2025 Legislative Update

The 2025 Oregon legislative session introduced a surge of bills that directly impact homeowners and condominium associations. These proposals addressed key issues such as construction defect liability, land use, and community governance, sparking important conversations about property rights and financial responsibility. It is essential for boards, managers, and homeowners to understand these legislative developments and prepare for the changes ahead by planning for compliance, educating residents, and protecting the long-term interests of their communities. House Bill 3746 introduces significant changes to how community associations can pursue legal action for construction defects. Now signed into law, it shortens the statute of repose from ten years to seven years from substantial completion, regardless of whether the work involves new construction or major rehabilitation. The law also requires associations to conduct moisture intrusion inspections and follow a detailed notice process before initiating a claim, including notifying builders and subcontractors and allowing time for repairs. While intended to reduce litigation and encourage housing production, this change limits the time available to hold builders accountable for hidden defects. The law becomes effective January 1, 2026. House Bill 3144 invalidates HOA rules or restrictions that prohibit manufactured homes, prefabricated structures, or accessory dwelling units. Designed to address housing shortages and promote affordability, this law may require associations to revisit and revise their governing documents to ensure compliance. It also becomes effective January 1, 2026. Senate Bill 59 sought to void governing document provisions that prohibit gardening, hen-keeping, or beekeeping. Although the bill aimed to promote sustainable living practices, it did not pass and remained in committee upon adjournment, though it may reappear in future legislative sessions. House Bill 3545 attempted to clarify how and when HOA and condominium assessments accrue on properties transferred to counties through tax foreclosure. This bill also did not pass but is anticipated to return in a future session. Overall, the 2025 session underscores the importance of community associations remaining engaged in the legislative process. Organizations such as the Community Associations Institute’s Oregon Legislative Action Committee continue to advocate for policies that protect homeowners and support responsible self-governance. Staying informed and involved helps associations minimize negative impacts and shape fair and effective legislation.

Coverage Corner: Inflation Guard Coverage

With rising construction costs, supply chain delays, and labor shortages, rebuilding today costs significantly more than it did just a few years ago. Inflation Guard coverage is a critical yet often overlooked insurance policy feature designed to protect associations from being underinsured in the event of a loss. This endorsement automatically increases the building coverage limit at each renewal, helping the policy keep pace with inflation and changing market conditions. Without this adjustment, an association can quickly become underinsured as material and labor costs rise while coverage limits remain static. Although Inflation Guard provides an important baseline level of protection, it is still essential to periodically review the building’s replacement cost with an insurance agent or carrier. Recent increases in construction costs have left many associations undervalued, even when this endorsement is in place. Most insurance carriers offer Inflation Guard as an option, but it is not always included automatically. Boards should confirm whether this protection is part of their current policy or if it needs to be added. In addition to being a best practice, Inflation Guard is often a standard lending requirement, as lenders want to ensure that adequate coverage is maintained to protect the asset securing their loan. Without it, associations may encounter challenges when securing or refinancing loans, and unit owners could face significant financial exposure following a major loss.

Owners’ Question: If a Neighbor’s Renovation Accidentally Causes a Leak Into My Unit, Who Is Responsible for the Damage?

Responsibility for damage caused by a neighbor’s renovation typically depends on the source of the loss and the association’s governing documents. If the neighbor’s contractor caused the leak, that party may be held liable for the resulting damages. However, the association may still be responsible for repairing certain components of the building or common elements, depending on the governing documents. The association’s insurance policy may also include a deductible, and an adopted insurance resolution can clarify how that deductible is allocated in negligent versus non-negligent situations. If no negligence is found, affected owners are generally responsible for repairing their own units, which highlights the importance of maintaining adequate HO-6 insurance coverage. Promptly reporting any damage to the association and relevant insurance carriers is essential to ensure a timely and coordinated response.

Update of the Month: Governing Documents

An association’s governing documents establish the framework for how the community operates and what owners can expect. Over time, these documents can become outdated, sometimes containing conflicting information, lacking modern best practices, or including provisions that are no longer legally enforceable. Periodic review is essential to ensure alignment with current laws, community needs, and efficient operational standards. Depending on the nature of the change, updates may require a formal amendment approved by owners or may be implemented through a board-adopted resolution or rule. Consulting legal counsel before making any updates is essential to ensure compliance and avoid unintended consequences. Common areas that often require attention include insurance language and claims processes, which can sometimes be clarified through an insurance resolution; maintenance and repair responsibilities, which may benefit from a maintenance matrix defining owner and association obligations; use restrictions addressing issues such as short-term rentals, electric vehicle charging stations, or smoking; and meeting and voting procedures to accommodate modern practices such as virtual meetings and electronic ballots. Even when state law permits certain actions, such as virtual meetings, updating governing documents provides clarity and consistency. If your documents have not been reviewed within the last seven to ten years, now is an ideal time to consider a comprehensive update to keep your community protected and well-governed.