Rental property owners who have a multi-family building with two or more units might find themselves dealing with the Rent Escrow Account Program (REAP).
That’s not a place you want to be.
When your property is referred and placed into the REAP program, it’s because the Los Angeles Housing Department has determined that health, safety, or habitability standards have not been met and the repairs necessary to bring your property into compliance have not been made in a timely or complete manner.
This is a Los Angeles project, and any tenant, City, or County agency can refer a building or residential unit to REAP. We’re talking about how to comply with REAP and how to avoid becoming part of this program at all.
How a Los Angeles Rental Property lands in REAP
REAP is never the first step. Your property will only land in this program after you’ve received an Order to Comply from the Los Angeles Housing Department (LAHD) listing the deficiencies at the property and demanding the required repairs. You’ll be given a timeline to make those repairs and if you fail to make the repairs, you’ll be referred to REAP.
Under Los Angeles Municipal Code Section 162.03, a REAP referral is warranted if your property meets the following conditions:
- The property has one or more Orders to comply, correct, or abate a condition or violation issued by an Enforcement Agency.
- The property has Orders for compliance that have expired without compliance.
- The violation affects the health or safety of the occupants
- The violation results in a habitability violation, as defined in Section 153.02.
What happens when your property is in REAP?
If the condition of your property is threatening the health or safety of your tenants, is inhabitable, or needs repairs that rectify a previous violation, that property can be included in REAP.
- Tenants receive a reduction in rent when the rental home they’re living in is placed into REAP and a notice will indicate what that reduction is, which is typically between 10 and 50 percent, depending on the violations.
- An escrow account for the property will be opened by the Los Angeles Housing Department and Tenants will be able to pay their reduced rent into that escrow account. They can also continue paying directly to you; the choice is theirs.
- A REAP notice is placed on the title of your property, so there’s no chance of selling it without prospective buyers knowing that it’s in the program.
Compliance and Actions Required When Your Property is in REAP
Here’s what will happen once you receive a notice that your property was placed into REAP:
- You’ll have fifteen (15) calendar days to appeal the REAP notice. If your appeal is filed, you’ll have until the date of your General Manager hearing to be compliant with prior Orders.
- If no appeal is filed, the property is automatically placed into REAP.
- There will be a General Manager Hearing, wherein a decision will be issued determining whether the property will be accepted into REAP. This decision may also be appealed, this appeal must be filed by you within ten (10) days of the General Manager’s decision. This won’t give you more time to make any repairs.
- If your property is turned over to REAP, you’ll have to come into compliance to ensure you’re removed from the program. All violations must be repaired and any other discovered deficiencies must also be cured.
- After you have made the repairs, you need to contact the REAP offices. If it appears that you’ve done what is required, an Outreach Contractor will be assigned to your property, and a site visit will be scheduled.
During the site visit, the Outreach Contractor will provide you with either a positive or negative report, based on their inspection and visit. A negative report, as you might expect, will mean that repairs are not sufficient or complete, and your property will remain in violation. A positive report, however, means that you can move forward and contact a Case Manager to schedule a final inspection to get yourself out of REAP.
Moving on from REAP
To get out of the program, you’ll need to accomplish the following:
- Collect a positive report and an official sign-off from the City’s Case Manager.
- Submit to a review by REAP to determine whether there are any other outstanding orders or failed inspections on file with the Building & Safety Department of Health Services, or the Fire Department.
- Ensure that the water and power bills are paid in full.
Once you successfully meet all of those criteria, REAP will make a recommendation to the Los Angeles City Council to remove your property from this program.
Assuming the City Council agrees to remove your property from the program, you can expect a 30-day notice formally closing the REAP account. Rents will be restored to their original levels.
You will be responsible for paying all program and administrative fees, inspection fees, systematic code enforcement fees, legal preparation fees, and two pre-paid annual inspection fees.
Avoiding the REAP referral
No rental property owner wants to go through all this and the key to avoiding it is pretty simple: provide a safe, habitable, and functional home at all times for your tenants. Conduct thorough inspections during move-ins, move-outs, and throughout the tenancy. Stay up to date on all maintenance needs, whether they’re emergency problems, routine repairs, or preventative services.
Establish a good relationship with your tenants, when you work well with your residents, it’s unlikely that things will ever escalate to a situation such as this. Maintaining your investment property has to be a team effort; you need to work with tenants and with your vendors and contractors to ensure that everything is up to code and compliant with habitability standards.
There is no excuse for not making the repairs or investing in the upgrades that keep your rental property habitable. If you’re struggling with this part of the rental process, work with a Los Angeles property manager. We’ll keep you compliant.
Contact us at Earnest Homes if you’d like some help avoiding the hassles of REAP.
