On May 19, 2020, the DC Council further specified landlords’ obligations to offer payment plans under the Coronavirus Support Emergency Act. Two weeks ago the Council approved a law requiring, among other things, that certain landlords enter into payment plans with tenants’ whose ability to pay rent has been impacted by the public health emergency. However, the original law was vague as to specific rights and obligations. This week the Council approved new legislation to clarify several aspects of the law. Under the original law, certain landlords (residential owners with 4+ units and all commercial landlords) are required to extend payment plans to eligible tenants, adversely impacted by the public health emergency. The original law did not give any guidance on the terms of such a plan. The new law provides more concrete standards.
Contents of Payment Plans
Payment plans must be extended to eligible tenants for rent that comes due from March 11, until one year after the public health emergency ends (or the tenancy ends, if sooner). The minimum term of repayment is one year and payments must be made in equal monthly installments. I understand this to mean that following a missed month, an agreement can require a tenant to pay 1/12 of the missed month, every month for the next year. Moreover, unlike the rent relief afforded to tenants under the mortgage provisions, it cannot be made payable in a lump sum at the termination of tenancy. Payment plans will continue, even after the tenant moves out. As a practical matter, this may leave the landlord without a meaningful remedy to collect payments under the plan, where the tenant leaves town. The new statutory language also restricts tenant eligibility criteria. Now, a tenant must show a financial hardship resulting from the public health emergency which was not pre-existing. Additionally, the hardship must cause the tenant to fall below the standards required to rent the unit in the first place.
Pass Through Mortgage Relief
There is an additional favorable change for landlords in the mortgage relief provision of the new law. The prior version required landlords to pass any mortgage reduction or forbearance along to the tenant in a proportional amount. However, the new version of the law only requires landlords to pass through 80% of the mortgage relief. This newest version of the statute is far clearer than it’s predecessor. Nonetheless, there are several technical and procedural challenges for both sides of aisle. Parties must consult with counsel to fully understand the steps to compliance. Landlords (both commercial and residential) and commercial tenants in need of counseling can contact me or book an appointment to speak using my online scheduling tool.