The Los Angeles Rent Escrow Account program is designed to confiscate your rents and give your money to the City.
It is difficult to believe, but the City can send you only one notice letter, and whether you receive the letter or not, (maybe you were on vacation) the City can confiscate 100% of your rental income on the first day of the next month, and every month thereafter.
This has happened to hundreds of owners – it is not theoretical. Many are in foreclosure or bankruptcy.
The REAP notice is usually preceded by an inspection where deficiencies were found with your building, no matter how minor or cosmetic (eg. scratched paint). If the defects are not fixed in a timely manner, you will get the REAP notice letter.
How to respond to the REAP letter.
Many owners read the REAP letter, which states a hearing will be scheduled (or is scheduled), and assume they can wait until the hearing and present their defense.
This Is Wrong!
The REAP letter contains an appeal form which must be filed by a deadline date, 15 days after the REAP letter is dated. You must timely file the appeal, on the city mandated form, or your rents will be automatically confiscated.
How do I file the Appeal?
If you mail the appeal form and it is not received by the Housing department by the 15th day, you will be put in REAP and your rents will be confiscated. Note that you have already lost several days because the City mailed the REAP notice to you.
The safest course is to deliver your appeal to the Housing Department at one of their six addresses listed on the letter. Beware if you wait until the last day – the Housing offices close early (at 4:00 p.m.), and some of the offices listed in the letter have moved!
What should the Appeal say?
First, use the City form. An owner who used a slightly different form had his building put in REAP. Make your appeal as detailed as possible. Be sure to include the required tenant information. The City has argued that you cannot later raise any issue in Court that you failed to raise in your initial appeal. You may want to consult an attorney regarding your appeal.
What if I am in compliance?
You still have to file an appeal. Your building will be put in REAP even if you are 100% in compliance, if you fail to file an appeal.
Ok, I filed an Appeal, what do I say at the hearing?
The Hearing Examiner is a phony judge, without a law degree – she is a mere Housing Department employee. She wears judicial robes to intimidate you. She favors her employer, the Housing Department. Unfortunately, this bureaucrat makes the decisions. The first question she will ask is whether you are in compliance.
Although the Hearing Examiner is required to take evidence from you, she pays little attention to it. She will be dismissive of your witnesses and photographs. She will complain that you took too long to repair your building.
The Hearing Examiner is only interested in what the inspector has to say. Therefore, BEFORE the hearing, call the inspector and get everything signed off as in compliance. If you do so, you will probably avoid REAP (provided you filed an appeal).
I could not repair everything before the hearing, What do I do?
Many times, additional time is needed to do repairs. Many times this is the result of a City delay (eg. finalizing permits). Sometimes new defects are alleged for the first time at the Hearing. Often the tenants continually damage the building (e.g. tampering with smoke detectors). Always ask for a continuance to comply. If the continuance is granted, fix your building before the continued hearing. Also remember that some so called “defects” are actually grandfathered in, and are not defects at all (especially some electrical items).
The hearing Examiner put my building in REAP, and my next months (And all following months) rents will be confiscated, What do I do?
You have a very short time period (10 days) to file another (second) appeal. File it in person, and pay the $150.00 filing fee. This second appeal must state detailed reasons why the Hearing Examiner was in error (you may want to consult an attorney). If you properly and timely file an appeal, the rent confiscation will be stayed (stopped) until the RAC Appeal hearing. At the present time, RAC appeal hearings are heard approximately 5 months after filing.
What do I do while I am awaiting my Appeal hearing?
Many owners wrongfully assume that the RAC Appeal Board will reverse the Hearing Examiner’s decision to put the building in REAP. That almost never happens. It does not matter if you are in compliance. Instead, use the time to get out of REAP. That means you must get signed off by the Housing Department, Building Department, Fire Department, Health Department, a Tenant Organization, and the City Council, all before the RAC Appeal hearing.