DO YOU OWN MULTIFAMILY PROPERTIES?

By Mark Zinman | Zona Law 

If you own multifamily properties, be prepared as changes are coming next year. 

In July 2024, the FHFA announced they would be publishing new "tenant protections" governing multifamily properties with Fannie or Freddie loans ("Enterprise Loans"). On August 28, 2024, the FHFA published more details about the new regulations. Here is what owners and operators need to know:

This rule applies only to multifamily properties with new Enterprise Loans where applications were submitted AFTER February 28, 2025. This does not apply to any older existing loans. 

• Covered housing providers will be required to give 30-day written notice of a rent increase.

• Covered housing providers will be required to give 30-day written notice of a lease expiration.

• Covered housing providers will be required to give a 5-day grace period for rent payments. The FHFA says, "If rent is due on the 1st day of the month, a late fee cannot be charged until the 6th day of the month if rent is still unpaid."

According to the August policy, this does NOT apply to manufactured housing community loans. Also, loans that were originated using third-party (i.e., non-Enterprise) form loan documents (therefore, if Fannie/Freddie assumes a private loan not on enterprise forms, these terms still do NOT apply). Landlords whose policies do not already comply with the regulations will have 6 months to change their lease to reflect the change and will have 6 months to notify residents of the change in writing.

Arizona law already requires a 30-day notice to terminate the lease and to increase rent. Therefore, the first two requirements are not a significant issue. However, under Arizona law, there is no requirement for a grace period and many operators have different grace periods. 

Under this new regulation, a 5-day grace period must be given before late fees can be assessed. The regulation does not specifically address when notices can be sent, but potentially a notice cannot be sent until after the grace period expires. The August policy says you must wait 5 days before "late or other penalties can be charged." Therefore, you absolutely cannot charge a notice fee, and we would think you likely can't even send a notice. Hopefully, more information will come out on this issue, as we get closer, and we will update clients.