On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). While much of the CARES Act focuses on providing economic relief to individuals and businesses impacted by COVID-19, certain provisions of the Act will have direct and indirect impacts on real estate holdings. The following provides a summary of the key provisions that will impact real estate holdings:

[Section 2307] The CARES Act provided a much needed technical amendment to Internal Revenue Code section 168, by providing that a “qualified improvement property” will now have an intended 15-year life rather than the current 39-year life set forth in the Tax Cuts and Jobs Act of 2017. This technical amendment is retroactive to January 1, 2018. Thus, taxpayers should be entitled to file amended returns to reap the benefits of accelerated depreciation in 2018 and 2019.

[Section 4022] Consumer borrowers with federally backed mortgages have the ability to receive a 180-day forbearance on mortgages, which forbearance may be extended for an additional period of up to 180 days. During a period of forbearance, no fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract, shall accrue on the borrower’s account. Finally, except with respect to a vacant or abandoned property, a servicer of a federally backed mortgage loan may not initiate any judicial or non-judicial foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale until at least May 17, 2020.

[Section 4023] Borrowers with mortgages on certain multifamily properties also can obtain a forbearance on the mortgage for up to 30 days, which may be extended for two additional 30 day periods. But a borrower that receives such a forbearance may not, for the duration of the forbearance, evict or initiate the eviction of any tenant on the subject property solely for nonpayment of rent, or charge any late fees, penalties, or other charges for late payment of rent. This Section is effective as of March 27, 2020, the date of the enactment of the CARES Act, and terminates on the later of the date that the declaration of a national emergency is terminated, or December 31, 2020.

[Section 4024] Between March 27, 2020 and July 25, 2020, the lessor of a “covered” dwelling may not initiate a legal action to recover possession of the covered dwelling from the tenant for nonpayment of rent or other fees or charges, or charge fees, penalties, or other charges to the tenant related to such nonpayment of rent. The temporary moratorium on eviction filings found in this Section is distinct from the provisions found in Section 4023.

In addition, nothing in the CARES Act abrogates any existing State or local government prohibitions on evictions or foreclosures. Accordingly, in addition to complying with the CARES Act, any mortgagor or landlord must analyze the State and local laws, orders and ordinances before initiating any eviction or foreclosures.

Finally, the CARES Act did not include any provision concerning 1031 exchanges. As a result, at this time, there has been no changes to the deadlines imposed under 1031 of the IRC, although these deadlines may still be extended for some or all parts of the country, including California.

We will continue to closely monitor developments in this arena. Please feel free to contact us if you have any questions or require any assistance. If you would like to receive our Financial Services Updates and/or our Labor & Employment Updates, please let us know. In the meantime, please stay safe.