DC Council Acts to Extend COVID-19 Relief for Tenants and Others

Mortgage Relief

Section 401 of the legislation requires each non-exempt lender or servicer who holds or services a residential or commercial mortgage loan in the District of Columbia to develop a deferment program. At a minimum, the program: (i) must grant, to borrowers who demonstrate financial hardship due to the COVID-19 pandemic, at least a 90-day deferment of monthly debt service payments; and (ii) must waive any late fee, processing fee, or any other fee during the public health emergency. The deferred amount cannot be reported to a credit reporting agency as delinquent. Unless another “reasonable time” is agreed, the deferral must extend for three years (or, if sooner, to loan maturity). The lender cannot require a lump-sum payment of the deferred amount.

The definition of covered transactions in Section 401 is quite broad:

“Commercial mortgage loan” means a loan for the acquisition, construction, or development of real property, or a loan secured by collateral in such real property, that is owned or used by a person, business, or entity for the purpose of generating profit, and includes real property used for single-family housing, multifamily housing, retail, office space, and commercial space that is made, owned, or serviced by a mortgage lender.

However, exempt from this Section are: (i) mortgages for which a lender had initiated a foreclosure action or exercised its rights to accelerate the loan on or before March 11, 2020; (ii) national banks and federally chartered credit unions; (iii) certain federally backed mortgage loans; and (iv) mortgages underwritten by Fannie Mae, Freddie Mac and Ginnie Mae.

This section of the legislation is to be administered by the Commissioner of the Department of Insurance, Securities, and Banking under D.C. Code §§ 26-1101 et seq. Until 60 days after the end of the public health emergency, mortgage lenders are required to notify the Commissioner of approved applications in 15-day intervals.

Rent Payment Plans

Section 402 of the legislation requires each landlord or other “provider” to make a payment plan available to its “eligible tenants” for amounts that come due under the lease during the public health emergency and for one year thereafter. As defined in this section:

• A “provider” is a landlord, sublessor, agent, or other party entitled to receive rents or similar benefits.
• An “eligible tenant” is a tenant that: (i) has notified a provider of an inability to pay all or a portion of the rent due as a result of the public health emergency; (ii) is not a franchisee unless the franchise is owned by a District of Columbia resident; and (iii) has leased from a landlord: (a) a residential property; (b) a commercial retail space; or (c) a commercial space that is less than 6,500 square feet and that comprises “all or part of a commercial building.”

Each provider must 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 period during the public health emergency and for one year thereafter (“the program period”). The payment plan must have a minimum term length of one year unless a shorter term is requested by the eligible tenant. The plan must waive any fee, interest, or penalty resulting from the plan. The deferred amount cannot be reported to a credit reporting agency as delinquent. The eligible tenant cannot lose any rights under the lease by entering into the plan. Other than the above, the legislation does not specify what must be included in a payment plan.

Under a payment plan, a tenant “shall be required to make payments in equal monthly installments” for the duration of the plan unless the tenant requests a different payment schedule. A tenant can elect to pay more than the monthly amount, but a landlord cannot request or require a tenant to make a lump-sum payment under a payment plan. A provider must notify all tenants of the availability, terms, and application process for its payment plan program. Payment plans must be in writing and landlords must permit an application for a payment plan to be submitted online and by telephone.

A provider must approve each application for a payment plan submitted during the program period from each eligible tenant that demonstrates a financial hardship resulting directly or indirectly from the public health emergency, regardless of an existing delinquency prior to the start of the public health emergency. During the program period, a provider that has not offered a rent payment plan and approved compliant applications is prohibited from filing any collection lawsuit or eviction for nonpayment unless the tenant defaults on the rent payment plan.

Guidance from the Office of the Tenant Advocate for residential tenants is available at this link.

Guidance from the Department of Consumer and Regulatory Affairs for commercial tenants is available at this link.

Eviction Prohibition

Section 404 of the legislation prohibits evictions, during the public health emergency and for 60 days thereafter, under D.C. Code § 16-1501 (covering all parties) or under D.C. Code § 42-3505.01 (under the Rental Housing act). Service of summons for evictions is also delayed.

Rent Increase Prohibition

Section 406 of the legislation prohibits any rent increase for a residential property or for certain commercial property during the COVID-19 public health emergency and for 30 days thereafter. The legislation amends the definition of covered “commercial” property so that it means (i) commercial retail establishments and (ii) commercial space that is less than 6,500 square feet in size and that comprises all or part of a commercial building. This definition of commercial property mirrors the definition used in the rent payment plan provisions discussed above. Importantly, the legislation mandates that any increase of rent on a covered commercial property made by a landlord between March 11, 2020, and June 9, 2020, is null and void and any such voided amount must be credited to the tenant. The legislation does not provide any other specifics as to how this prohibition would operate.

Foreclosure Moratorium

Section 408 of the legislation imposes a moratorium on foreclosures during the public health emergency and for 60 days thereafter. This applies to residential foreclosures under D.C. Code § 42-815 and § 42-816 and to condominium foreclosures under D.C. Code § 42-1903.13(c).

Public Health Emergency

In response to COVID-19, Mayor Muriel Bowser declared a public health emergency, in her Order Number 2020-46, dated March 11, 2020, for an initial period of 15 days. The public health emergency has been extended multiple times, most recently through October 9, 2020.

The Mayor also declared a public emergency, in her Order Number 2020-045, which to date also has been extended to run concurrently with the public health emergency. Various legislative enactments run for periods coinciding with one or the other of these declared emergencies.

Constitutionality

Lawsuits are beginning to be filed around the United States challenging the constitutionality of laws that purport to change contractual obligations or that impose moratoriums on remedies. Among the grounds argued in various lawsuits are that certain COVID-19 emergency laws violate the U.S. Constitution’s assurance of due process, prohibition of takings without just compensation, and prohibition on passage by states of laws impairing the obligation of contracts.

See, e.g., Union City Property Housing Initiative v. City of Union City, et al. (No. HUD-L-001772-20, filed May 11, 2020 in the Superior Court for Hudson County, New Jersey), Elmsford Apartment Associates LLC v. Cuomo (No. 1:20-cv-4062, filed May 27, 2020 in the U.S. District Court for the Southern District of New York, now on appeal challenging the grant of summary judgment for Governor Cuomo on June 29, 2020 in the U.S. Circuit Court of Appeals for the Second Circuit, No. 20-2565, filed July 28, 2020), Ent Int’l Realty Corp. et al. v. Cuomo et al. (No. 1:20-cv-04277, filed June 4, 2020 U.S. District Court for the Southern District of New York), Apartment Ass’n of Los Angeles County v. City of Los Angeles, et al. (No. 2:20-cv-05193-DDP-JEM, filed June 11, 2020 in the U.S. District Court for the Central District of California), San Francisco Apartment Ass’n, et al. v. City and County of San Francisco, et al. (No. CPF-20-517136, filed June 29, 2020 in the Superior Court of California of the County of San Francisco), Auracle Homes LLC, et al., v. Lamont (No. 3:20-cv-00829 (VAB), filed in the U.S. District Court for the District of Connecticut June 16, 2020, temporary restraining order and preliminary injunction denied August 7, 2020).

Pillsbury is closely monitoring and analyzing the global legal, economic, policy and industry impacts of COVID-19. For our latest insights, visit our COVID-19 and Economic Impact Resource Center.