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How to traverse the nightmare that is the Los Angeles Housing Department’s REAP Program
The other day a good friend of mine challenged me to write a journal. I have never been a person who
liked to write anything down, I figure, let’s just sit down and talk about it.
Well after going through the process of pulling a few properties out of the Los
Angeles City REAP Program, I decided that I would write about the
experience. Man oh man, what an
experience that was.
Let’s first discus what the REAP Program actually stands for. The REAP is a rent escrow account program that is administered by the City
of Los Angeles Housing Department. The
only way to even get put into the program is when your property, or the
property you are representing, has had violations that were not taken care of. Once you have not complied with the demands
of the Housing Department (they do give you a chance) you are done. When the
REAP Department starts collecting your rents and have placed a “cloud” on your
title, well now the real fun begins.
Where do I start? Let’s start with the day your nightmare began.
You wake up to a new REO listing, “YEAH”. It’s a multi-family dwelling located within Los Angeles City boundaries, “Oh no!” You check the Housing Department’s website
and find out that the property has some issues and it is in the REAP Program.
“Oh Boy! Now for the fun.” Oh, did I
forget to tell you that there is now a “Cloud” on the title, so forget about
traditional financing options for your buyers. OK, now what do you tell the
seller, (remember they have taken back the property and are now considered the
owners, and guess what, they are responsible for the REAP and all of the
properties issues.) So you tell the Asset Manager the truth and they respond like
Arnold from Different Strokes, “What you talkin’ bout Willis?” Then
they snap back to reality, they either tell you to sell the property for
cash. That’s so they don’t have to deal
with the title issues, but then you have to find an all cash buyer and/or
someone who is going to deal with the REAP on their own (scary thought) or they
clear the title and get top dollar for the property.
So now let’s get the property out of the REAP Program and clear the title so you can sell your property.
Now we have to deal with the Systematic Code Enforcement Program. This
is pretty much where it all began for you.
You have to get a copy of the previous violations and/or have the
property re-inspected so that you can find out what the violations are. Then
you fix the property and have it re-inspected by the Housing Inspector. Once
you have cleared the Housing Inspector, you need to contact the Outreach
Contractor and have the property re-inspected by them. (Now understand that
more than likely you have had a Building & Safety Inspection because you
need to get your permits signed off and you have had a Housing Department inspection,
ok sorry I digressed for a moment, too many inspections). Ok the Outreach
Contractor has signed you off, now what?
Make sure that all of the DWP bills on the property are paid, I mean all
of them (and I don’t care who’s name they are in). The Housing Department also
has an UMP Program (Utility Maintenance Program) that you must not be in; if
you are then pay the bill. OK, now you have made sure that you don’t owe, DWP
but did you check to see if you owed the Housing Department any money? Well you
need to check that little bit of information. Ok, now we are cooking with
grease. You have paid the Housing
Department bill and now they will clear you for removal from the REAP Program.
Ok they refer the property to the City Council and recommend removal from the
program. YEAH! well no , not yet. Once
the property has gone through City Council and you have been cleared, you still
have a few more steps to go. Now you have to wait, yes I said WAIT 30 days
until you can even ask the Housing Department if you owe them any more
money. Yes, I said it; you may still owe
more money. What you say, you just PAID
the Housing Department. Well you will have to pay them again, yes again, to
finally remove your property from the REAP Program and remove the “Cloud” from
the title. Once issued, this “Demand for Payment” is good for 30 days. You had
better get your loan funded within that 30 day window or pay the final demand
amount, if you don’t, then there will be penalties and you will owe more money.
But once paid, the Housing Department will remove the “Cloud” from the title
and you are REAP free. The moral of this story is if you own a multi-family
dwelling within Los Angeles City Boundaries, “TAKE CARE OF YOUR PROPERTY,
COMPLY WITH ANY AND ALL NOTICES FROM THE HOUSING DEPARTMENT AND KNOW THE RIGHTS
OF A PROPERTY OWNER AND THE RIGHTS OF YOUR TENANTS.”