D.C. Mandates Rental Payment Plans, but not Business Interruption Coverage

At the D.C. Council May 5, 2020 Legislative Session, the D.C. Council approved a Bill requiring commercial landlords and residential landlords with five or more units to develop a rental payment plan program.

The Bill also clarified that an earlier freeze for commercial rent increases only applies to commercial retail property. Notably, during the same session, the Council rejected mandating coverage for business interruption insurance claims arising from the pandemic.

Under the May 5 Bill, Landlords may require supporting documentation of financial hardship resulting from the pandemic to justify a payment plan, but landlords are also constrained in the ability to refuse plans for previously delinquent tenants. The Bill also contains several program requirements, such as waiver of fees and penalties arising from entry into a plan and limiting lump sum payments.

Landlords must also make the application for the program available via telephone and online, and must notify all tenants of the availability, terms and application process for the program. Currently, only the following tenants are disqualified from the program: (a) tenants that constitute a franchise not owned by a District resident and operated in the District; and (b) tenants already paying reduced rent due to the Landlord’s use of the District’s mortgage forbearance program.

In addition to legislating payment plans, the D.C. Council also mandated regular cleaning of common areas of housing accommodations on a regular basis, including frequently touched surfaces such as doors, railings, seating and exterior of mailboxes. Landlords are also now required to refund amenity fees, to the extent the amenity fees are separately charged and are for amenities that are no longer available as a result of the pandemic. 

The above is a summary of only some of the salient features of the Bill. The attorneys with the Lerch Early Real Estate Practice Group are here to assist with understanding and complying with the Bill’s requirements.

The draft bill and a summary of oral amendments are accessible at the following links:

Lerch Early will monitor the next Committee of the Whole Meeting of the D.C. Council on May 19, 2020 and will provide an update as to any modifications to the Bill occurring during the Mayoral review period.

The DC Council is operating at a quick pace and the landscape for residential and commercial landlords is consistently changing. 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].