Answers to COVID-19 Questions: DC Area Multifamily Properties
To assist multifamily property owners, operators and managers in the District of Columbia, Maryland, and Virginia in navigating the changing landscape of multifamily property operations in the wake of the COVID-19 pandemic, below are answers to some frequently asked questions, with a focus on emergency orders and legislation applicable at the state level and nationwide. Ballard Spahr attorneys are available to discuss how these issues may impact your multifamily project.
Can a landlord currently evict a tenant for nonpayment of rent?
Nationwide – Not if the property is secured by a federally backed mortgage. Section 4024 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides that for 120 days, landlords cannot initiate legal action to recover possession of a tenant’s unit for nonpayment of rent or issue a notice to vacate if the landlord’s mortgage is insured, guaranteed, supplemented, protected in any way by the federal government, if the property is a covered housing program under the Violence Against Women Act (includes numerous federally supported programs including tax credits and vouchers), or if the property is part of the rural housing voucher program. The 120-day period started with the enactment of the CARES Act on March 27, 2020. In addition, Section 4023 of the CARES Act provides that if the owner of a multifamily property with a federally backed multifamily mortgage receives forbearance under the CARES Act, the landlord cannot evict or initiate eviction of a tenant for nonpayment of rent or other fees during the forbearance period.
District of Columbia – No. In accordance with the COVID-19 Response Emergency Amendment Act of 2020 (DC Emergency Act), all evictions are prohibited during the public health emergency which was declared by Mayor Bowser on March 11, 2020, and remains in effect.
Maryland – No. In accordance with Governor Hogan’s Order No. 20-04-03-01, Amending and Restating the Order Dated March 16, 2020 Temporarily Prohibiting Evictions of Tenants Suffering Substantial Loss of Income Due to COVID-19, et al., no court may grant any judgment for possession or repossession, or warrant for restitution of possession or repossession of residential, commercial, or industrial real property, if the tenant can demonstrate that the tenant suffered a substantial loss of income resulting from COVID-19 or related state of emergency). As drafted, this Order applies to any lease violation and is not limited to defaults for non-payment of rent. In addition, on March 18, 2020, the Maryland Court of Appeals issued an Administrative Order on Suspension of Foreclosures and Evictions During the COVID-19 Emergency staying all residential evictions pending with Maryland courts.
Virginia – No. In accordance with the Order Extending Declaration of Judicial Emergency in Response to COVID-19 Emergency Order of the Supreme Court of Virginia dated March 27, 2020, new evictions have been stayed through April 26, 2020 (extending the April 6, 2020 deadline set forth in the Supreme Court’s Order Declaring a Judicial Emergency in Response to COVID-19 Emergency). Pending eviction cases have also been continued until after April 26, 2020. This applies to all evictions regardless of whether they relate to monetary or nonmonetary defaults and regardless of whether such defaults are COVID-19-related.
Can a landlord charge late fees in connection with failure to pay rent?
Nationwide – Not if the property is secured by a federally backed mortgage for which forbearance has been provided under the CARES Act. Section 4024 of the CARES Act provides that for 120 days (commencing on March 27, 2020), landlords cannot charge fees, penalties or other charges to tenants related to nonpayment of rent if the landlord’s mortgage is insured, guaranteed, supplemented, protected in any way by the federal government, if the property is a covered housing program under the Violence Against Women Act (includes numerous federally supported programs including tax credits and vouchers), or if the property is part of the rural housing voucher program. In addition, Section 4023 of the CARES Act provides that if the owner of a multifamily property with a federally backed multifamily mortgage receives forbearance under the CARES Act, the landlord cannot charge any late fees or other charges to tenants for late payment of rent during the forbearance period.
District of Columbia – No. In accordance with the DC Emergency Act, landlords are prohibited from imposing late fees on residential tenants during any month for which the public health emergency is in effect.
Maryland – Maybe. Maryland’s emergency actions do not limit a landlord’s ability to charge late fees that are otherwise permitted in accordance with the lease and applicable law. However, some restrictions under the CARES Act may still apply to Maryland properties.
Virginia – Maybe. The Commonwealth’s emergency actions do not limit a landlord’s ability to charge late fees that are otherwise permitted in accordance with the lease and applicable law. However, some restrictions under the CARES Act may still apply to Virginia properties.
Are utilities and other service companies required to continue providing service?
Nationwide – The CARES Act does not address utility coverage.
District of Columbia – Yes. In accordance with the DC Emergency Act, utility providers are prohibited from disconnecting gas, water, electric, basic cable television and basic broadband internet service during the public health emergency and for 15 days thereafter. This measure does not prevent cable and internet providers from reducing service levels, provided that the basic level remains.
Maryland – Yes. By Governor Hogan’s Order Prohibiting Termination of Residential Services and Late Fees dated March 16, 2020, providers of electric, gas, sewage disposal, telegraph, telephone, water, cable television, and/or internet facilities are prohibited from terminating service to residential customers, and may not bill or collect late fees on residential accounts. Unless otherwise amended, this Order remains in effect until the earlier of termination of the state of emergency and May 1, 2020.
Virginia – Yes. On March 16, 2020, the Virginia State Corporation Commission issued an Order Suspending Disconnection of Service and Suspending Tariff Provisions Regarding Utility Disconnections of Service suspending disconnection by identified utility providers of customer service for electric, gas, water and sewer utilities for a period of 60 days. Virginia’s Attorney General has asked the State Corporation Commission to extend the applicability of the disconnection suspension until at least June 14, 2020.
Can a landlord raise tenant rents?
Nationwide – The CARES Act does not address tenant rent increases.
District of Columbia – Maybe. On April 7, 2020, a bill supplementing the DC Emergency Act was introduced and passed by the DC Council (DC Emergency Act Supplement), and would therefore be effective immediately upon approval by the Mayor. If approved, the DC Emergency Act Supplement will prohibit residential tenant rent increases during the public health emergency and for 30 days thereafter. Under the DC Emergency Act Supplement, if the landlord provided notice of a rent increase before the public health emergency was declared on March 11, 2020, to take effect after that date, the rent increase will also be nullified.
Maryland – Maybe. Maryland’s emergency provisions do not impose limitations on tenant rent increases. However, local laws and property-specific documents may impose such restrictions in the ordinary course.
Virginia – Maybe. Virginia’s emergency provisions do not impose limitations on tenant rent increases. However, local laws and property-specific documents may impose such restrictions in the ordinary course.
Is a landlord required to reduce rent if a tenant is unable to pay rent?
Nationwide – The CARES Act does not address tenant rent reductions.
District of Columbia – Maybe. The DC Emergency Act requires that landlords reduce the rent for commercial and residential tenants if (a) the landlord received a mortgage deferral under the DC Emergency Act, and (b) the tenant notifies the landlord of the tenant’s inability to pay all or a portion of its rent due to the public health emergency. The DC Emergency Act requires lenders and mortgage services that are under the jurisdiction of the Commissioner of the Department of Insurance, Securities, and Banking to provide mortgage loan deferment for any borrower that demonstrates financial hardship as a result of the public health emergency. While the details are unclear in the DC Emergency Act, if a landlord benefits from a mortgage loan deferment under DC law, then the landlord is required to reduce the rent for its tenants.
Maryland – No. Maryland’s emergency provisions do not require landlords to reduce tenant rent. However, there are a number of state and local resources available to assist tenants in obtaining rent support and may be worthwhile to make tenants aware of such resources.
Virginia – No. Virginia’s emergency provisions do not require landlords to reduce tenant rent. However, there are a number of state and local resources available to assist tenants in obtaining rent support and it may be worthwhile to make tenants aware of such resources.
Does the DC Emergency Act impact the TOPA process?
Yes. The DC Emergency Act extends tenant and tenant association deadlines under the Tenant Opportunity to Purchase Act (TOPA), and the Rental Housing Act, until 30 days after the termination of the public health emergency.
What resources are available for landlords and property managers to address economic uncertainty due to the COVID-19 pandemic?
Nationwide – The CARES Act is a nearly $2 trillion federal stimulus package aimed at combating the economic impact of the COVID-19 pandemic on businesses, individuals and families. Among other things, the CARES Act includes: (1) the Paycheck Protection Program (PPP), a $349 billion expansion of the existing Small Business Administration (SBA) loan program designed to help small businesses retain employees, fund payroll and pay for other operating expenses; and (2) expansions to the SBA’s Economic Injury Disaster Loan (EIDL) Program, which are intended to provide businesses with immediate, emergency cash. The CARES Act also provides mortgage relief for single family and multifamily property owners with federally backed mortgages. Commercial banks have already received hundreds of thousands of applications totaling billions of dollars which are expected to be processed in the order received.While the funding for PPP and/or EIDL programs may ultimately be increased, prospective applicants are advised to submit requests for relief as soon as possible.
The PPP permits loans of up to $10 million generally available to businesses with fewer than 500 employees to be used for payroll costs (including benefits), mortgage payments, rent and utilities. The loans are to be provided through lending institutions and guaranteed by the federal government. PPP loans will be eligible for forgiveness equal to the amount spent during the eight week period after loan origination for payroll costs, mortgage interest, rent, and utility payments (provided that mortgage interest, rent and utility obligations were in existence prior to February 15, 2020 and that at least 75% of the loan amount is used for payroll purposes). The amount of forgiveness may be reduced in connection with a reduction in the number of employees or decrease in salary or wages; provided that the borrower may rehire employees and restore salary or wage cuts by June 30, 2020 and remain eligible for the full amount of forgiveness. No security or borrower guaranty is required. Any PPP loan amount that is not forgiven will bear interest at a rate of 1% per annum. All payments are deferred for at least six months and the loan will mature after two years. EIDL loans are low-interest working capital loans of up to $2 million available to qualifying small businesses that have experienced substantial economic injury as a result of the COVID-19 crisis. Unlike the PPP loans, EIDL loans are not forgivable (other than an initial $10,000 advance, which advance can also be rolled into a PPP loan and subtracted from the amount that is forgiven). EIDL applications can be submitted through the SBA website.
The borrower under a federally backed multifamily mortgage loan who experience financial hardship due to the COVID-19 pandemic may request forbearance of its mortgage payments provided that the borrower was current on its payments as of February 1, 2020. Upon receipt of a request from such borrower, the servicer is required provide forbearance for up to 30 days with the right of the borrower to extend the forbearance period for two additional periods of 30 days each. As noted above, any borrower receiving such forbearance is prohibited during the forbearance period from evicting or initiating eviction of any residential tenant for nonpayment of rent and from charging late fees to such residential tenants.DC/MD/VA – In addition to the nationwide relief programs described above, jurisdictions across the country have numerous relief programs available at the state and local level.
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