Real Estate Industry Alerts Tracker - April 17, 2020 Issue
COVID-19 and 1031 Exchanges
Last week, the IRS issued Notice 2020-23 (that updates Notice 2020-18, “Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic”), which appears to extend the deadlines for identification of replacement properties and the completion of tax deferred “like-kind” exchanges under Section 1031 of the Internal Revenue Code for taxpayers who had already initiated 1031 tax-deferred exchanges. Notice 2020-23 provides that “Affected Tax Payers” have until July 15, 2020 to perform all “Specified Time Sensitive Actions” that are due to be performed on or after April 1, 2020, but before July 15, 2020. “Specified Time-Sensitive Actions” are listed in §301.7508A-1(c)(1)(iv) – (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018) (see links below). Thus, some taxpayers that initiated tax deferred exchanges prior to April 1, 2020 now have additional time within which to identify replacement (or relinquished) property or complete exchanges, but taxpayers that missed deadlines before April 1, 2020 may still be out of luck. It is not clear how Notice 2020-23 impacts deferred like-exchanges that are initiated after April 1, 2020, but before July 15, 2020.For additional information on the impact of COVID-19 on 1031 like-kind exchange deadlines see Kelley Drye’s advisory.
The full text of Notice 2020-23 may be found here.
A list of the “Specified Time-Sensitive Actions” contained in 26 CFR 301.7508-1 may be found here.
Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 may be found here.
Heard Around the Industry
Rent Abatements: Last week, New York City Mayor Bill de Blasio issued a statement imploring the Rent Guidelines Board to issue a rent freeze to assist residents impacted by COVID-19 closures. Landlords are objecting to such calls for rent freezes, noting that a rent freeze will not aid tenants already struggling (or unable) to pay current rents during the pandemic, while also noting that a rent freeze will prevent landlords from maintaining and improving New York City’s aging housing stock. Also of note, Mayor de Blasio is reaching out to New York State regulators to allow New York City residents to use their tenant security deposits to pay rent.Additional information may be found here.
New York City Business Groups Ask for Help: A coalition of New York City business groups that include local chambers of commerce, restaurant associations, and the Real Estate Board of New York have requested that New York City and State leaders consider allowing small businesses to convert, or revert, sales and use tax collections into grants and to permit property tax deductions for landlords providing rent concessions as relief from the novel coronavirus pandemic and as a way to increase their cash flow and help stimulate the economy.
Additional information may be found here.
Possible Rent Freeze in Montgomery County, Maryland: On April 14, 2020, the Montgomery County Council (the “Council”) introduced Expedited Bill 18-20 (“Bill 18-20”). The Council will hold a public hearing and vote on Bill 18-20 on April 21, 2020 at 1:30 p.m. If passed, Bill 18-20 will, during any period when a state of emergency is declared by the Maryland Governor or the County Executive and/or during “catastrophic health” emergencies declared by the governor, and for 30 days thereafter, (1) prohibit rent increases for residential tenants, and (2) require landlords who previously notified a tenant of a rent increase to provide such tenant with another notice in writing to disregard the increase if such increase would go into effect on or after the date on which the emergency began.
The introduced bill may be found here and additional information may be found here.
D.C., Maryland and Virginia Common Law Doctrines Relating to Commercial Leases: On April 13, 2020, several of Kelley Drye’s real estate attorneys from our Washington D.C. office published an advisory on “Analyzing Commercial Leases in the District of Columbia, Virginia and Maryland in the Face of COVID-19.” The advisory provides a summary of common law in these jurisdictions with respect to force majeure and the doctrines of impracticability, impossibility and frustration of purpose, in each case, as it relates to commercial real estate leases. It also contains a list of practical considerations in addressing the issues presented by the COVID-19 pandemic and related government-mandated closures.
CREFC Guide to COVID-19 Relief Programs
On Wednesday, March, 15, 2020, CREFC announced that it is publishing “CREFC’s Guide to COVID-19 Relief Programs”, which is available to its members. The guide is meant to provide a high-level viewpoint on the various relief measures within the industry and specifics on the various programs.CREFC’s guide may be accessed here and CREFC’s COVID-19 Policy Resource webpage may be found here.
Limited Construction In New Jersey
As of Friday, April 10, 2020, Governor Phil Murphy of New Jersey ordered all non-essential construction projects to cease during the COVID-19 pandemic. “Essential Construction Projects” that can continue during this period include the construction of: (a) hospitals, other health care facilities, and pharmaceutical manufacturing facilities; (b) roads, bridges, and mass transit facilities or physical infrastructure; (c) utility projects; (d) affordable housing projects; (e) school construction projects, including projects involving higher education facilities; (f) residential construction projects for single family homes (if already underway) or an apartment where an individual resides, but with a crew of five or fewer; and (g) residential construction projects already underway (that have a delivery date which cannot be met unless construction continues).A complete list of the permitted construction projects is contained in the order, which may be found here.
The order also contains requirements to limit social interaction and maintain social distancing, as well as cleaning and sanitizing requirements while the work continues.
Additional information may be found here.
The Federal Reserve Launches $600 Billion Main Street Loan Programs
On Thursday, April 9, 2020, the Federal Reserve (the Fed) announced two Main Street Lending Facilities, one for new loans (Main Street New Loan Facility) and the second for expanded loans (Main Street Expanded Loan Facility), as part of a suite of funding measures designed to support the economy. Combined, the total Main Street loan facility – authorized under Section 13(3) of the Federal Reserve Act – will enable up to $600 billion in new financing for small – and medium-sized businesses. In all, the facilities the Fed announced last Thursday can inject up to $2.3 trillion into the COVID-19-battered economy. The Fed has kept some of its powder dry, however, reserving Treasury capital for approximately $2 trillion in additional leverage.For additional information please see the full text of this client advisory from Kelley Drye’s Government Contracts and Government Relations and Public Policy practice groups, which may be found here.
OCC Continues Efforts Related to Community Lending
Last week, Comptroller Joseph Otting, the head of the Office of the Comptroller of the Currency (the “OCC”) indicated that the OCC will continue its efforts, along with the FDIC, to finalize draft revisions to regulations requiring banks to lend in lower-income communities in accordance with the Community Reinvestment Act, in spite of COVID-19. The proposed revisions would broaden the range of banking activities that qualify for compliance credit and expand the locations where banks can get credit conducting such activities. The OCC’s plans to move ahead during the pandemic has been met with opposition by Democrats, state officials, and some community and industry groups that are pushing against a rush to finalize new rules during the COVID-19 crisis.Additional information may be found here.
Recording Offices – Current Operating Status
As noted in our Kelley Drye Real Estate Industry Alert from March 30, 2020, ALTA seems to be providing the most up to date operating status and limitations of the various recording jurisdictions.This information is located on the ALTA website and may be found here.
Getting Back to Work: Preparations and Considerations for Employers
The coronavirus threat will still be active when many employers begin to return their employees to the job. What will you do when employees refuse to return? When some have been sick but not diagnosed? When social distancing measures remain in place? When some parts of the country (or even your city) are “more open” than others? What should employers do to prepare?Join Kelley Drye for a two-part webinar series focused on helping employers through the snares of legal, logistical and practical considerations as the nation returns to work. The Getting Back to Work: Preparations and Considerations for Employers webinar will be held on Friday, April 24, 2020 at 12:30 EST. Click here to register.