Property and asset management.

Growing professionalism and new technologies are transforming the experience of those who live in apartments. Fueled in part by the rise of publicly owned apartment companies and their customer-centric approach to apartment management, today's apartment residents receive a variety of new services and conveniences that make apartment living a desirable alternative to traditional single-family living.

While large, publicly owned apartment firms are a major presence in the apartment sector, the vast majority of residential property managers are small businesses. Of the nation's residential rental housing managers, 99 percent qualify as small businesses (i.e., they have total "annual receipts" of no more than $5 million).

Although many important decisions affecting both large and small stakeholders in the residential property management industry are matters of state law, federal legislation and regulation significantly affect market-rate and subsidized apartments alike.

As the 109th Congress begins, a number of federal legislative and regulatory issues affect property management. In addition to the priority issues detailed below, NAA/NMHC will closely watch judicial, regulatory and legislative developments that significantly affect the interests of apartment owners/managers.

Class Action Reform

NAA/NMHC Position: NAA/NMHC strongly support legislation that would reduce frivolous class action lawsuits and promote the prompt resolution of legitimate claims. Existing laws promote class action abuse that can cause harm to both plaintiffs and firms forced to defend abusive and frivolous lawsuits.

Background: The present legal system's rules for class certification, jurisdiction and settlement procedures force apartment firms--the vast majority of which are small businesses--to absorb the cost of defending class action lawsuits and pass those costs along to consumers in the form of increased rents.

Class action lawsuits have proven an effective tool to lure many otherwise innocent defendants into settling cases because of the threat of more costly litigation. Real estate firms have been recent targets of costly class action litigation involving mold, lease termination fees, building accessibility and fax marketing.

The 108th Congress recognized the harm being done by abusive class action lawsuits, and in late 2003, the House passed comprehensive class action reform legislation (H.R. 1115) that would have moved large, multi-state class action lawsuits from state to federal court. This would reduce the ability of litigants to go "forum shopping." The measure also contained important consumer protections, including prohibitions on unfair settlements. The Senate failed to consider its version of the bill before adjourning last year, however.

The issue is expected to be a high priority in the 109th Congress, particularly because President Bush has identified tort reform, including class action reform, among his top legislative priorities for this year.

Action Requested: NAA/NMHC strongly urge Congress to approve meaningful class action and tort reform legislation that will protect responsible businesses from abusive lawsuits.

Bankruptcy Reform

NAA/NMHC Position: NAA/NMHC strongly urge Congress to remove loopholes in the U.S. Bankruptcy Code that allow resident debtors who no longer have a right to remain on the premises to stay in an apartment after declaring bankruptcy.

Background: Apartment operators, particularly small business apartment owners, continue to suffer economic loss because of residents who remain in their apartments after filing for bankruptcy protection, but do not pay rent. The loophole in the U.S. Bankruptcy Codes regarding automatic stays has even spurred marketing campaigns that promote it as a way to live "rent-free" for months at a time.

This "free ride" is an abuse of the Bankruptcy Code's "fresh start" principle. The widespread bipartisan support for bankruptcy reform reflects strong public opinion that the loopholes in the Bankruptcy Code that permit abusive behavior should be eliminated.

Congress has tried unsuccessfully to pass bankruptcy reform legislation the past four Congresses. In the 108th Congress, the momentum created by House passage of a comprehensive measure in March 2003 failed to produce results when the Senate did not act. The House version (H.R. 975) included an important provision (Section 311) that would have preserved existing resident protections, while also expediting eviction actions in bankruptcy court of residents who lacked a valid lease.

Action Requested: NAA/NMHC call on Congress to adopt a bankruptcy reform bill that includes the landlord-tenant automatic stay reform provision approved by the House in 2003.

Do-Not-Fax Laws

NAA/NMHC Position: NAA/NMHC support reasonable measures to provide privacy protections to consumers. However, we urge Congress and the administrative agencies to review the cost effect and operational burdens those regulations impose on business operations. Further, we urge Congress to repeal the onerous rule changes promulgated by the Federal Communications Commission (FCC) that severely limit the ability of firms to communicate with current and prospective residents via fax.

Background: Congress has recently enacted new consumer privacy laws regulating telephone, fax and e-mail communications and business use of consumer data. In 2003, the Federal Trade Commission (FTC) created the enormously popular National Do-Not-Call (DNC) Registry, which allows consumers to "opt out" of telemarketing calls. The FCC issued an additional rule regulating the DNC registry, but importantly, added several provisions addressing the permissible uses of fax communications.

The FCC's Do-Not-Fax rule would require firms to obtain advance, written consent before sending most "commercial" faxes, even to those with whom the sender has an established business relationship. This significant change from current law not only creates an unreasonable compliance burden on apartment firms, it also creates new potential liability for class action lawsuits. The FCC postponed implementation of the rule twice, but it is currently scheduled to go into effect on July 1, 2005. NAA/NMHC are working with a coalition of businesses and trade associations seeking to overturn the rules.

Action Requested: NAA/NMHC urge Congress and administrative agencies to carefully analyze the cost burden that any proposed laws intended to protect consumer privacy would impose on the operations of apartments and other businesses. We also urge Congress to approve legislation to repeal the onerous FCC fax rules that create an unnecessary burden on the entire business community.

Terrorism Insurance 

NAA/NMHC Position: NAA/NMHC urge the extension of the Terrorism Risk Insurance Act of 2002 (TRIA) to ensure that terrorism insurance rates and deductibles do not negatively affect the cost and availability of rental housing, especially affordable housing. NAA/NMHC also urge multifamily lenders to develop flexible insurance requirements that permit apartment providers in less-risky areas to operate without expensive terrorism coverage.

Background: When terrorism insurance became both unaffordable and unavailable following September 11, Congress passed the Terrorism Risk Insurance Act (TRIA). The law provides federal funds to pay for a portion of an insurance company's terrorism-related losses (from a qualifying attack) once the insurer's losses exceed specified levels. It also requires insurance firms to offer terrorism insurance on the same terms and conditions that they offer regular property and casualty coverage.

TRIA has restored the terrorism insurance marketplace, although it is scheduled to expire on Dec. 31, 2005. The "make available" provision was set to expire one year earlier on Dec. 31, 2004. After receiving more than 200 comment letters from policyholders, insurers, lawmakers and other stakeholders--including 184 House members and 15 members of the Senate--on June 18, 2004, U.S. Treasury Secretary John Snow extended the make-available provision through 2005.

Lacking evidence that a private market for reinsurance has emerged, the Coalition to Insure Against Terrorism (CIAT), of which NAA/NMHC are members, is urging Congress to extend the entire program beyond its 2005 sunset date. A study released in 2004 whose authors include Professor R. Glenn Hubbard, the former chairman of the Council of Economic Advisors, concluded that the 2005 expiration of TRIA "will result in lower economic performance and greater disruption to the U.S. economy in the event of a terrorist attack."

Action Requested: NAA/NMHC urge an extension of TRIA in order to maintain the availability and affordability of terrorism insurance.

Insurance Availability and Affordability

NAA/NMHC Position: NAA/NMHC urge Congress to expand the Liability Risk Retention Act of 1986 (LRRA) to permit the formation of Risk Retention Groups (RRGs) for property coverage. The LRRA must be expanded to include property coverage in order to fully realize Congress' goals of reducing insurance costs and increasing insurer competition. This expansion would provide alternative coverage opportunities for property owners that would reduce policyholder costs and promote greater competition among insurers.

Background: Congress passed the Liability Risk Retention Act of 1986 as a response to skyrocketing insurance costs in the 1980s. The measure facilitates the formation of risk retention groups to promote affordable liability coverage within individual industries by spreading risk exposure among group members. RRGs can make insurance available and affordable when the traditional insurance market cannot. The formation of numerous successful RRGs since 1986 signifies the law's success; however, that success is limited by the law's scope.

Action Requested: NAA/NMHC urge Congress to advance insurance availability and decrease exorbitant premiums by amending LRRA to permit RRGs for property coverage.

Homeland Security 

NAA/NMHC Position: NAA/NMHC strongly support ongoing efforts to enhance homeland security while taking appropriate measures to ensure such actions do not unnecessarily interrupt or significantly burden the business operations of our industry.

Background: In the post-September 11 world, the business community, including the apartment industry, is being confronted with what seems like daily doses of new government initiatives to protect the homeland against terrorism. Apartment firms now screen residents and employees against terrorist lists and report large cash transactions to federal counter-terrorism officials. They are also complying with enhanced lease termination rights for deploying service members enacted in 2003.

In addition, the landmark intelligence reform legislation approved at the end of 2004 includes a provision encouraging the private sector to adopt a disaster and emergency preparedness standard. It advises the insurance industry and credit rating agencies to "consider a company's compliance standards" when making underwriting/credit-worthiness decisions. Congress is also considering a requirement for some real estate businesses to establish anti-money-laundering programs.

Action Requested: NAA/NMHC urge Congress and regulators to take a reasonable approach when instituting new laws intended to enhance homeland security so that the business community is not unduly burdened by unreasonable new compliance obligations or increased legal liability.

HUD Fair Housing Enforcement Practices

NAA/NMHC Position: NAA/NMHC encourage HUD to increase funding for programs that promote the understanding of fair housing and federal accessibility requirements by all sectors involved in design and construction.

Background: NAA/NMHC continue to lead the apartment industry in monitoring the U.S. Department of Justice's (DOJ) fair housing enforcement activities.

The HUD budget for fair housing enforcement decreased from $48 million in FY2004 to $46.55 million in FY2005. Funding for the Fair Housing Initiatives Program (FHIP) will remain at $20 million, while funding for the Fair Housing Assistance Program (FHAP) was cut from $28 million to $26.55 million.

NAA/NMHC continue to monitor and generally support HUD's commitment to expand technical assistance to the industry and move away from an accessible design policy that had been focused almost exclusively on enforcement by advocacy groups. NAA/NMHC will also monitor HUD and DOJ accessible design enforcement activities for any changes affecting member firms.

Action Requested: NAA/NMHC encourage Congress to direct a greater percent of FHIP funding for industry-directed education.

Telecommunications Policy

NAA/NMHC Position: NAA/NMHC strongly favor a healthy and competitive telecommunications industry that meets the reliability, technical capability and cost needs of apartment residents. Federal telecommunications policy should be based primarily on a free and open market, without legal restrictions and requirements that impair the management of a multi-unit dwelling.

Background: Today's apartment residents require newer, faster and more sophisticated telecommunications capabilities. Therefore, apartment owners rely on advanced telecom systems and services to satisfy resident needs and establish an edge in real estate's highly competitive marketplace.

Those needs can only be met when telecommunications providers compete in a freely operating market. Such competition has spurred the development of new technologies and higher quality service.

Some telecom providers have asked Congress for permission to ignore the normal service negotiations that must take place between property owners and providers and gain mandatory access to multi-unit properties. Efforts by either federal or state governments and agencies to mandate physical access to various telecommunications technologies, presumably in the interest of individuals who reside in apartments, more often than not result in higher prices and less competition. In addition, it leads to forced acceptance of technologies that may soon become obsolete.

Action Requested: Congress should reject any efforts by telecommunications providers who seek legislation that grants them special access privileges to private property.