UPDATE: District of Columbia COVID-19 Response Supplemental Emergency Amendment Act of 2020: What it Means for Real Estate

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Seyfarth Synopsis: Mayor Muriel Bowser (the “Mayor”) signed an update to the recent Response Emergency Amendment Act of 2020 (the “Act”) entitled COVID-19 Response Supplemental Emergency Amendment Act of 2020 (the “Supplemental Act”). This Supplemental Act is much more expansive than the Act and covers everything from funeral services and debt collection to mortgages and education. The effective date of the Supplemental Act dates is April 10, 2020 (but applies retroactively as of March 10, 2020), and unless extended, will remain in effect until July 9, 2020. This article focuses on those provisions of the Supplemental Act impacting commercial real estate.

Mortgages

• During any period in which the Mayor has declared a Public Health Emergency, and for sixty (60) days thereafter, a mortgage servicer holding servicing rights to a residential or commercial mortgage under the jurisdiction of the Commissioner of the Department of Insurance, Securities and Banking (the “Commissioner”) is required to create a deferment program (the “Program”) for borrowers.
• The Program must (a) grant at least a 90-day deferment for the payment of mortgage payments, (b) waive all fees, including late fees, accruing during the Public Health Emergency, and (c) prohibit the reporting of any delinquency or other negative information to a credit bureau that occurs as a result of the deferral.
• While there is an application process, each application will be approved if the borrower (a) can demonstrate a financial hardship resulting from the Public Health Emergency, including an existing or future inability to make mortgage payments, and (b) agrees in writing to pay such deferred payments within a reasonable amount of time agreed to in writing (or if such timeframe cannot be agreed upon by the parties, the earlier of five (5) years from the end of the deferment period, or the end of the original term of the loan).
• Any borrower accepted into the Program cannot be required to make a lump sum payment. If a person or entity has its application for deferment denied, such party can file a written complaint with the Commissioner.
• If the mortgage included in the Program covers property that has a commercial tenant, the borrower must reduce the rent charged to any Qualified Tenant (as defined below) in the same proportion that the mortgage payment was reduced for the period in which the Program is in place. The borrower may require the Qualified Tenant repay the amount of such reduced rent without interest or fees by the earlier of the end of the lease term or eighteen (18) months. A “Qualified Tenant” is a commercial tenant of property owned or controlled by a party who is participating in the Program who has notified the landlord of its inability to pay all or a portion of the rent as a result of the Public Health Emergency.
• This section of the Supplemental Act does not apply to a property for which a mortgage servicer had already initiated foreclosure proceedings or exercised its right to accelerate the loan as of March 11, 2020.

Restaurant Delivery

The language in the Act was repealed and replaced with the following provisions:

• A vendor with “commercial street frontage” at the Walter E. Washington Convention Center that sells food and is approved to sell alcoholic beverages for on-premises consumption may, upon registering with the Alcoholic Beverage Control Board (the “Board”) and receiving written authorization from the Alcoholic Beverage Regulation Administration (“ABRA”), sell beer, wine or spirits in closed containers to individuals for carry-out or deliver the same in closed containers to the homes of District of Columbia residents so long as such carry-out or delivery order is accompanied by prepared food.
• The Supplemental Act’s new language clarified that only a restaurant, bar or private club that holds a specific enumerated on-premises retailer’s license may register with the Board and then offer for sale beer, wine and spirits in closed containers to persons for carry-out or delivery to homes of District of Columbia residents, along with the mandatory prepared food item. While Board approval is not required, an establishment must receive written authorization from ABRA prior to beginning such carry-out or delivery sales.

Residential Tenant Rights

• All deadlines for tenant or tenant organizations to exercise any rights under The Rental Housing Conversion and Sale Act of 1980 or The Rental Housing Act of 1985 are tolled from the date the Public Health Emergency began until thirty (30) days following the end of the Public Health Emergency.
• The Supplemental Act amends The Rental Housing Act of 1985 by tolling deadlines for a tenant to vacate if a notice of intent to vacate was provided prior to the declaration of a Public Health Emergency.
• Any rental increases pursuant to a variety of rental housing acts will be null and void if the effective date of the notice of rent increase occurs during a period in which a Public Health Emergency is in effect and for 30 days thereafter, the notice was provided to the tenant during the pendency of a Public Health Emergency or the notice was provided to the tenant prior to, but takes effect following, the declaration of a Public Health Emergency. All other rent increases will also be prohibited during a period in which a Public Health Emergency has been declared and for 30 days thereafter.

As we receive any updates or clarifications on any real estate related provision of the Supplemental Act, this memorandum will be updated.