Real Estate Alert: DC Council Freezes Commercial Rent Increases
The DC Council has imposed a freeze on rent increases for commercial tenants and clarified applicability of an existing requirement for mortgage lenders and servicers to provide mortgage payment deferrals.
On April 21, 2020, the D.C. Council amended the COVID-19 Response Supplemental Emergency Amendment Act. As amended, the Act now prohibits any rent increase for commercial properties during the period of the COVID-19 public health emergency and for thirty (30) days thereafter.
In addition to this change, the D.C. Council also amended its previous requirement that mortgage servicers regulated by the Department of Insurance, Securities and Banking (DISB) grant borrowers a 90-day deferment period for mortgage payments and waive late fees for borrowers who demonstrate financial hardship resulting from the pandemic. As amended, the Act now applies both to mortgage servicers and holders of mortgage loans regulated by DISB, and specifically excludes Freddie Mac, Fannie Mae and Ginnie Mae mortgages. The Act continues to be silent as to interest and other fees that may be chargeable to the borrower.
Borrowers utilizing the deferral program must notify all commercial tenants of the affected property of any deferral obtained, and must provide a rent deferral to those commercial tenants that notify the borrower that they are unable pay some or all of the rent due as a result of the public health emergency. The rent deferral provided must be proportionate to the reduced mortgage payment and the owner may require the Tenant to repay all deferred rents within the lesser of eighteen (18) months or the end of the lease term, without interest or fees.
Because of the sweeping nature of these requirements, it remains possible that litigation will be filed challenging the scope of these requirements.
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].