The CARES Act and the Multifamily Industry
April 6, 2020 — Included in the newly enacted Coronavirus Aid, Relief, and Economic Security Act (CARES) are a few provisions that could potentially have an immediate impact on multifamily owners and investors.
Section 4024 of the Act provides that any properties receiving a federally backed multifamily mortgage loan, including Fannie Mae, Freddie Mac, HUD, rural housing voucher program or the Violence Against Women Act of 1994, must comply with the following beginning on March 27, 2020 through July 25, 2020:
- Landlords of the above properties may not make any filing to recover possession of the above properties from a tenant for nonpayment of rent or other fees or charges and may not charge fees, penalties or other charges to the tenant related to nonpayment of rent. Landlords also may not provide any notices to vacate (not limited to nonpayment) during the 120 day period.
- Landlords are also not permitted to require tenants to vacate the above properties until 30 days after the landlord provides tenant with a notice to vacate and such notice may not be issued until 120 days after the enactment of the CARES Act.
In addition to the above, Section 4023 of the Act also provides relief for borrowers receiving federally backed multifamily mortgage loans under certain circumstances. If the aforementioned borrower is current on their mortgage payments as of February 1, 2020, they may request forbearance from their mortgage payments assuming borrower can attest that they are experiencing COVID-19 related financial hardship. If this requirement is met, borrower may request up to 90 days of forbearance, with the initial period of forbearance being 30 days. The Act allows borrower to access relief for two additional forbearance periods of 30 days as long as the borrower:
- Submits a request for an extension during the period between March 27, 2020 and the earlier of (i) the termination of the national emergency, or (ii) December 31, 2020; and
- At least 15 days prior to the end of the initial forbearance period.
Although the borrower has the option to discontinue the forbearance at any time, it is important to note that a borrower receiving forbearance under this section cannot evict or initiate eviction procedures against tenants for nonpayment of rent or other fees related to late payment of rent. A borrower receiving forbearance under 4023 is also prohibited from requiring tenants to vacate prior to the expiration of 30 days after borrower provides the tenant with a notice to vacate. Additionally, the aforementioned notice to vacate may not be issued until after the expiration of the forbearance.
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