Section 311 of the bill partially sums up the relevant provision, noting that the legislation: "Denies an automatic stay of specified residential real property eviction proceedings by a lessor against a debtor if: the lessor obtained judgment for possession prior to the bankruptcy filing date; or lessor furnishes certification of specified debtor offenses."
Organizations affiliated with various facets of commercial and residential real estate have sighed in relief after having been, as they see it, on the losing end of a longstanding escape clause. "In 1996, the Los Angeles County Sheriff's Department estimated that nearly 4,000 residents filed for bankruptcy to avoid eviction," says Jim Arbury, vice president of government affairs with the National Multi Housing Council and National Apartment Association. "[Congress] has stopped this 'free ride' which abuses the Bankruptcy Code's 'fresh start' principle." The "free ride" led to financial losses for property owners that resulted in rent increases for other renter and decreases in apartment availability, the council notes.
The new law will also have far reaching effects beyond the multifamily rental sector. "This legislation will prevent commercial/multifamily lenders from becoming victims of a loophole that has allowed borrowers with assets valued over $4 million to side-step required repayments," says Kurt Pfotenhauer, senior vice president of government affairs for the Mortgage Bankers Association. President Bush has already committed to signing once it hits his desk.
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