D.C. Council Expands Freeze on Commercial Rent Increases, and Clarifies and Expands Rent Payment Plan Requirements
On May 19, 2020, the D.C. Council passed amendments to previously approved omnibus legislation, further impacting residential and commercial landlords. The principal changes are as follows:
- Previously, rent increases were prohibited for all residential properties and commercial retail properties during the period of the COVID-19 public health emergency and for 30 days thereafter. As amended, the freeze on rent increases now also applies to any commercial property that is less than 6,500 square feet in size.
- Previously, landlords utilizing the mortgage forbearance program were required to provide notice of mortgage forbearance to all tenants and to agree to a proportionate rent reduction for tenants asserting an inability to pay rent as a result of the pandemic (in which case those tenants were unable to take advantage of the payment plan program offered by the landlord). As amended, there is no longer an obligation for a landlord to provide a proportionate rent reduction if a forbearance is obtained, and the landlord must continue to provide a payment plan program for all eligible tenants.
- Previously, only landlords of commercial retail properties and owners of 5 or more residential units were required to offer a payment plan program. As amended, all residential landlords and all commercial retail landlords must provide a payment plan program.
- The amended legislation also clarifies that the payment plan program must cover gross rents due for the duration of the public health emergency and one year thereafter, and must have a minimum term of one year. Although not expressly stated in the amendment, the Council Chair clarified from the dais that the legislation does not mandate a 100% rent deferral, and the intent of the legislation is that landlords and tenants will negotiate and agree on an appropriate percentage of rent to be deferred.
- The amended legislation also provides that no eviction action for non-payment of rent may be commenced until a year after the expiration of the declaration of public health emergency unless the landlord has offered a payment plan to the tenant and the tenant has defaulted under the payment plan, and that tenants may not lose any rights under their lease due to a default on monetary amounts due during the lease period, provided the tenant does not default under the terms of the payment plan.
The legislation will undergo Mayoral review, and is expected to be signed into law in the coming weeks. The D.C. Council intends to explore further legislation at the next Committee meeting on June 9, 2020.
Please remember to periodically check our COVID-19 Resource Center for future legislative updates.
Ashley Haun is a real estate attorney who counsels investors and owners on the purchase, sale, financing and leasing of commercial real estate assets in the Washington metropolitan area. For more information, contact her at 301-657-0152 or [email protected].