SB 426 and Tenant Improvements: Does Ownership of the Finished Buildout Matter?

Oregon's Senate Bill 426 broadens potential wage-payment exposure on private construction projects by imposing joint and several liability on certain owners and direct contractors for unpaid wages owed to covered construction workers. The statute took effect on January 1, 2026.

For landlords and tenants, one of the most significant interpretive questions may arise in the tenant-improvement context. SB 426 defines an "owner" broadly enough to include not only a fee owner, but also a lessee or another holder of a less-than-fee interest, if that party "causes" the work to be performed. That wording suggests the inquiry is not limited to who owns the real property. It also asks who, in substance, brought about the construction.

That framing supports a reasonable textual argument that, in a tenant-managed tenant improvement (TI) project, the tenant may be the relevant statutory owner where the tenant elects to do the work, hires the contractor, controls the buildout, and pays for it. The statute's express inclusion of lessees reinforces that point.

The more difficult question is the one many landlords will care about most: What if the landlord ultimately owns the completed improvements or is the economic beneficiary of the buildout? Many commercial leases provide that installed improvements become the landlord's property immediately or no later than lease expiration. That fact creates a meaningful complication for any argument that the landlord falls outside SB 426 altogether.

Even so, there is a plausible textual argument that ultimate ownership of the finished buildout is not the same thing as causing the construction work. SB 426 does not define "owner" simply as the party that ends up holding title to the completed improvements. Instead, it reaches a party with a relevant ownership interest that causes the work. On that reading, post-construction ownership may be relevant, but should not necessarily be dispositive.

At the same time, landlords should be careful not to overread that argument. A court examining a tenant-improvement project may look beyond the formal contract chain and ask whether the landlord's practical role was substantial enough to make the landlord a party that caused the work. Facts that could complicate the landlord's position may include a landlord-required buildout, detailed landlord control over scope or design, meaningful contractor-selection control, landlord funding through a TI allowance tied to specific construction requirements, or lease provisions making the buildout part of the economic bargain for occupancy.

As a practical matter, landlords should review leases, work letters, TI allowance structures, approval provisions, and construction-administration practices now. Under SB 426, the exposure analysis may turn less on labels such as "fee owner" and "tenant," and more on the project-specific question: Who actually brought about this work?

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Antonija Krizanac is an associate in the Portland office of DWT. For questions or more insights, please reach out to Antonija or another member of our construction & government contracts team and sign up for our alerts.