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| Homebuyer Protection Act (ORS 87.007) |
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| General Information |
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The Homebuyer Protection Act (HPA), codified at ORS 87.007, is designed to protect new home buyers from construction liens when the buyer has already paid for the new home. Construction work performed before the sale of a home may result in a lien after the sale. This law offers various ways to protect a buyer against such liens.
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| HPA Frequently Asked Questions |
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This information answers the most commonly asked questions about the Homebuyer Protection Act (HPA). These answers do not substitute for legal advice. If you need assistance completing the Notice of Compliance with the Homebuyer Protection Act (HPA) of 2003 (“Notice of Compliance”) or if you need answers to specific questions, you should consult an attorney.
What is a construction lien?
Construction liens have been a part of Oregon’s law for over 100 years. Under the law, anyone who constructs improvements on property, supplies materials, rents equipment, or provides services for improvements has a right to collect payment from the property if they are not paid. If the general contractor does not pay the subcontractors, laborers, material suppliers, or equipment rental companies, those persons may claim a lien against the property. Or, if the owner of the property does not pay the general contractor, the general contractor may file a lien against the property.
What is the purpose of the Homebuyer Protection Act (HPA)?
A person may buy a new house and arrange for full payment to the owner-seller. Under Oregon’s lien laws, contractors and others may still be able to file construction liens against the property after the sale. The HPA protects buyers of new homes against construction liens that are filed after the sale.
When did the HPA become law?
The HPA became law on January 1, 2004. It applies to all new home sales after that date.
Who must comply with the HPA?
Any property owner selling:
- A new single-family residence, condominium unit, or residential building. “Residential building” is not defined, but a “residential structure” means a building (with one or more dwelling units) that is less than four stories tall.
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- An existing single-family residence, condominium unit, or residential building where there was at least $50,000 worth of improvements within three months before the sale.
How can a seller determine whether the property being sold is affected by the HPA?
A person can ask oneself:
- Is this a newly constructed home (or condominium unit or residential building)?
- Is this the first time the home (or condominium unit or residential building) has been sold?
- Has the seller had more than $50,000 in construction work, improvements or remodeling done to the home (or condominium unit or residential building) within the last three months?
If the answer to any of these questions is “yes,” the owner-seller may need to comply with the HPA.
What must an owner-seller do to comply with the HPA?
An owner-seller may comply with the law by:
- Purchasing title insurance that does not exclude filed or unfiled claims of lien;
- Retaining at least 25% of the sales price in escrow;
- Maintaining a bond or letter of credit for at least 25% of the sales price;
- Obtaining lien waivers or releases;
- Waiting to complete the sale until after the deadline for filing liens (usually 75 days); or
- Obtaining a signed, written waiver from the buyer.
The owner-seller must complete the HPA Notice of Compliance indicating how the owner-seller has complied with the law.
The owner-seller and the buyer must sign and date the form by the sale closing date. Both parties should retain a copy of the signed Notice of Compliance.
What happens if a seller does not comply with the HPA?
If the seller fails to provide the HPA Notice of Compliance, it is a Class A violation, which carries a fine of up to $720.
If the buyer has to take legal action to remove the liens, the seller may have to pay up to twice the buyer’s damages plus the buyer’s costs and attorney fees.
Where do I get an HPA Notice of Compliance form?
The HPA Notice of Compliance form is available by clicking on the link below.
Are there instructions for filling out the form?
Yes, the instructions to complete the Notice of Compliance are combined with the form and are available by clicking on the link below.
Who is responsible for complying with the HPA and filling out the HPA Notice of Compliance?
The owner-seller (including a contractor selling a “spec home”) has sole responsibility for complying with the HPA.
What kind of title insurance satisfies the requirements of the HPA?
An owner’s extended coverage title insurance policy, or equivalent, that does not exclude filed or unfiled claims of lien may satisfy the requirements of the HPA. A standard title insurance policy or a lender’s title insurance policy may be inadequate. Consult your title insurance company or your attorney.
How much money must a seller retain in escrow to satisfy the HPA? Can the money be returned if not used to pay liens?
The seller must retain in escrow an amount of at least 25% of the sales price of the property. The escrow funds will pay any claims of lien not paid by the seller filed after the date of the sale. Any unused funds may be released to the seller, upon the seller’s request, upon fulfillment of the following conditions:
- Claims of lien have not been filed and at least 90 days have passed since the date the construction was completed;
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- One or more claims of lien were filed against the property, but at least 135 days have passed since the lien claims were filed, and the liens were released or waived.
How does a seller obtain a bond or letter of credit that satisfies the HPA?
A qualifying bond can be purchased only from a company that is authorized or permitted to do surety insurance in Oregon. The bond must comply with OAR 812-001-0305. A traditional CCB bond, which is required for a CCB license, does not satisfy the requirements of the HPA.
A qualifying letter of credit must be obtained from a financial institution. The letter of credit must comply with OAR 812-001-0305.
Click here for the Oregon Administrative Rules 812 (OARs).
How can a seller obtain lien waivers or releases to satisfy the HPA?
The seller should contact an attorney. These are forms that may impact the legal rights of the persons who sign them.
If the seller selects this method to comply with the HPA, there must be a written waiver or release from every person claiming a lien or liens that total $5,000. The seller must provide copies of the waivers or releases to the homebuyer not later than the date of the sale.
How long does a seller need to wait after the sale to satisfy the deadline for filing liens?
The seller should wait at least 75 days after the date of completion of construction.
How can a seller obtain a buyer’s waiver form to satisfy the HPA?
The waiver form is set forth in ORS 87.091 and may also be obtained by clicking on the link below under HPA Forms.
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