What the District’s COVID-19 Response Legislation Means for the Real Estate Industry 

I. MORTGAGE RELIEF

A. Residential and Commercial Mortgage Loan Deferment Program

1. Deferment Program Overview

The Act provides guidelines that mortgage lenders that make or hold residential and commercial mortgage loans in the District must follow until 60 days after the end of the public emergency period declared by the Mayor.

These mortgage lenders are required to develop a deferment program that:

1. grants at least a 90-day deferment period of mortgage payments (this refers to the monthly payment of principal and interest on a mortgage) for borrowers;
2. waives any late fees or other fees that may accrue during the pendency of the public health emergency; and
3. does not report the deferral as delinquent to any credit reporting agency.

2. Definition of “mortgage lender”

The term “mortgage lender” is broadly defined to include both originators and servicers of mortgage loans. However, a “mortgage lender” does not include the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Government National Mortgage Association.

3. Application for Deferment Program

Mortgage lenders are required to establish application criteria and procedures for borrowers to apply for the deferment program and must make the application or a summary of procedures available online or by telephone.

Approval Process

Mortgage lenders must approve each application in which a borrower:

1. demonstrates financial hardship resulting from the public health emergency (including an existing delinquency or future inability to make payments); and
2. agrees in writing to pay the deferred payments within: (a) a reasonable time agreed to in writing by both parties, or (b) the earlier of (i) 3 years from the end of the deferment period, or (ii) the end of the original term of the mortgage loan.

Complaint Process

A person or business whose application for deferment is denied may file a written complaint with the Commissioner of the Department of Insurance, Securities and Banking (the Commissioner). The Commissioner is authorized to investigate the complaint in accordance with section 13 of the Mortgage Lender and Broker Act of 1996.

Reporting Requirements

Mortgage lenders who approve an application for deferment must, on or before June 4, 2020, have provided the Commissioner all approved applications on a form prescribed by the Commissioner. Subsequently, the mortgage lender must provide the Commissioner with a list of all new approvals in 15-day intervals for the duration of the public health emergency and for 60 days thereafter.

Payment Prohibitions

Mortgage lenders are prohibited from requiring or requesting a lump sum payment from any borrower making payments, subject to investor guidelines.

4. Notable Exclusions of Deferment Program

The mortgage relief provisions will not apply to:

1. National banks or federally chartered credit unions;
2. A property for which a mortgage lender initiated a foreclosure action, or exercised its right to accelerate the balance and maturity date of the loan, on or before March 11, 2020; and
3. A mortgage loan that is a “Federally backed mortgage loan” or a “Federally backed multifamily mortgage loan” as defined by the CARES Act.

B. Residential Foreclosure Moratorium

1. Length of Moratorium

The Act prohibits residential foreclosures during the period of time for which the Mayor has declared a public health emergency and for 60 days thereafter. Commercial foreclosures are excluded from this moratorium. However, the Act permits residential foreclosures if the record owner (or an heir or beneficiary of a deceased record owner) has not resided at the property for at least 275 days in the 12 months preceding the first day of the public health emergency. The District is therefore not protecting properties owned primarily for investment rather than occupancy.

2. Effect on Condominiums

The 3 year statute of limitations on a condominium association’s collection of assessments is tolled during the public health emergency and for 60 days thereafter.

II. TENANT PROTECTIONS

A. Tenant Payment Plan

1. Overview of Rent Payment Plan Program

For the duration of the public health emergency and for one year thereafter (the program period), the Act requires landlords to offer a rent payment plan for eligible residential and certain commercial tenants who cannot pay their rent due as a result of the public health emergency.

Eligible Tenants

Landlord is only required to offer the program to an “eligible tenant,” which is defined as a tenant that:

1. has notified the landlord of an inability to pay all or a portion of the rent due as a result of the public health emergency;
2. is not a franchisee (unless the franchise is owned by a District resident); and
3. has leased from a landlord (a) a residential property, (b) commercial retail space, or (c) commercial space that is less than 6,500 square feet.

2. Tenant Payment under Rent Payment Plan Program

Tenants entering into a payment plan must make payments in equal monthly installments for the duration of the payment plan, unless a different schedule is requested by the tenant.

Landlord cannot require or request a tenant to provide a lump-sum payment under a payment plan.

3. Requirements of Rent Payment Plan Program

Under the program, a landlord must:

Rent Deferred Under Plan

1. make a payment plan available to an eligible tenant for the payment of gross rent and any other amounts that come due under the lease during the program period and prior to the cessation of the tenancy;
• The Clarification Act recently amended this provision so that the payment plan covered base rent and additional rent payments, such as reimbursements to landlords of common area maintenance expenses, real estate taxes and other building operating expenses, as is common in commercial leases.

Length of Plan

2. make the minimum term length of the program one year, unless a shorter payment plan term length is requested by the eligible tenant;

No Tenant Penalty

3. provide that an eligible tenant does not lose any rights under the lease by entering into the payment plan;

Misc. Requirements

4. waive any fee or penalty arising out of the entering into the payment plan;
5. not report to a credit reporting agency as delinquent the rent that is subject to the payment plan; and
6. notify all tenants of the availability, terms, and application process for the program.

4. Landlord Guidelines for Development of Rent Payment Plans

Landlords are given some discretion in the development of the program’s application process, which allows landlords to use existing procedures or establish new procedures (including requiring tenants to submit supporting documentation). However, they are required to permit an application for a payment plan to be made online and by telephone.

5. Landlord Guidelines for Approving Tenant Application of Rent Payment Plan

Importantly, landlords must approve an eligible tenant’s application if following criteria are met:

1. The eligible tenant demonstrates to the landlord evidence of a financial hardship resulting directly or indirectly from the public health emergency (i) regardless of an existing delinquency or a future inability to make rental payments established prior to the start of the public health emergency and (ii) that would cause tenant to be unable to qualify to rent the space (using same qualification criteria applied to tenant when it was initially approved); and
2. The eligible tenant agrees in writing to make payments in accordance with the payment plan.

Regardless of whether the application is approved or denied, a landlord who receives an application for a payment plan must retain the application for at least 3 years and is also required to, upon request, make an application for a payment plan available to:

1. For residential tenants, the Rent Administrator, Office of the Tenant Advocate
2. For commercial tenants, the Department of Consumer and Regulatory Affairs (the DCRA)

6. Complaint Process

If a residential tenant’s application for a payment plan is denied, then the tenant may file a written complaint with the Rent Administrator (head of the Rental Accommodations Division under the Department of Housing and Community Development). The Rent Administrator will then forward the complaint to the Office of Administrative Hearings for adjudication.

If a commercial tenant’s application is denied, the tenant may file a complaint with the DCRA.

7. Limitations on Collection Lawsuits and Evictions

During the program period, unless the landlord offered and approved a rent payment plan, the landlord is prohibited from filing any collection lawsuit or eviction action for non-payment of rent, provided the tenant does not default on the terms of the payment plan.

B. Protections for Residential Tenants and Certain Commercial Tenants

1. Rent Increase Prohibition

For the duration of the public health emergency and for 30 days thereafter, rent increases are prohibited on:

1. Any residential property;
2. Any commercial retail establishment; and
3. Leased commercial space that is less than 6,500 square feet.

Voiding of Certain Rent Increases Previously Collected During Public Health Emergency

Any rent increases on commercial space that were made between the beginning of the public health emergency (March 11, 2020) and June 9, 2020 and are prohibited as described above are null and void and required to be credited back to the tenant.

2. Residential Tenant Protections

Tolling of Time Periods

The running of all time periods for residential tenants and tenant organizations to exercise their rights under the Rental Housing Conversion and Sale Act are tolled during the public health emergency, and for 30 days thereafter.

Late Fees

No late fees may be assessed for any rent due during any month in which a public health emergency has been declared.

Amenity Refunds

If a residential landlord temporarily stops providing an amenity that a tenant pays for, separately from the rent charged, the landlord is required to refund to the tenant pro rata any fees charged for that amenity during the public health emergency.

No Rent Increases

Any rent increase under the Rental Accommodations Act of 1975, the Rental Housing Act of 1977, the Rental Housing Act of 1980 is null and void if (i) the effective date for the rent increase occurs during a public health emergency or 30 days after; (ii) the notice of rent increase was issued during the public health emergency; or (iii) the notice of rent increase was issued prior to, but takes effect after, the public health emergency.

Governmental Oversight of Rent Adjustment

The Rent Administrator (head of the Rental Accommodations Division (RAD) under the Department of Housing and Community Development) will review all notices to tenants of rent adjustments that are filed by a housing provider with RAD.

Penalty for Rent Increases

If it is determined that the residential landlord (i) knowingly demanded or received any rent increase prohibited by the Act or (ii) substantially reduced or eliminated related services previously provided for a rental unit, then the housing provider may be subject to (x) treble damages and (y) for a rollback of the rent.

Notice to Vacate

At tenant’s election, any notice of intent to vacate that tenant provided to landlord prior to the period for which a public health emergency has been declared will be tolled for the period of the public health emergency. Tenant will have the same number of days to vacate remaining at the end of the public health emergency as the tenant had remaining upon the effective date of the public health emergency.

C. Eviction

Eviction Prohibition

During the public health emergency and for 60 days thereafter, landlords are prohibited from the filing of any eviction action against residential or commercial tenants.