New Foreclosure Surplus Process for Counties Becomes Law on Sept. 26
House Bill 2089, which brings Oregon into alignment with the U.S. Supreme Court’s decision in Tyler v. Hennepin County, was deliberated between counties and consumer advocates over the course of eight amendments and ultimately was passed out of both legislative chambers with unanimous approval. The bill will go into effect Sept. 26, 2025, and the provisions will apply to property and claims for which the claimant received a one-year redemption period notice on or after May 25, 2023. The law is silent on property and claims for which the claimant received a one-year redemption period notice for on or before May 24, 2023.
Intro to Tyler v. Hennepin County
Prior to the U.S. Supreme Court decision in the Tyler v. Hennepin County, Minnesota (2023) case, Oregon was one of 20 states that statutorily allowed local governments to retain surplus equity from tax foreclosed properties after selling properties at a county auction. This meant that after a tax foreclosed property was sold to a new owner, counties and the local taxing districts within their jurisdiction were allowed to keep the surplus funds that remained after back taxes were recouped from the sale proceeds. This commonly took the form of taxing districts splitting surplus funds amongst themselves.
The Tyler decision, which was decided unanimously by the U.S. Supreme Court, deemed that any retention of surplus funds from a foreclosed property sold by a county is a violation of the Fifth Amendment’s Takings Clause. As a result, many states, including Oregon, were required to change the laws on their books to bring their statutes in alignment with the federal law.
In order to begin the process of aligning Oregon law with the Tyler decision, Oregon lawmakers drafted HB 4056 during the 2024 legislative session to address the matter, which brought out stakeholders from consumer-advocate groups and counties to engage on the legislation. Consumer advocates’ goal was to create policy that maximized the amount of surplus that counties could fetch for former owners, and counties’ priority was to come up with a surplus transfer process that complied with Tyler.
Ultimately, consumer-advocates and counties failed to come to an agreement on what a proper process would look like and, instead, lawmakers passed legislation that mandated a workgroup and report back by DOR and stakeholders to that would propose a uniform process by which counties could transfer surplus proceeds from the sale of a property to their rightful owners.
That 2024 workgroup eventually dissolved and no uniform process was agreed upon by counties or the consumer advocates.
Oregon’s 2025 Legislative Session
During the 2025 legislative session, the House Committee on Revenue, the Association of Oregon Counties (AOC), and consumer-advocates all indicated a need to find a resolution and end the uncertainty of how counties would deal with new foreclosures in a post-Tyler environment, but all stakeholders diverged in what they felt the solution should be, similar to the 2024 legislative session.
Lawmakers ended up playing a mediating role, using HB 2089 as the primary vehicle to work from, while AOC and county staffers worked to negotiate against a consumer-advocate coalition that had grown larger, and more powerful, since the 2024 session. While AOC partnered with the Oregon State Assessor and Tax Collector Association and Oregon County Counsel Association members to form the “county coalition,” the consumer-advocate coalition consisted of national civil liberties think tanks, AARP, bankers and mortgage lenders, and trial lawyers. Despite being heavily outgunned and outnumbered, the county coalition worked tirelessly to mitigate HB 2089’s harm to counties with each subsequent amendment that was drafted.
At the start of the 2025 legislative session, the consumer-advocate group had drafted a bill that would have made counties: provide additional pre-foreclosure notices to all owners and lienholders; have sheriffs physically post pre-foreclosure notices on properties prior to the redemption period expiring; send out notices in multiple languages; track down and send notice to all heirs of a property owner; use a realtor to sell all types of property; use an online bidding platform for foreclosure auctions; and appraise properties with a real market value or assessed value above $10,000.
Through negotiations with legislators and the consumer-advocate coalition, the following concessions were gained by the county coalition: removal of the additional pre-foreclosure notices and sheriff postings; moving the language notices to the Oregon State Treasury; removing notice to heirs as a requirement; the waiving of public procurement laws when counties contract with realtors or appraisers; limiting the use of realtors to certain residential properties; limiting the appraisal requirement to certain residential properties; and making online bidding platforms optional.
Additionally, definitions for a “claimant” were established to ensure that former owners of real property at the time of foreclosure are the ones who can make a claim to surplus funds, and not creditors, third-parties, or LLCs. There is also a mechanism within HB 2089 that allows counties to recoup any allowable costs associated with the new foreclosure requirements from surplus proceeds. Lastly, the Oregon State Treasury graciously offered to take on the responsibility of receiving the surplus funds from counties and placing them in their unclaimed property system. From there, the Treasury has a process by which it can reunite surplus property with the proper former owners and claimants.
While the final version of HB 2089 was far from ideal from the county point of view and multiple degrees beyond the scope of what Tyler called for, the provisions in Oregon’s law are much better for counties than similar versions of the law that passed in other states that needed to align their laws with the SCOTUS decision.
Implementing HB 2089
HB 2089 will go into effect Sept, 26, 2025. The information provided in this article is meant to be a high-level guide to navigating HB 2089 and the overarching changes that the new law makes on the county foreclosure process. For additional guidance and information on implementing HB 2089, or for official legal guidance on what is and isn’t required of your county, please reach out to your county counsel.
Below is a high-level overview of each section:
Sections 1–2
Make changes to notices of foreclosure proceedings and one-year notices of redemption period expiration, respectively. There is new and specific language that must be sent out in those notices, due diligence must be done by counties to ensure all owners are notified, information about legal and tax relief services are to be included, and a reference to the unclaimed property website where the notices are translated into Oregon’s five most commonly spoken languages is also mandated.
Section 3
Requires counties to provide notice of surplus within 60 days after the date on which a claimant could make a claim on their surplus at the Oregon State Treasury. Notices are to be distributed to other local municipalities and state agencies, in addition to the claimant.
Section 4
Requires counties to also provide foreclosure proceeding notices and one-year redemption period expiration notices to the Oregon Department of Justice, Oregon Department of Revenue, and local municipalities.
Section 5
Provides proper definitions for a “claimant”, which is to be used when implementing HB 2089. In short, a claimant is the individual who owned the property at the time the property was foreclosed on and subsequently deeded to the county.
Section 6
Makes changes to the county process of selling foreclosed properties. In order to simplify the various changes for each category of property, they are broken down here into three general categories that the law specifically touches on:
For Residential and Formerly Occupied Properties (appraisals required if the property has a $250k+ RMV):
- Make 3 attempts to contract with a realtor and sell the property via realtor
- If it doesn’t sell via realtor, move to an auction with a 2/3 FMV starting bid.
- If it doesn’t sell via 2/3 FMV starting bid, move to a minimum bid price sale (the minimum bid would be the sum of delinquent property taxes, special assessments, penalties, interests, and costs assigned to the property by counties).
- If it doesn’t sell via minimum bid price sale, the county can forgive all that is owed by the former owner and then may proceed to dispose/keep the property on books as they see fit. No surplus or proceeds exist, and so nothing is required to be sent out to former owners.
For Non-Residential Properties or Residential Properties that were not Formerly Occupied as a Primary Residence (no appraisals required):
- Go straight to an auction with a 2/3 FMV starting bid.
- If it doesn’t sell via 2/3 FMV starting bid, move to a minimum bid price sale.
- If it doesn’t sell via minimum bid price sale, the county can forgive all that is owed by the former owner and then may proceed to dispose/keep the property on the books as they see fit. No surplus or proceeds exist, and so nothing is required to be sent out to former owners.
For Properties that the County Decides to Retain for Public Use or for Lease to a Non-Profit
- Appraise the property
- Send surplus to the former owner (which is the greater of the appraised and RMV values, minus delinquent taxes and costs that counties can recoup).
Section 7
Allows counties to contract with realtors and third-party appraisers, for the purposes of HB 2089, without having to follow public procurement laws.
Section 8
Outlines how counties should calculate surplus amounts and requires the surplus to be determined within 60 days after the date on which the gross sales proceeds from the sale of the property are deposited in a separate, interest bearing account.
Section 9
Creates the provisions for how a claimant would file a claim with the Oregon State Treasury for their surplus proceeds.
Section 10
Officially establishes foreclosure surpluses as unclaimed property and requires counties to report and deliver surpluses to the Oregon State Treasury within 30 days after the date on which the surplus is determined.
Section 11
Makes a minor tweak to statues for reporting abandoned property to be aligned with the new requirements in Section 10.
Sections 12 to 15
Establish the effective date. HB 2089 will go into effect Sept 26, 2025 and the provisions within the law will apply to property and claims for which the claimant received a one-year redemption period notice for on or after May 25, 2023.
Contributed by: Justin Low | Legislative Affairs Manager
