taking = Extraordinary Delay

3. Equal Protection = Preferential Treatment

4. Procedural Due Process = Right to Know &Opportunity to be Heard

5. Substantive Due Process = Abuse of Power

Common threadGovernment over stepping bounds

Theories of Liability (Wood / Foster)

1. Individual Capacity (Wood and Foster)

Defendant’s acts deprived Plaintiff of Constitutional Right

2. Supervisory Capacity (Foster only)

(a) Foster’s subordinate(s) deprived Plaintiff of Constitutional Right

(b) Foster either directed the subordinates in the actOR

Foster knew, or reasonably should have known, of the act and failed to act to prevent it



11/1/2013

3

Theories of Liability (City)

1. Acts of Final Policy Maker

(a) Acts of Sykes or Foster deprived Plaintiff of Constitutional Right

(b) Sykes or Foster had final policy making authority (satisfied)(c) Sykes or Foster was acting as a final policy maker when

engaging in the act(s)

2. Ratification of Acts by Final Decision Maker

(a) Acts of Wood or Vanderkin deprived Plaintiff of Constitutional Right

(b) Sykes or Foster had final policy making authority concerning acts of Wood or Vanderkin (satisfied)

(c) Sykes or Foster ratified the acts of Wood or Vanderkin

7-21-05Construction

Plans Submitted

10-17-05Wood/Foster meeting with City Attorney. Attorney directs that City would be “ill advised” to “force” McDonald to do anything other than what has been submitted.(Exhibit #368 & 136)

What Should Have Happened

What Actually Happened

2-14-05Preliminary Plat Application Filed

2-14-05Preliminary Plat Application Filed

7-21-05Construction

Plans Submitted

9-2-05Binding Land Use Decision

9-2-05Binding Land Use Decision

9-21-05-Construction Plans Approved-Construction Permit Issued

9-21-05Stop Work Order issued

(Exhibit #7)

9-21-05 4-21-06Construction

4-21-06Construction Complete

5-1-06Final Plat Recorded

9-30-05City meeting with McDonald’s team to purportedly discussStop Work Order – but sewer is top of the agenda(Exhibit #34)

10-18-05City proposes two options, including “sewer alignment alternative”outside of UGB or Hoodenpyle easement

(Exhibit #10 & 370)

11-3-05“BB” meets secretly with Mayor and Sykes(Exhibit #136)

11-23-05Vanderkin requests private meeting with the County “without interpretation and input from developer”(Exhibit #15)

12-14-05City’s closed-door meeting with Browning and Matiaco to discuss McDonald’s sewer plan(Exhibit #100)

3-1-06McDonald rejects Huttula’s proposal and gets oral agreement from School District(Exhibit #436)

3-9-07Construction Complete

4-10-07Final Plat Recorded

2-14-05 9-2-05Plat Review

2-14-05 9-2-05Plat Review 6-15-06 3-9-07Construction

1-26-06Wood is “working the developer” on trunk sewer issue(Exhibit #103)

6-15-06Construction Permit Issued

5-15-06Construction Plans Approved

City forces negotiations with Huttula(Exhibit #118)

8-30-05Meeting with McDonald,

Huttula, City and County.Decided on no median.

(Exhibit #35 & 36)

9-05Matiaco has Browning tell

City to “shut them down!”



11/1/2013

4

Temporary Taking “Extraordinary Delay”

Plaintiff was entitled to the permit or approval

AND

Plaintiff encountered “extraordinary delay” in getting the permit or approval

Factors to consider:

1. Whether the City delayed in issuing the required permits or approvals necessary to allow David Hill to proceed with the subdivision

2. The duration of the delay caused by the City

3. The character of the City’s action which caused the delay

4. The economic impact of the delay on Plaintiff’s property

5. The extent to which the delay interfered with Plaintiff’s reasonable and distinct investment-backed expectations

Just Compensation: “You must put the Plaintiff in as good a position monetarily as they would have been in if the Defendants had not taken the property.”

Extraordinary Delay



11/1/2013

5

Equal Protection “Preferential Treatment”

1.Plaintiff was intentionally treated differently from others in the same or similar position

2.There was no rational basis for the difference in treatment

VDSTHE PARKS (DAVID HILL)

PACIFIC CROSSING

MATIACO

OAK HILL (HUTTULA)

N

SPEISSCHAERT FARM

Equal Protection



11/1/2013

6

Master Sewer Plan “To and Through”

Huttula Sewer “Preferential Treatment”



11/1/2013

7

The Parks Sewer

Equal Protection – Early GradingThe ParksThe Parks Pacific CrossingsPacific Crossings

No rock allowed Rock allowed / Roads cored-out



11/1/2013

8

Equal Protection - ConstructionThe ParksThe Parks Pacific CrossingsPacific Crossings

No Construction Permit issued Construction Permit issued

Equal Protection

DEDICATION FOR DAVID HILL ROAD

DEDICATION FOR DAVID HILL ROAD

Required to dedicate four extra feet on road shared with Oak Hill

Not required to dedicate any

extra footage on shared road

ELECTRICAL MAINELECTRICAL MAIN

Required to install electrical main

trunk line

Not required to install electrical main trunk line

UPSTREAM SEWER CONNECTION

UPSTREAM SEWER CONNECTION

Required to accommodate

uphill landowner

Not required to accommodate

uphill landowner

The ParksThe Parks Oak HillOak Hill

CONSTRUCTION PERMITCONSTRUCTION PERMIT

Required to have plans approved

before construction

Not required to have plans approved to construct sewer



11/1/2013

9

Equal Protection

STREET TREESSTREET TREES

Required to meet 6’ branch

height

Not required to meet 6’

branch height

Not required to meet 6’

branch height

Does not meet

regulations

6 ft 6 ft 6 ft 6 ft

The ParksThe Parks Pacific CrossingsPacific Crossings Oak HillOak Hill Forest GroveForest Grove

Procedural Due Process “Notice & Opportunity”

1. David Hill possessed a protected property interest (satisfied)

2. David Hill was deprived of that interest by one or more of the Defendants

3. The City failed to give David Hill adequate notice and a fair and meaningful opportunity to be heard

Adequate Notice & Meaningful Opportunity to be Heard = the fundamental requirements of due process of law



11/1/2013

10

Subdivision ProcessPLANNING STAGEPLANNING STAGE

• Community influence

• Broad discretion

• Public notice

• Public comment

CONSTRUCTION PERMITCONSTRUCTION PERMIT

• Ministerial function

• Narrow discretion– Building codes– Engineering standards

• NO Public process

• NO Public influence

BINDING LAND USE DECISION

1 2

Stop Work Order



11/1/2013

11

Failure to Make a Decision

Didn’t Notify McDonald that Plans Were Approvable



11/1/2013

12

No Choice But to Sign the Contract

Substantive Due Process “Abuse of Power”

1.The Defendants, or any one of them, took action against David Hill that was not rationally related to a legitimate government purpose

2.The action taken was an abuse of power lacking in reasonable justification



11/1/2013

13

Cronyism ?

“Shut ‘emDown!”

Closed-Door Meeting 11-3-05



11/1/2013

14

Closed-Door Meeting 12-14-05

“BB”

Mayor

Sykes

Matiaco

Wood

Foster

The Most Important Expert ?

The CityAttorney



11/1/2013

15

Ignoring City Attorney

Rule of Law

“You would be ill advised to force McDonald” To change the sewer routing

Did It Matter?



11/1/2013

16

“Who Owns the Delay”

Causation

Plaintiff must show by a preponderance of the evidence

That the Defendants’ acts were so closely related to the deprivation of Plaintiff’s rights as to be the moving forcethat caused the injury

Defendants’ excuses don’t add up …Defendants have to “own the delay”

City’s Excuses

1. Timetable for getting construction plans approved was unreasonable because McDonald did not secure access to sewer until June, 2006

2. McDonald signed a contract on May 15, 2006 that absolved the City of wrong-doing

3. Dow Brothers are the true culprit because they took over 500 days to get the job done

4. Venture Properties was not serious about its contract – Kelly Ritz had no intentions to buy all 215 lots

5. City Engineers were simply overwhelmed by number of subdivisions

6. McDonald did not know what he was doing

7. David Hill made enough money, so should not be entitled to sue



11/1/2013

17

Damages

Damages = “The amount of money that will reasonably and fairly compensate the Plaintiff for any injury you find was caused by Defendants”

Just Compensation =“You must put the Plaintiff in as good a position monetarily as they would have been in if the Defendants had not taken the property.”

For a temporary taking, you can award damages based on the difference in value of the property before and after the taking

ORBased on the reasonable interest on the reduction in value to the project

Damages

$ 3,779,4621. Decline in market value

2. Increased costs due to delay

3. Additional costs due to City’s unlawful conduct

4. Opportunity costs (7% interest)

TOTAL DAMAGES

$ 2,182,719

$ 775,690

$ 5,820,400

$12,558,271

