Mayor Muriel Bowser has signed the COVID-19 Response Supplemental Emergency Amendment Act of 2020 (the “Act”) amending the COVID-19 Response Emergency Amendment Act of 2020.  The Act addresses many topics, including unemployment protections, debt collection practices, and protection of basic services such as cable, internet, and cellphones.  This article focuses on the ways in which the Act impacts commercial real estate lending.

The Act applies as of March 11, 2020 and remains in effect until July 9, 2020.  

The Act does not apply to any loan for which, as of March 11, 2020, a foreclosure was commenced or the loan was accelerated.

Mortgage Servicers

During any period for which the mayor has declared a public health emergency and for 60 days thereafter, a mortgage servicer that holds mortgage servicing rights to a residential mortgage loan or commercial mortgage loan under the jurisdiction of the Commissioner of the Department of Insurance, Securities, and Banking (the “Commissioner”), shall develop a deferment program for borrowers.  The application for the program shall be available online and by telephone.

The deferment program shall, at a minimum:

• Provide at least a 90-day deferment of mortgage payments; 
• Waive late fees, processing fees, and other fees that accrue during the pendency of the public health emergency; and
• Prohibit the reporting of any delinquency or derogatory information as result of deferral to a credit bureau.

The servicer shall approve each application in which the borrower:

• Demonstrates a financial hardship resulting directly or indirectly from the public health emergency, including existing delinquency or future inability to make payments; and
• Agrees in writing to pay the deferred payments within a reasonable time as agreed to by both the applicant and servicer, or, if no agreement can be reached, within the earlier of five years from the end of the deferment period or the end of the original term of the mortgage loan.

No borrower shall be required to repay the deferred payments with a lump sum payment.  Any applicant that is denied a deferment can file a complaint with the Commission.  The servicer shall retain each application, whether approved or denied, for three years after final payment or the mortgage is sold.

Borrower/Landlord

Any borrower that receives a mortgage deferral shall reduce the rent charged for the property to any qualified tenant during the time in which there is a deferral in place in an amount proportional to the reduced mortgage amount.

• A qualified tenant is a tenant of any property owned or controlled by a person or entity receiving a mortgage deferral pursuant to the Act and that has notified the landlord of its inability to pay all or a portion of rent due as a result of the public emergency. 
  • A prior version of the Act limited this section to commercial tenants but the final version removed the qualifier “commercial.”  Therefore, it is likely that the government intends this provision to cover both residential and commercial qualified tenants.  
• The borrower may require the qualified tenant to repay the amount of the reduced rent, without interest or fees, within the earlier of 18 months or the end of the lease term.

Residential Tenants

The time period for tenants and tenant organizations to exercise their rights under The Rental Housing Conversion and Sale Act of 1980 or The Rental Housing Act of 1985 is tolled from the date the public health emergency began until 30 days after the end of the public health emergency.  

A tenant’s notice of intent to vacate given prior to the date the public health emergency was declared shall be tolled during the public health emergency such that the tenant will have same number of days to vacate remaining at the end of the public health emergency as the tenant had on the effective date of the public health emergency.

Any rent increase shall be null and void if:

• The effective date of the rent increase occurs during the period of a public health emergency and 30 days after expiration of the public health emergency;
• The notice of rent increase was provided during the period of a public health emergency; or
• The notice was provided to the tenant prior to a public health emergency but takes effect after expiration of the public health emergency.  

A copy of the Act is available here.  For additional web-based resources available to assist you in monitoring the spread of the coronavirus on a global basis, you may wish to visit the websites of the CDC and the World Health Organization. 

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