In previous articles, we discussed many changes that were ratified by the Oregon Legislature, some of which directly impact real estate licensees. As many of these changes go into effect on January 1, 2008, it is no surprise that Oregon Real Estate Forms, LLC (“OREF”) has updated several of its forms to incorporate changes in the law and practical considerations due to the changing marketplace. This article will discuss some of the more significant changes to OREF forms.

As you may know, the Oregon Legislature recently passed House Bill 2592, a law which requires escrow to withhold a portion of the seller’s proceeds if the seller is an out-of-state individual or corporation. The purpose of the withholding requirement is for income tax purposes. According to the legislation, the amount withheld is equal to the lesser of:

A) Four percent of the consideration for the real property being conveyed;

B) Four percent of the net proceeds resulting from the conveyance; or

C) Ten percent of the gain includable in taxable income.

In order to remind buyers, sellers and licensees of this requirement, OREF has revised Section 26 of the Real Estate Sale Agreement to reflect this new withholding requirement. This Section previously dealt only with the Foreign Investment in Real Property Tax Act (“FIRPTA”), which is a federal withholding law, and as of January 1, 2008, will deal with both FIRPTA and House Bill 2592 withholding requirements.

Another change instituted by the Oregon Legislature is a result of House Bill 2723, which amends Oregon Revised Statute 93.040(2). The amendment to the statute revises the statutory warning which must be included in every sale agreement, including the following new warning that purchasers should: “verify that the unit of land being transferred is a lawfully established lot or parcel, as defined in ORS 92.010 or 215.010.”

OREF has revised Section 27 of the Real Estate Sale Agreement to reflect this new required language.

House Bill 2723 also amends Oregon Revised Statute 105.464, which dictates the form of a seller’s property disclosure statement. Sellers are now required to include and answer the following question: “Is the property being transferred an unlawfully established unit of land?”

Furthermore, Senate Bill 99 requires a seller’s property disclosure statement to include the following question: “Has the property been classified as forestland-urban interface?”

The revised OREF Seller’s Property Disclosure Statement includes these new questions.

Although not mandated by new statutes, the following changes have also been made to various OREF documents:

Section 11 of the OREF Real Estate Sale Agreement, Seller Representations, has been revised in the January 1, 2008 version of the agreement to state that all of a seller’s representations are “to the best of Seller’s knowledge.” Previously, the agreement stated that a seller’s representations were based to the best of the seller’s actual knowledge. Although seemingly minor, this makes clear that a seller’s representations are based on what they knew at the time of execution of the sale agreement, rather than the actual conditions of the property.

Section 14, Inspections, was also revised so that the waiver portion of the section states that the buyer is “knowingly and voluntarily” waiving the right to conduct inspections. This revision was made for risk management purposes, as buyers who decide to waive their right to conduct inspections are assuming great risk. This additional language will serve as a reminder that buyers need to carefully consider the risks inherent in waiving this right. Licensees would be well advised to remind buyers of these risks in writing.

In reviewing the January 1, 2008 versions of OREF documents, you may notice that the name of one of the forms has been changed. What was formerly named the “Condo and Townhouse Addendum” will be changed to the “Planned Community/Condominium/Townhouse Addendum” in order to clarify that the addendum is useful for all types of transactions involving homeowners’ associations, including planned communities.

This form has also been revised to include a checkbox which asks whether there are rules regarding pets, parking and rental restrictions. This checkbox was included because it was perceived that these types of restrictions are frequently at issue.

Furthermore, OREF added a checkbox which asks whether there are documents relating to claims being made by or against the association involving structural integrity or safety of the property being sold. This checkbox was undoubtedly added as a result of numerous claims that have been made regarding such defects.

Although the above matters are not all-inclusive, they address many substantive changes to Oregon laws and OREF forms. The new and/or revised OREF forms will impact how licensees transact business and how they advise their clients. Accordingly, licensees would be well advised to review the forms before January 1, 2008, and direct any questions they may have to their principal brokers.

 
This column contains general information only and must not be construed as legal advice. Questions may be submitted directly to Maylie & Grayson by fax at (503) 775-1765, by email at or by mail at 7959 SE Foster Road, Portland, Oregon 97206.