If you own multifamily properties in New York, you’re certainly aware of the extraordinary relief being offered to tenants in response to the coronavirus pandemic.  On March 20, 2020, Governor Andrew Cuomo issued Executive Order No. 202.8 staying all eviction proceedings against tenants.  On the same day, Governor Cuomo Governor issued Executive Order No. 202.6 in which he mandated that all non-essential employers in the state of New York reduce the number of employees working in the office by 50%.  Two days later, Governor Cuomo mandated that non-essential employers reduce the number of employees by 100% - effectively shutting down most, if not all, economic activity in the state of New York. Many other states have taken similar steps.  As a result, employment has plummeted - 3.3 million people filed claims for unemployment during the week ended March 20, 2020, by far the highest number in history. Economists at the St. Louis Federal Reserve estimate that US will lose 47 million jobs, resulting in an unemployment rate of around 32% - worse than the Depression.

Because the government had to effectively shut down the economy in order to protect the public from the coronavirus pandemic, it makes a lot of sense to provide relief to renters.  Indeed, as a direct result of the government’s restrictions, people are losing both their jobs and their ability to pay rent.

This raises the important question: what are multifamily property owners supposed to do in the face of a precipitous drop in rent payments due to historic levels of unemployment?

The Federal Housing Finance Agency (FHFA), conservator of Fannie Mae and Freddie Mac, is providing some relief.  On Tuesday, March 21, 2020, FHFA announced that qualifying multifamily owners who can demonstrate hardship related to the coronavirus pandemic will be allowed to defer their mortgage loan payments for up to 90 days, so long as they agree not to evict tenants based solely upon non-payment of rent during the course of the forbearance period.  According to FHFA, approximately 43% of the multifamily market is eligible for this relief.

In addition, the recently passed $2 trillion CARES Act provides relief to the owners of affordable housing properties.  Qualified borrowers are entitled to forbearance for up to three 30-day periods.  In exchange, the borrowers cannot evict or initiate eviction solely for nonpayment or charge any late fees or penalties for late payment during the period of the forbearance.  All the borrowers have to do to obtain relief is submit a request for relief and the relief is automatically granted to the loan Servicer.

If your multifamily mortgage is held by a private lender and does not qualify under one of the above programs, you should reach out to them and request relief immediately.  Bank lenders, for now at least, appear to be offering some relief in these situations but, of course, everything depends on the particular bank you are dealing with.

It is important to point out that the relief discussed above is only temporary.  Remember, loan forbearance is not loan forgiveness.  At the end of these temporary forbearance periods, you will owe your lender any amounts that you have not paid during the forbearance period.  Similarly, your tenants will owe you all amounts that they did not pay during their forbearance period.  What happens at the end of the forbearance periods is a hugely important issue that will have to be resolved when the time comes.

Conclusion   Based upon the historic level of job losses, multifamily property owners will almost certainly face reductions in the amount of rental payments they receive from their tenants.  To avoid default, it is extremely important to be proactive and take the following steps:

Communicate with your lender early and often.  In times like these, the worst thing you can do is to bury your head in the sand and wait and see what happens.  Be proactive about making arrangements with your lender in order to obtain relief before you default on any loan payments.

Communicate with your tenants. Encourage them to share any changes in their circumstances with you, so that you can have better visibility as to how your building’s cash flow is likely to be affected in the coming months.  You should also share information with your tenants regarding rental relief programs that are (and will become) available to them.
Monitor the situation closely and develop updated pro-forma projections for your building to facilitate discussions with your lender (and tenants) at the end of the applicable forbearance period.  You will need this information in order to negotiate a permanent solution with your lender – most likely a modification of your mortgage loan.


I believe in New Yorkers. Whether they’ve ever questioned the dream in which they live, I wouldn’t know, because I won’t ever dare ask that question. Dylan Thomas

We are all in this together, and together we will get through this!  For all your construction, development, and real estate needs and questions in these uncertain times, please reach RICHTER RESTREPO PLLC. 

Attorney Advertising Only
The content of this newsletter is designed for general information purposes, and it should not be construed to present legal advice, nor the formation of an attorney-client relationship. Prior results do not guarantee future outcomes.

Published: 04/02/2020