What to do if you get a Notice of General Manager’s Hearing and Notice of Acceptance into the Rent Escrow Account Program

Late last week, a new property management client sent over a Notice of General Manager’s Hearing and Notice of Acceptance into the Rent Escrow Account Program (REAP) from the Housing and Community Investment Department of Los Angeles (HCIDLA).

That’s one of the worst letters you can receive as an owner of apartment buildings in Los Angeles. If your property is accepted into REAP after the GM’s hearing, the city starts taking some of your tenants’ rent payments and you’re blocked from refinancing the property or selling it to someone using a loan. And, once it’s in, it can be pretty tough to get your building removed from the program. So you can imagine the owner was upset.

(The backstory, I think, is that his previous manager never resolved a Notice to Comply which he received from HCIDLA. Once you fail to resolve issues identified by the city by the deadline, a General Manager’s hearing is scheduled automatically.)

The good news is that this is a solvable problem, if you are willing to move quickly. Here’s what to do when you receive a Notice of GM’s hearing:

  1. Make arrangements to resolve the outstanding issues (usually, this involves bringing in handymen or, for more complicated problems, contractors)
  2. Contact the city inspector assigned to the case to explain that you are working on getting the issues resolved
  3. Actually start doing the work to resolve the issues
  4. 7-10 days prior to the hearing date, call out the inspector to have him/her check off those issues which are resolved and show him that you are working on any others which remain unresolved at that time

Hopefully, you have resolved all of the issues, the inspector checks them off, you go to the hearing, and the hearing officer closes the file. But what happens if you can’t resolve the issues identified by the date of the hearing?

Then, your goal at the hearing is to get the hearing officer to grant you an extension of the deadline for resolution and thereby avoid getting your property put into REAP.

The key to getting the extension is to be able to demonstrate that you are making a good faith effort to get into compliance. That means:

  1. Show that you have resolved the straight-forward issues (that’s why you have the inspector come out prior to the hearing to check off whichever issues you have already resolved)
  2. Demonstrating your path to resolving the unresolved issues – for example, being able to show a contract with the relevant contractor/subcontractor which calls for her to resolve the issues, showing payments to that contractor, showing permits opened by the contractor for the work necessary to resolve the issues, being able to provide upcoming inspection dates, etc.

Obviously, you’re at the mercy of the hearing officer, who can be more or less understanding. However, in my experience, if you demonstrate good faith by doing what I outlined above, the hearing officer grants you an extension instead of placing your property into REAP.

Final note: If you are in a jam like this and need help, feel free to get in touch by emailing me at moses@adaptiverealty [dot] com. Sometimes, it makes sense for us to take over management of the building. Or, if you’d prefer to avoid the hassle entirely, we might be willing to buy the building from you, as-is.