Two pieces of legislation affecting District of Columbia commercial landlords have recently moved forward. On May 4, 2020, Mayor Bowser signed the emergency legislation previously passed by the D.C. Council, amending the emergency law enacted on April 10, 2020. On May 5, 2020, the D.C. Council passed new emergency relief, which is expected to be signed by the mayor.
These two pieces of legislation affect or will affect the following commercial landlord issues:
- Retail Tenant Rent Increase Freeze
- Mortgage Relief and Pass-Through to Tenants
- Commercial Evictions
- Rent Payment Plans for Commercial Retail Property
Retail Tenant Rent Increase Freeze
The emergency freeze on residential rent increases is now extended to commercial retail leases, effective as of May 4, 2020. The law now prohibits "a rent increase for a commercial retail property . . . during a period for which a public health emergency has been declared . . . and for 30 days thereafter." The emergency declared by the mayor by executive order expires on May 15, 2020 but is expected to be extended.
Mortgage Relief and Pass-Through to Tenants
The acts passed on April 10 and May 4 together establish a mortgage relief program that allows landlords to obtain mortgage relief and requires them to pass the relief through to tenants. The acts require a mortgage lender "that makes or holds a residential mortgage loan or commercial mortgage loan under the jurisdiction of the Commissioner of the Department of Insurance, Securities, and Banking" to develop a program that allows borrowers to obtain a 90-day deferral of payments of principal and interest and a waiver of late fees. To obtain mortgage relief, the landlord-borrower must demonstrate evidence of a financial hardship resulting "directly or indirectly" from the public health emergency. The deferred payments must be repaid in installments, but not in a lump sum, within a reasonable time as agreed between the lender and borrower. If there is no agreement on the term of a repayment plan, then the term will be 5 years from the end of the deferment period or the end of the mortgage loan term, if earlier. A landlord-borrower that obtains mortgage relief under the program must pass the relief through to tenants that have notified the landlord that they are unable to pay all or a portion of rent due as a result of the public health emergency. The May 4 Act provides some guidance as to how the pass-through relief is to be allocated to tenants. A tenant that receives rent relief must repay the deferred rent without interest or late fees upon the earlier of 18 months or upon cessation of the tenancy if earlier.
On May 5, 2020, the D.C. Council passed emergency legislation that, if signed by the mayor as expected, will prohibit the filing of a complaint for eviction of a residential or commercial tenant. The previously enacted emergency legislation did not prohibit the filing of a complaint, although it placed a moratorium on proceeding with an eviction case. During the pandemic, landlords have filed hundreds of eviction complaints in D.C. Superior Court.
Rent Payment Plans for Commercial Retail Property
The emergency legislation passed by the D.C. Council on May 5, if signed by the mayor as expected, will require landlords to establish and give tenants notice of a program to apply for a rent payment plan. In this bill, only tenants of a residential or "commercial retail property" are eligible. The plan must comply with the following requirements:
- The plan must cover rent payments due through the one-year period after the public health emergency ends, or a shorter term if the tenant so requests;
- The plan must provide for the rent payments in minimum monthly installments, not in a lump sum;
- The plan must waive fees or penalties arising from entering into the plan; and
- If the tenant agrees, the plan may provide for the application of the security deposit to satisfy plan payments.
To qualify for a rent payment plan, the tenant must provide evidence demonstrating certain financial qualifications, including a financial hardship "resulting directly or indirectly from the public health emergency." If the tenant is already receiving rent relief as a result of the mortgage relief program, the landlord is not required to provide additional relief. Certain franchises are not eligible for relief as a commercial retail tenant. The Department of Consumer and Regulatory Affairs will have jurisdiction over non-residential rent payment plan programs and complaints.
NOTE: This alert provides only a summary of key points of the legislation; the actual legislation in its entirety should be considered before making a decision to take or not to take an action. This alert is not intended to provide legal advice, and consultation with a lawyer is encouraged.
For prior COVID-19 alerts on topics of interest to landlords, please see: