Oregon boards must warn owners before suing over defects
Oregon boards must warn owners before suing over defects
2026-09-15 · Oregon · Compliance
An Oregon association can no longer decide to sue its builder in a single board meeting. Since January 1, 2026, ORS 94.662 for planned communities and ORS 100.490 for condominiums require three rounds of owner notice, a minimum 90-day wait, and a board vote taken at a properly called meeting — and one of those notices must carry a warning, in statutory words, that the litigation may make owners' homes harder to sell.1
The gate
ORS 94.662(3)(a) and (b), as added by House Bill 3746:
“(a) A homeowners association may only initiate or intervene in litigation or an administrative proceeding under ORS 94.630 (1)(e)(E) to recover damages for a claim regarding a matter that results from a defect as defined in ORS 701.560, or damage arising from a defect, if approved by the board at a meeting held pursuant to ORS 94.644. (b) The meeting held under paragraph (a) of this subsection must occur: (A) At least 90 days after the homeowners association first sends a notice described in paragraph (c) of this subsection to each owner; (B) After sending a second notice by first class mail with certificate of mailing; and (C) At least 15 days after sending a third notice by first class mail.”2
Note the word intervene. The gate is not limited to cases the association starts; joining an existing proceeding triggers the same sequence.
What the notice must contain
Beyond the contents already required by ORS 94.662(1), a notice under this subsection must state that the association believes a defect in the common property exists; give “a detailed description of the defect”; identify “the parties the association considers responsible”; include the name of each board member and a method of contacting each of them electronically or by mail; and carry the warning.
The warning, in the Legislature's own words
ORS 94.662(3)(c)(E) prescribes it “in substantially the following form”:
“WARNING: If the board decides to proceed with the proposed litigation or administrative proceeding, your ability to sell your lot in this planned community may be limited while the litigation or proceeding is pending. If you have opinions or information that you wish the board to consider in making its decision, you are advised to contact the board promptly.”2
It is an unusually candid thing for a statute to require an association to tell its own members, and it is accurate: pending construction-defect litigation is a disclosed item on lender project questionnaires and a common cause of a project being found ineligible for conventional financing.
Notice to the other side, too
ORS 94.662(3)(d) adds a duty running outward:
“The association shall send a copy of the notice by certified mail to each person identified in the notice as a party the association considers responsible for the defect. The requirement for sending notice under this subsection is in addition to the notice of defect requirement in ORS 701.565 and does not initiate the procedure described in ORS 701.560 to 701.595.”2
That last clause is doing careful work. The owner-notice package must be copied to the builder, but sending it does not start the contractor right-to-repair clock. Those are two separate processes with separate triggers, and an association that treats the owner notice as having started the ORS 701.565 process will find it has not.
The condominium version is not word-identical
ORS 100.490(3) mirrors the structure, with three differences a practitioner should not blur:
- the approval meeting is held pursuant to ORS 100.420, not ORS 94.644, and the claim is one under ORS 100.405(4)(e)(E), not ORS 94.630(1)(e)(E);
- the opt-out description in ORS 100.490(1)(f)(D) says the opt-out “Does not interfere with the association's right to make repairs to common elements,” where ORS 94.662 says “common areas”;
- the condominium warning as enacted says “your ability to sell your lot in this condominium” — lot, not unit. That reads as a drafting slip, and it is what the enacted text says.
The one-word change with real consequences
Both ORS 94.662(2) and ORS 100.490(2) govern the owner opt-out. House Bill 3746 changed the operative verb from “the association shall not make or continue any claim” to “the association may not make or continue any claim.”
In Oregon drafting convention that is not cosmetic. “Shall not” states a duty; “may not” states an absence of authority. An association acting without authority is in a materially weaker position than one that has breached a duty, and the change bears directly on what a defendant can argue about an association's standing to bring a claim as to opted-out owners.
Where that leaves a board
Work backwards from the filing date and count. Ninety days from first notice to the meeting is the floor, not the schedule. Add the time to prepare a “detailed description of the defect” that will survive being read back in cross-examination, to assemble contact details for every board member, to obtain certificates of mailing for the second notice, and to identify responsible parties precisely enough to serve them by certified mail. Four months from decision to meeting is a realistic minimum, and it sits inside a repose period the same bill shortened to seven years for post-2026 declarations.
The notice package itself is also likely to become a disclosure item. Our Oregon resale and disclosure page covers what a seller and an association have to put in front of a buyer; a live defect notice naming a defect in the common property is exactly the kind of material an association will be asked about.
What to watch next
Whether the warning changes outcomes. The Legislature has given every owner in an Oregon association a 90-day window, a named board member to contact, and an explicit statement that suing may impair resale. That is a structure designed to produce owner pushback before a filing decision, and the first visible effect is likely to be fewer association defect claims rather than better-noticed ones.
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