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 wholiked 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 LosAngeles City REAP Program, I decided that I would write about theexperience. Man oh man, what anexperience 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 Cityof Los Angeles Housing Department. Theonly way to even get put into the program is when your property, or theproperty you are representing, has had violations that were not taken care of. Once you have not complied with the demandsof the Housing Department (they do give you a chance) you are done. When theREAP Department starts collecting your rents and have placed a “cloud” on yourtitle, 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 websiteand find out that the property has some issues and it is in the REAP Program.“Oh Boy! Now for the fun.” Oh, did Iforget to tell you that there is now a “Cloud” on the title, so forget abouttraditional financing options for your buyers. OK, now what do you tell theseller, (remember they have taken back the property and are now considered theowners, and guess what, they are responsible for the REAP and all of theproperties issues.) So you tell the Asset Manager the truth and they respond likeArnold from Different Strokes, “What you talkin’ bout Willis?” Thenthey snap back to reality, they either tell you to sell the property forcash. That’s so they don’t have to dealwith the title issues, but then you have to find an all cash buyer and/orsomeone who is going to deal with the REAP on their own (scary thought) or theyclear 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. Thisis pretty much where it all began for you. You have to get a copy of the previous violations and/or have theproperty re-inspected so that you can find out what the violations are. Thenyou fix the property and have it re-inspected by the Housing Inspector. Onceyou have cleared the Housing Inspector, you need to contact the OutreachContractor and have the property re-inspected by them. (Now understand thatmore than likely you have had a Building & Safety Inspection because youneed 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 OutreachContractor has signed you off, now what? Make sure that all of the DWP bills on the property are paid, I mean allof them (and I don’t care who’s name they are in). The Housing Department alsohas an UMP Program (Utility Maintenance Program) that you must not be in; ifyou are then pay the bill. OK, now you have made sure that you don’t owe, DWPbut did you check to see if you owed the Housing Department any money? Well youneed to check that little bit of information. Ok, now we are cooking withgrease. You have paid the HousingDepartment 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 theprogram. YEAH! well no , not yet. Oncethe property has gone through City Council and you have been cleared, you stillhave a few more steps to go. Now you have to wait, yes I said WAIT 30 daysuntil you can even ask the Housing Department if you owe them any moremoney. Yes, I said it; you may still owemore money. What you say, you just PAIDthe Housing Department. Well you will have to pay them again, yes again, tofinally remove your property from the REAP Program and remove the “Cloud” fromthe title. Once issued, this “Demand for Payment” is good for 30 days. You hadbetter get your loan funded within that 30 day window or pay the final demandamount, 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 titleand you are REAP free. The moral of this story is if you own a multi-familydwelling within Los Angeles City Boundaries, “TAKE CARE OF YOUR PROPERTY,COMPLY WITH ANY AND ALL NOTICES FROM THE HOUSING DEPARTMENT AND KNOW THE RIGHTSOF A PROPERTY OWNER AND THE RIGHTS OF YOUR TENANTS.”

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  • Well it can be frustrating, but I am that person that can get you out of the REAP if you don't want to tackle that job yourself. :-D
  • This sounds like a perfect case of "knowing when to hold em, and knowing when to fold em." Sounds like it can be a great market for an office commited with dealing with the REAP Program, but not a market for someone that dabbles with multi-family unit dwellings on occasion. At least that's what I'm getting from your experience.
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