Ever been scanning across apartment listings in LA and been confused by the statement “Property in REAP. Looking for an all-cash buyer”? You are not alone. Read on for a brief synopsis on the program and whom it affects.
What exactly is REAP?
The Rent Escrow Account Program has been established by the City of Los Angeles and exists to resolve health, safety and habitability issues found in rental properties. It essentially functions to protect tenants from unsound housing, while also preserving the value of LA’s properties and housing developments.
How does REAP work?
Rental properties and units get placed in REAP if they do not correct cited health, safety and Housing Code violations within the allotted time. This placement may be appealed by the landlord, but once the decision to put a property into REAP is finalized a rent reduction is put in place. Based on the severity of the violations, the reduction may be between 10% to 50% of the monthly rent.
The tenant may continue to pay the reduced monthly rate to the landlord or he or she can opt to send the payments to an escrow account established by the Housing & Community Investment Department of Los Angeles (HCIDLA).
Tenants will be alerted that their rental property is in REAP via mail or by a visit from one of REAP’s outreach counselors. An outreach counselor is assigned to every case and is accountable for educating the tenants and the landlord on their respective rights and responsibilities within the program.
How is the property owner affected?
Once a property or unit is put into REAP, the HCIDLA also records a notice on the property’s title. This notice alerts potential buyers and their lenders, that there is a problem with the property.. which means that no one will lend to the owner or attempt to buy the property using a loan – this is why REAP properties are required to sell for cash. The owner is also charged a monthly administration fee of $50. Owners are further negatively impacted by spending more money on repairs while simultaneously being required to lower rental rents.
How does a property get taken OUT of REAP?
A property remains in REAP until the HCIDLA can verify that the violations have been resolved and that all the issues have been signed off on by a Department inspector. Once the HDICLA confirms that Los Angeles Department of Water and Power bills have all been paid off, the City Council will evaluate (and most likely) approve the property’s removal from the program. Tenants will be alerted by mail that the property has been removed from the program and that required rent has been reverted back to it’s normal rate. It is important to note that if a tenant has been paying rent through an escrow account that they are required to return to directly paying his or her landlord.
Know your responsibilities as a land lord so REAP does not happen to you, as well as your rights as tenant when it comes to the quality of your rental property.
For more information on the Rent Escrow Account Program, check out the HDCILA’s info page: http://hcidla.lacity.org/what-is-reap-for-renters