April 30, 2003—IREM and CCIM members met with Senators, Congressmen and their staffs to present their views on five key legislative issues during “Commercial Real Estate Capitol Hill Visit Day” on April 29th. Topics included:
- Bankruptcy Reform
- Keeping Banks Out of Real Estate
- Depreciation/Tenant Leasehold Improvements
- Accessibility
- Expensing of Building Security Equipment
For the past several years, says IREM, Congress has debated the issue of bankruptcy reform without success. They have taken up the issue again this year with H.R. 975, which passed the House of Representatives by a wide margin on March 19. The bill contains several provisions of interest to the property management industry, including eliminating the cap on single asset bankruptcies, closing a loophole that allows tenants to abuse the bankruptcy process to avoid paying rent, limiting the amount of time bankrupt shopping center tenants have to make a decision on assuming or rejecting leases, and ensuring that bankruptcy is not used to avoid paying fees or assessments to a homeowners, community, or condominium association.
S. 576, the “Tenant Leasehold Improvement Act” was introduced in February. Currently, when a landlord makes improvements for a particular tenant, the cost of those improvements must be amortized over the lifetime of the property (39 years for nonresidential property). These improvements, however, do not, by their nature, last for as long as 39 years. The legislation will allow the costs of leasehold improvements to be amortized over 10 years, making them more economically feasible for landlords.
Additionally, reports IREM, some state attorneys have been using the Americans with Disabilities Act (ADA) for unscrupulous purposes, filing frivolous lawsuits against commercial property owners. While the ADA does not allow plaintiffs to collect damages, their lawyers can collect legal fees. In addition to being a burden on well-meaning property owners and managers, there is a fear that these lawsuits will cause a backlash against the ADA and may erode public sympathy for the disabled. In March, Congressman Mark Foley (R-FL) introduced H.R. 728, the “ADA Notification Act,” which would ensure that commercial facilities and places of accommodation are given 90 days before a lawsuit is filed to make necessary corrections without the expense of going to court.
On the topic of expensing of building security equipment, IREM states that since September 11, 2001, businesses have spent huge sums increasing and improving building security. This equipment is geared toward increasing the safety and protection of building tenants, visitors, shoppers, and guests. According to IREM, building owners across the country report that their security related operating budgets have increased between 100 and 200 percent and are still climbing. Currently, building owners would depreciate security assets over a 5-7 year lifetime. H.R. 1259 would allow these costs to be wholly deducted in the year they are placed in service.
For more information, contact IREM.
