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Answer. Subject to the caveat that I am not a First Amendment lawyer, here are my thoughts:

The First Amendment to the U.S. Constitution provides:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Section 8 of the Oregon Constitution provides:

No law shall be passed restraining the free expression of opinion, or restricting the right to speak, write, or print freely on any subject whatever; but every person shall be responsible for the abuse of this right.  (Emphasis added.)

How these two laws have been legally interpreted, and the scope of each one vis–à–vis the other, is beyond my skill-set.

First, there is only one statute in Oregon’s landlord-tenant law that addresses this issue, and it is broadly crafted to permit expression:

90.755 Right to speak on political issues; limitations; placement of political signs. 

(1) No provision in any bylaw, rental agreement, regulation or rule may infringe upon the right of a person who rents a space for a manufactured dwelling or floating home to invite public officers, candidates for public office or officers or representatives of a tenant organization to appear and speak upon matters of public interest in the common areas or recreational areas of the facility at reasonable times and in a reasonable manner in an open public meeting. The landlord of a facility, however, may enforce reasonable rules and regulations relating to the time, place and scheduling of the speakers that will protect the interests of the majority of the homeowners.

      (2) The landlord shall allow the tenant to place political signs on or in a manufactured dwelling or floating home owned by the tenant or the space rented by the tenant. The size of the signs and the length of time for which the signs may be displayed are subject to the reasonable rules of the landlord. [Formerly 91.925; 1991 c.844 §18; 1995 c.559 §40; 2009 c.816 §17] (Emphasis added.)

So as to political signs, it appears that pro- and anti-Trump signs are clearly protected. What about pro-life signs, which could be viewed as a political statement? Same question for gay rights. Confederate flags might be regarded as political, but I believe in this day and age of hypersensitivity, it has become viewed less as emblematic of southern heritage, and more as having racial undertones. In short, community management might have an easier chance of prohibiting the flag than a sign.

What is interesting in Oregon’s law is that the rights of expression, speech, and press, are modified by the clause “but every person shall be responsible for the abuse of this right.”  Again, I do not know how this law has been judicially interpreted, but clearly, it suggests that the freedom is balanced against an abuse of the right.

In this vein, ORS 90.740(4)(j) provides that one of a resident’s legal duties in a community is to:

Behave, and require persons on the premises with the consent of the tenant to behave, in a manner that does not disturb the peaceful enjoyment of the premises by neighbors.

So, my take, is the following:

• Each situation must be viewed on a case-by-case basis, depending not only upon the signage, but the demographics of the community itself. In other words, certain signs in certain communities may not be viewed as provocative or inflammatory, and therefore be permissible. 
• However, here’s the rub: All it takes is one person with a provocative sign that offends an entire community, to enlist the aid of the ACLU, and you may quickly confront the reality of the legal cost for protecting the “peaceful enjoyment” of the rest of the community.[1]

So in the final analysis, my belief is that the “peaceful enjoyment” language of ORS 90.740(4)(j), protecting the community’s residents as a whole, coupled with Oregon’s constitutional protection against abuse of the right of free speech, together provide a legitimate basis for prohibiting non-political signage that could be deemed offensive to the rest of the community. However, such proscriptions should only be broadly spelled out in management’s rules, rather than expressly deeming certain topics permissible, and others impermissible. For example:

“Residents shall not post on their spaces or homes, signs, emblems, flags, slogans, or similar expressions, which, by their nature, could be viewed as offensive or inflammatory to other residents, and thereby interfering with their peaceful enjoyment of the Community.”

However, if the signage relates to political candidates, campaigns, politicians, and legislation, etc., ORS 90.755 appears to give residents broad rights, subject only to the size of the signage and length of time it may appear.  Lastly, I would believe that the use of profane or vulgar images or text in political signs may be reasonably prohibited by management.

[1] This is why community management should carry sizeable liability insurance.

There are several significant deadlines in the Oregon Legislature that start to willow down the life span of legislative proposals. The first of these deadlines was last Friday, April 7th. As of midnight on last Friday any bill in a committee in the chamber of origin (Senate bills in the Senate and House bills in the House) must be scheduled for a hearing and work session or the bill will not be considered any further during this legislative session. The exceptions to this rule are bills in Revenue Committees, Rules Committees and Ways and Means Committees which stay open the duration of the legislative session. The remaining bills will need to move out of committees by April 18th.

A number of bad legislative bills that MHCO has been fighting were stopped by last week's legislative deadline. However there are three bills that remain 'alive' that are of great concern:

HB 2004A: Prohibits landlord from terminating month-to-month tenancy without cause after first six months of occupancy except under certain circumstances with 90 days' written notice and payment of [relocation expenses] amount equal to one month's periodic rent. Provides exception for cer- tain tenancies for occupancy of dwelling unit in building or on property occupied by landlord as primary residence. Makes violation defense against action for possession by landlord. Requires fixed term tenancy to become month-to-month tenancy upon reaching specific ending date, unless tenant elects to renew or terminate tenancy. Requires landlord to make tenant offer to renew fixed term tenancy. [Repeals statewide prohibition on city and county ordinances controlling rents.] Permits city or county to implement rent stabilization program for rental of dwelling units. This bill passed the Oregon House and is now being considered in the Senate.

HB 2008: Requires landlord of manufactured dwelling park to pay tenant necessary relocation costs or applicable manufactured dwelling park closure penalty, as determined by Office of Manufactured Dwelling Park Community Relations, upon closure of park to convert to other use. Requires owner of manufactured dwelling park to give notice of final sale to office upon sale of park. Prohibits landlord from terminating without cause, unless under certain circumstances with 90 days' written notice, month-to-month tenancy consisting of rental of manufactured dwelling of float- ing home owned by landlord on space in facility. Requires fixed term tenancy consisting of rental of manufactured dwelling or floating home owned by landlord on space in facility to become month-to-month tenancy upon reaching specific end date, unless tenant elects to renew or terminate tenancy. Requires landlord to make tenant offer to renew fixed term tenancy. Requires office to produce materials to inform tenants of rights and adopt rules to require landlords to post materials in manufactured dwelling park public spaces. Directs office to establish and administer landlord-tenant dispute resolution program. Requires office to submit annual report on progress of program to interim committees of Legislative Assembly related to housing and human services for five years. Authorizes office to impose penalties for violations of landlord-tenant law against landlords of manufactured dwelling parks. Scheduled for a legislative work session on Thrusday.

HB 3331: Directs Office of Manufactured Dwelling Park Community Relations to establish and administer landlord-tenant dispute resolution program for disputes arising from notices of certain rent in- creases. Scheduled for legislative work session on Thursday.

We will be sending updates on the status of these three bills as they move through the legislative process. We are expecting significant amendments to HB 2008 but not enough to change MHCO's opposition. We are also expecting significant amendments in the Senate on HB 2004A. Again, the amendments will likely not change MHCO's opposition.

MHCO was successful in negotiating a landlord-tenant coalition bill (SB 277). This bill will be significantly amended on Wednesday in the Senate. We were also successful in exempting manufactured home communities from HB 2511. Obviously, all the bad bills left behind so far this session are a success - but we still have a lot work ahead. 

We have reached the halfway point of the 2017 Legislative Session. Unlike past legislative sessions this one looks to be a ugly and nasty fight to the end in July.    

A detailed list of bills currently being tracked by MHCO is attached - just click above the title.  

Disparate impact holds that certain practices in employment, housing, etc., may be considered discriminatory under the Act, if they have a disproportionately "adverse impact" on certain members of a protected class, i.e. those falling into the following groups: Race, color, religion, sex, disability, familial status or national origin.  The simplest explanation of how disparate impact works is by the following example: 

A landlord may be found to have discriminated against a prospective tenant, not because of an intentional discriminatory act, such as rejecting him or her based upon race or religion, but unintentionally, because the landlord relied upon a perfectly legal basis, except that it had a disproportionately adverse impact on members of a protected class.  Proof of the “disproportional impact” is usually based upon some statistical correlation showing that a certain class of protected persons are impacted more than others. In other words, unintentional discrimination can be found to be a violation of the Act.

According to the Memo (footnotes omitted): 

Across the United States, African Americans and Hispanics are arrested, convicted and incarcerated at rates disproportionate to their share of the general population. Consequently, criminal records-based barriers to housing are likely to have a disproportionate impact on minority home seekers. While having a criminal record is not a protected characteristic under the Fair Housing Act, criminal history-based restrictions on housing opportunities violate the Act if, without justification, their burden falls more often on renters or other housing market participants of one race or national origin over another (i.e., discriminatory effects liability). Additionally, intentional discrimination in violation of the Act occurs if a housing provider treats individuals with comparable criminal history differently because of their race, national origin or other protected characteristic (i.e., disparate treatment liability).

The purpose of the Memo is to issue guidance, mostly by way of examples and prior case law, in how the use of criminal history during the tenant-screening process, may, and may not, trigger a disparate impact result. 

MHCO has closely reviewed the Memo and will be providing further guidance shortly. In the meantime, this article is a “heads-up” to landlords and managers regarding the use of criminal background checks in light of the Memo. It is preliminary only, and not intended as “legal advice”. MHCO members should consult their own legal counsel for advice relating to their particular situation. 

Summary of Thoughts and Suggestions.  Here are some tips based upon information from the Memo: 

1. 1.    Beware of testers, calling over the phone and asking if you will rent to persons with a criminal background. Be careful about answering these blind calls with a “yes” or “no”. Make sure callers understand that no rental decisions are made in advance of reviewing all relevant background information, including a criminal background report. Encourage the caller to either come to the office and pick up the necessary paperwork, or if they prefer, send it to them at their provided address. 

1. 2.    Ultimately, members should plan on making adjustments in their rules and application process.  MHCO will elaborate on this further in a future article.

1. 3.    Do not have a rule or policy that treats arrests, with no conviction, the same as a conviction. If you currently have such a rule, it should not be enforced.

1. 4.    Do not have a blanket guideline providing, for example, that conviction for any crime is an automatic denial.

1. 5.    Be sure that all rules or policies concerning criminal records are uniformly enforced – no exceptions.  However, note No. 7 below. You should avoid a policy saying that all persons with a felony are automatically disqualified. There is a world of difference between an ex-felon who served time for embezzlement ten years ago and has been a contributing member of society ever since vs. an ex-felon who served time for aggravated battery, and has been in and out of jail for similar violence over the past five years.

1. 6.    If possible, evaluate all other rental history, such as prior tenancies, employment, credit, income and affordability, before even going to the results of a criminal background check. If the prospective tenant does not pass one or more of these criteria, then the rejection can be based on that, thus avoiding the use of criminal background reports and disparate impact issues entirely.

1. 7.    In evaluating an applicant’s criminal history, do not use a “one size fits all” approach. There are several gradations of severity. Additional issues need to be addressed before making a decision to reject a prospective tenant based upon criminal history. For example:

1. 1. a.    How long ago was the conviction? (Convictions over 6-7 years old, with no further convictions, in most cases should probably not be used as the basis for a denial (excluding registered sex offenders, or those convicted for violent crimes).

1. 1. b.    What has the person been doing since release?

1. 1. c.    Has the person been convicted once, or on multiple occasions?

1. 1. d.    What was the nature and severity of the crime? 

1. 1. 8.    Note that according to the Memo, a refusal to rent to an applicant who has a conviction for one or more drug crimes involving the manufacture or distribution (not mere possession) of a federally defined controlled substance is immune from a disparate impact claim. In other words, a landlord or manager may legally base the refusal to rent to a prospective tenant based upon his or her conviction for manufacture or distribution will not result in a violation of the Act, based upon disparate impact. Per the Memo: “Section 807(b)(4) of the Fair Housing Act provides that the Act does not prohibit ‘conduct against a person because such person has been convicted … of the illegal manufacture or distribution of a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802).’”

1. 1. 9.    ORS 90.303 (Evaluation of Applicant) addresses some of the same issues as in the Memo, but not all. And where there is similarity, Oregon law does not go as far as the Memo on the issue of criminal records and disparate impact. Oregon’s statute provides:

(1) When evaluating an applicant, a landlord may not consider an action to recover possession pursuant to ORS 105.105 to 105.168 (Oregon’s eviction statutes – PCQ) if the action:

      (a) Was dismissed or resulted in a general judgment for the applicant before the applicant submits the application. This paragraph does not apply if the action has not resulted in a dismissal or general judgment at the time the applicant submits the application.

      (b) Resulted in a general judgment against the applicant that was entered five or more years before the applicant submits the application.

(2) When evaluating the applicant, a landlord may not consider a previous arrest of the applicant if the arrest did not result in a conviction. This subsection does not apply if the arrest has resulted in charges for criminal behavior as described in subsection (3) of this section that have not been dismissed at the time the applicant submits the application.

(3) When evaluating the applicant, the landlord may consider criminal conviction and charging history if the conviction or pending charge is for conduct that is:

     (a) A drug-related crime;

     (b) A person crime;

     (c) A sex offense;

     (d) A crime involving financial fraud, including identity theft and forgery; or

     (e) Any other crime if the conduct for which the applicant was convicted or charged is of a nature that would adversely affect:

         (A) Property of the landlord or a tenant; or

         (B) The health, safety or right to peaceful enjoyment of the premises of residents, the landlord or the landlord’s agent. 

1. 1. 10.    Readers should not assume that compliance with ORS 90.303 means that a denial of tenancy could not result in a disparate impact claim.  In other words, landlords and managers should be extra-cautious in this minefield, since where federal law is more restrictive (i.e. burdensome on landlords), it will likely pre-empt state law.  

Here are some considerations to keep in mind:

1. 1. a.    The Memo and ORS 90.303 both prohibit screening applicants for arrests, regardless of the conduct that led to the arrest;
   2. b.    ORS 90.303 says that an arrest which has not been dismissed, but is still pending (i.e. a conviction is still possible) may be considered in tenant screening. The HUD Memo does not address this issue – so we don’t know what the feds would say. Accordingly, it may be prudent to take a more balanced approach in these situations. For example, rather than having a blanket policy that a tenant will automatically be rejected if their charge is still pending, landlords and managers should evaluate the matter based upon (a) When the matter will be resolved, e.g. a week, a month, or a year? (b) What was the charge? (c) If convicted, would the applicant automatically be denied?  As noted above, the whole issue of criminal background information is an element of the application process that need not be fully vetted, if, regardless of the crime, its severity or recency, the person would fail the application process on other grounds. If so, there is no need to rely upon the community’s criminal background policy to vet an applicant. However, a word of caution here: Be prudent when selecting a basis for denial. Using a weak reason, versus a stronger one, can be viewed as pretextual if the applicant is a member of a protected class. In other words, beware of using a credit basis for denial if it is “iffy” and exclude the criminal background basis. In these cases, landlords and managers should consult legal counsel; it may be best to use both bases. 
   3. c.    ORS 90.303 says that a landlord may consider a conviction for certain conduct, generally relating to threats of violence, drugs, sex, or property damage, which would indicate risks to fellow tenants or the landlord. However, the HUD Memo is broader and more subtle (i.e. it demands an evaluation beyond a one-size-fits-all rejection policy). In short, do not rely solely on ORS 90.303, to the exclusion of the more balanced approach demanded by the Memo.
   4. d.    Unlike the HUD Memo, ORS 90.303 does not address how long ago the conviction occurred, or require an evaluation of what the applicant had been doing since the conviction. (i.e. evidence of rehabilitation). The General Landlord-Tenant Coalition could not reach agreement on whether to use a five or seven year standard in the statute, nor whether multiple convictions should be dealt with differently than single ones. Accordingly, our statute is silent on this. Footnote 34 of the Memo cites to the following authority, which mentions six to seven years: 

“(S)ee, Megan C. Kurlychek et al., Scarlet Letters and Recidivism: Does an Old Criminal Record Predict Future Offending?, 5 Criminology and Pub. Pol’y 483 (2006) (reporting that after six or seven years without reoffending, the risk of new offenses by persons with a prior criminal history begins to approximate the risk of new offenses among persons with no criminal record).”

Conclusion.  Landlords and managers could be forgiven for feeling they are caught in a dilemma. If they follow Oregon law, it may not be enough – but at least the statutes are black and white. And while it may be sufficient to follow federal law, today that requires a “disparate impact” analysis, which, at best, is a shifting and nuanced set of “guidelines”. Perhaps most unsettling, now a good faith effort to comply with the tenant application process is not enough. Unintentional discrimination, now known under the more benign title, “disparate impact”, is more of a concept than a law, since it does not depend upon one’s overt actions,  - however well intended - but upon the long term “consequences” of those actions based upon inferred and empirical statistics derived from academic writings, analysis, surveys, footnotes, and demographics. Is this something landlords and managers can or should be expected to fully appreciate and understand?  The best we can do today is to keep alert to the issue. MHCO will have more on this minefield in coming articles.

Obviously, if the elderly or infirm resident, or their family, sell the home before the resident transfers to an assisted care facility, the problem goes away. If not, i.e. the home is vacated and space rent is not paid, the landlord should try to determine the intent of the departing resident, either from the resident themselves, or their family.[1] Are they intending to "abandon" the home?[2] If the resident, or their family, intends to try to resell the home, and make space rental payments in the meantime, then there is probably room for an agreement. But if - as is all too often the case - the intent is to either to simply "walk away" or not make any payments until the home is sold, then the landlord must evaluate his or her alternatives.

When the Resident Leaves Under these circumstances, assuming that the resident or their family did not contact the landlord in advance, and there is no way to find out where they have gone, the only alternative is to issue a 72-hour notice for nonpayment

of space rent. If it is not paid, the FED must be filed, and if the resident does not show up, the court will grant a judgment of restitution. After the lapse of 7 days following issuance of the judgment of restitution, the landlord may commence an abandonment, and proceed to auction as permitted by Oregon law.

It is precisely because the landlord's alternatives are so limited, that it is important to try to determine, in advance, what is going on with the tenant. If they are sick or infirm, this means trying to contact a close relative or friend. Are they planning on leaving? Are they going into an assisted care facility? Are they working with a social worker? If so, what agency is it? Having the answer to these questions make it much easier on the landlord and ultimately the elderly tenant, when the time comes for the tenant to relocate because of advanced age or health.

When the Resident Acquires State Assistance Where the resident obtains state assistance, and that agency acquires lien rights in the home as a result, the landlord still has the right to enforce payment of the rent. Similar to the situation where the resident "walks away" if rent isn'tpaid, an eviction may be filed and abandonment commenced following 7 days after the court's issuance of a judgment of restitution. As discussed below, while the state agency has certain rights during the abandonment process, they are not any different than other lienholders. However, if the space rent is not paid, either by the tenant or the state agency, the landlord has the right to commence the eviction process, by first giving a 72-hour notice of nonpayment.

Dealing with the Estate Most estate attorneys and heirs, do not understand the statutory abandonment process. In a nutshell, the estate has substantially the same rights to resell the home under a storage agreement as a lienholder, except that the resale period lasts for 90 days or close of probate, whichever is longer. Unfortunately, in most cases where the resident has passed away, the attorney, if one has been retained, or the beneficiaries, if not, assume that they do not have to pay space rent until the home is sold. This is patently incorrect. If the estate does not return the signed storage agreement within 60 days following the issuance of the abandonment and storage agreement, the landlord may proceed to auction.

In those cases in which the state agency has a lien (e.g. the Oregon Department of Revenue where the personal property taxes are paid under the senior citizens' deferral program), they must be notified of the abandonment the same as any other lienholder. However, in many instances, the state agency fails to file its lien with the Department of Motor Vehicles ("DMV"), which is the primary source for landlords to determine whether there are any liens filed against the home. Unless the landlord has actual notice of the lien, the failure of the agency to record it with the DMV will likely prevent it from being notified of a pending abandonment.[3]

Conversely, if a landlord is notified that the state agency providing assistance to the resident intends to claim a lien, then he or she should make sure to give them notice, once the resident has left the home (with no intent to return) and the abandonment process has been started. In this manner the state agency will have to decide - like all lienholders - whether to sign the storage agreement and commence making storage fee payments, or (b) give up the right to resell the home on site, to satisfy the lien.

[1] A related problem arises where the elderly tenant leaves, after transferring possession (and sometimes ownership) of the home to a younger relative - without the landlord's consent. Assuming that the landlord has not consented or accepted rent from the unauthorized occupant, this is a violation of ORS 90.400(3)(d) and the landlord has the right to issue a 24-hour notice to the occupant of the home, and, if necessary, terminate the tenancy.

[2] By "abandonment" I mean that the resident has, or will leave, with no intent of returning.

[3] Although this issue has not been addressed in any Oregon appellate court case, it is hard to see how a landlord could be required to notify a state agency, if he or she did not know that the agency claimed a lien on the home. Unless or until ORS 90.675 is amended, it would seem incumbent on any state agency claiming a lien to become familiar with the statute and record their lien with the DMV.

Answer:  This is an issue that the Oregon Residential Landlord Tenant Act (“ORLTA” or the “Act”) is not fully equipped to address. Nowhere in the Act is there a clear answer. But connecting some dots, I think we can arrive at a logical answer.  

· Technically, the 18-year old is not a tenant under the manufactured housing park (“MHP”) side of the Act, since he does not “own” the home. At best, he is a “tenant” under the non-MHP side of the law – he could be considered a month-to-month tenant, and therefore subject to the 30-day right of termination by the landlord.  Assuming this, what is the landlord to do?  First, do the rules permit subleasing?  If not, he could be compelled to leave. 

· Second, rent should not be accepted from him until this situation is clarified and a solution reached.

· Third, if the landlord is willing to accept the 18-year old under these circumstances (i.e. assuming he goes into title), he could be offered a monthly tenancy, subject to his qualifying under the community rules, etc. which, of course, require the background check, etc.  

· Lastly, again assuming the landlord is willing to accept him, a guarantee by the parents might be in order.  

· Keep in mind that since he was not a signatory to the original rental agreement since he was a minor, the fact that he is the only person remaining at the home, technically makes him an authorized occupant that has not yet been approved by park management. This is your strongest card, and you should use it to fashion the solution that best fits your needs.

All of these things require some legal guidance, but the answer to the above question is that the landlord, by acting carefully, should be able to protect his position and either require the 18-year old to vacate or qualify in all respects as a new resident (assuming he goes into ownership of the home).  In all cases a background check is not only appropriate, but essential.

The Manufactured Housing Landlord-Tenant Coalition met again this month to discuss a number of issues as we head into the 2015 Oregon Legislative Session that is just over a month away.

Lengthy Discussion on Competing Sales Conflict"

A: The writ of execution is necessary only in those cases in which the tenant refuses to vacate after the court has awarded possession of the space back to the landlord (also known as a "judgment of restitution"). If the tenant has voluntarily left following issuance of the judgment of restitution, the landlord may declare an abandonment after 7 days following the judgment. If a writ of execution has been issued, landlords do not have the right to obtain recovery of storage charges upon timely removal of the home by the tenant. Accordingly, the writ should only be served by the sheriff in those cases in which the tenant has refused to vacate following issuance of a judgment of restitution.

The required provisions of a rental/lease agreement are covered in ORS 90.510(5). These requirements include:

1. Location and approximate size of the space.
2. Federal Fair Housing age classification.
3. Monthly rent.
4. All personal property, services and facilities to be provided by the landlord
5. All deposits (refundable and non-refundable), fees and installation charges including government fees.
6. Improvements the tenant may or must make to the space or unit including plant material and landscaping.
7. Provisions for dealing with improvements to the space.
8. Any conditions the landlord applies in approving a purchaser of a manufactured dwelling or floating home as a tenant in the event the tenant elects to sell the home. This should be identical to the community's screening criteria.
9. Term of tenancy.
10. Processes for change to rules and regulations.
11. The process by which notices shall be given by either landlord or tenant

All of these provisions are included in the MHCO Rental/Lease Agreement

(MHCO Form 5A and 5B) 

Spot the Discrimination Mistake

Same scenario as last week’s article, but now assume that the landlord allows the tenant to keep her assistance animal stray cat, provided that she pays the pet deposit that all tenants who want to keep a pet in their apartment must pay.

Pitfall: If allowing a tenant’s assistance animal is required as a reasonable accommodation, you can’t ask the tenant to provide a pet deposit, extra insurance, or indemnity for keeping the animal.

Example: A Minnesota apartment community paid $35,000 to settle claims of placing undue conditions on a tenant’s request for a service animal by requiring her to:

• Buy an insurance policy covering the dog and listing the landlord as a co-insured;
• Make the dog wear a special emotional support animal vest at all times outside the apartment; and
• Sign an “indemnification and hold harmless waiver” covering the landlord against any harm the dog caused [United States v. Brooklyn Park 73rd Leased Housing Assoc., LLC (D. Minn., Jan. 22, 2016)].

So before I give you another accounting rule we are enforcing, let me say the goal is to protect your investment! We live in a very litigious society and need to be aware of potential risks and ways to protect our assets. Commonwealth employees are insured through workers' compensation policies and also provided regular training regarding workplace safety. Another area we are striving to improve risk management and compliance is in the area of hiring contractors. When a contractor is hired, the onsite manager must obtain verification that the contractor is licensed, bonded, and insured. In addition, a Form W-9 must be provided for purposes of reporting non-employee compensation on a Form 1099-Misc at the end of the year.

The downturn in the economy resulted in many contractors allowing their insurance and licensing to lapse. We are currently working on two projects to confirm all contractors are still in compliance. The first will be a "preferred vendor" list by location. Commonwealth is compiling lists by geographic areas of approved vendors so in an emergency situation your onsite manager or regional manager knows what vendors have up-to-date information on file. Secondly, we will be combining this vendor list with our accounting program to alert us when we need to update the insurance information. The reason to remind our customers of this policy is that some may have "tried and true" contractors that would not be eligible to work at the communities unless they can provide the necessary information requested OR become an employee to complete the task you wish to hire them for. I mention the latter as it is a legal remedy to tackling some of the small jobs that may be better served by hiring specialized temporary employees through agencies. Another option is hiring an individual on a task by task basis for their special skill. Commonwealth wants to be sure we are doing our best to protect your investment by limiting your risk exposure, both legal and financial, associated with contractors working at your communities.

Another reminder is that we do send 1099-Misc forms to all contractors annually. The form 1099-Misc reports all non-employee compensation. Amounts paid for employee compensation are reported on a Form W-2. Employees cannot receive a 1099-Misc and Form W-2 from the same employer for similar work. In order to keep away from any proof of control issues, our company policy is to send a W-2 to all employees and make sure all compensation for that individual runs through payroll. All independent contractor payments are reported on a 1099-Misc.

Article provided by Kathleen Landau, Accounting Manager for Commonwealth Real Estate Services since 2009. Kathleen brings over 20 years of accounting experience and knowledge to the Commonwealth team, and as a multi-site property owner herself, understands the unique needs facing property investors and small business owners.