The Oregon Capitol forms a dark silhouette against a pink and blue sky with gray clouds.

Lawmakers met at the state Capitol on Monday to extend the state's ban on residential evictions. Hours later, landlords filed suit.

John Rosman / OPB

With Oregon expected to continue a statewide eviction ban for at least six more months, three landlords are asking a judge to end the policy.

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In a suit filed in U.S. District Court Monday night, hours after lawmakers voted to extend the state moratorium, the group argued that policies enacted this year by Gov. Kate Brown, the state Legislative Assembly, Multnomah County and the city of Portland are unconstitutional because they hinder legal contracts and amount to the government “taking” their property without proper compensation.

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“Plaintiffs are being legally compelled to provide, for some indeterminate amount of time that has already stretched beyond 18 months, housing, utilities, and other services associated with habitability for large numbers of this state’s population — and Plaintiffs will likely bear the cost of this state-run public benefit program entirely on their own,” the lawsuit said.

Taking a recent extension into account, the statewide moratorium would stretch fewer than 16 months, but landlords say it will take longer to evict tenants who have not paid.

The plaintiffs — a large Portland landlord named Moe Farhoud and a married couple, Tyler and Crystal Sherman — are asking a federal judge to issue an injunction against the state, county and city, allowing evictions for nonpayment of rent to begin as the state grapples with swelling COVID-19 cases and deaths. Alternatively, they say, a judge can order the state to “adequately compensate Plaintiffs and all others similarly situated for their rental losses.”

“We’re not necessarily out to invalidate everything the legislature has done, the governor has done,” said John DiLorenzo, , the Portland-based attorney representing the plaintiffs. “But we need to be compensated.”

State leaders and tenant advocates have warned that resuming evictions would lead to a wave of homelessness, and at least one study has suggested evictions can worsen the spread of the coronavirus, as people are forced to stay with friends and loved ones.

House Speaker Tina Kotek, D-Portland, a powerful proponent of the eviction policy, called the lawsuit “appalling” in a statement Tuesday.

“The state’s eviction moratoriums have kept thousands of Oregonians housed during the worst public health crisis of our lifetime,” Kotek said. “These policies are critical for our most vulnerable communities.”

Tenant advocates also decried the move.

“It is deeply unfortunate that three days before Christmas and in the coldest time of the year, these landlords are threatening mass evictions in defiance of tenants protections that passed yesterday with bipartisan support,” said Alison McIntosh, of the Oregon Housing Alliance. “The filing of this lawsuit may cause confusion but Oregon renters should know that these protections remain in place.”

Farhoud, who owns roughly 1,200 apartment units around Portland, said in the lawsuit he prioritizes renting units to people who might have trouble being approved elsewhere: “tenants who have had prior criminal records, bankruptcies, credit problems, and who have otherwise encountered circumstances which would limit their ability to rent dwelling units.”

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Since an eviction moratorium began in Multnomah County in March, the suit said Farhoud has lost more than $1 million in back rent.

The Shermans own 22 housing units “throughout Oregon,” the suit said, and have missed out on more than $8,000 in rent payments this year.

Eviction bans have been in place in Oregon since the early days of the COVID-19 pandemic, and have taken on different forms. Multnomah County was the first government to pass a residential eviction moratorium on March 19. The governor followed suit with a statewide policy three days later.

That statewide policy has since been extended in different ways. The Legislature passed its own moratorium during a June special session, and Brown subsequently extended it via executive order in September. With that policy set to expire on Jan. 1, lawmakers met in an emergency special session in order to lengthen the moratorium by another six months.

But the Legislature also took a step that rankled many landlords: It created a $150 million landlord assistance fund that will help pay property owners for the rent they’ve lost during COVID-19. The catch: that money is likely not nearly enough to cover all the lost rent in the state, and, to receive money, landlords need to agree to forgive 20% of their back rent.

The bill also increased the ability for landlords to evict tenants for causes other than unpaid rent, such as when they are demolishing or moving into a property. But the prospect of being forced to lose income in order to receive state relief has been a flashpoint among landlords, who say they are being treated worse than other sectors of the economy.

Some lawmakers in both parties have agreed. During a debate on the House floor Monday, state Rep. Mark Meek, D-Oregon City, said the eviction bill “reminds me that this body holds rental housing providers in ill esteem.”

Supporters of the policy said the 20% provision was meant to ensure that the money could be spread to more people and pointed out that participation in the program was voluntary. Landlords who didn’t want to participate would be free to go after tenants for back rent in small claims court once the eviction ban expires, they said. In the meantime, the priority is keeping people housed.

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“At the very heart of this bill is protecting people who right now are completely freaked out at the possibility of being evicted,” state Rep. Alissa Keny-Guyer said Monday.

A major Oregon landlord group, Multifamily NW, had urged lawmakers to pass additional relief, arguing that landlords statewide have lost out on more than $800 million so far this year. The organization pushed a proposal by state Sen. Betsy Johnson, D-Scappoose, that would have allowed landlords to recoup 100% of lost rent via tax credits. That policy has clear interest in the statehouse and is likely to be a topic of discussion when the Legislature meets in a regular session beginning Jan. 19, 2021. It failed to win support on Monday.

“Multifamily NW agrees it is critical to Oregon’s housing supply that small business owners like Mr. Farhoud and the Shermans be compensated for the services they have provided,” said Multifamily NW Executive Director Deborah Imse. “It is Multifamily NW’s hope that the state will provide financial relief for families at risk of eviction and for housing providers who have foregone income as result of the state’s mandates.”

DiLorenzo, the plaintiffs’ attorney, said in an interview that his clients would not necessarily have held off from suing the state, even if lawmakers had passed the tax credit proposal. But he re-iterated that if the state compensates landlords for all lost rent, “maybe this lawsuit goes away.”

Taken together, the new lawsuit argues Oregon’s rent moratoriums have violated the Fourth, Fifth and 14th Amendments of the U.S. Constitution.

Under the various policies passed in the state, landlords have been unable to apply late rent fees or sue for back rent, on top of being prevented from evicting people for not paying. Even though tenants are technically still on the hook for all the money they owe, the lawsuit said says landlords are unlikely to see that money.

“The practical reality is that the tenants who cannot afford to pay one month’s rent now will be highly unlikely to afford the total past-due rent that will continue to accumulate each month until the State declares the ‘end’ of the statewide emergency,” the lawsuit said. “Plaintiffs’ ‘right’ to unpaid rent is little more than an illusion.”

The lawsuit makes no mention of a separate eviction moratorium passed by the federal government this year. That policy is set to expire Jan. 31.

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