Volume VIII, Number 2 - April 2003

In this bulletin:

•	Capitol Hill Visit
•	Banks in Real Estate Brokerage and Property Management
•	Real Estate Information Sharing and Analysis Center
•	NAR Insurance Task Force Meets With Major Insurers
•	Federal Tax Package
•	Toxic Mold Bill Reintroduced
•	Brownfield Cleanup Funds Closer to Accessible
•	FCC Inside Wiring Order
•	Terrorism Insurance Not Required by the FHA
•	Treasury Announces Executive Director of Terrorism Risk Insurance Program
•	Netscan Contract Helps Track State Legislation & Regulation

Capitol Hill Visits

The Capitol Hill Visit program kicks off on Monday, April 28 with an Orientation and Federal Issues Briefing. The program has been enhanced this year to include a Q&A with Senate and House staffers and an opportunity for the states to caucus on the issues and their scheduled meetings the following day. On Tuesday, April 29, participants will take to the Hill to meet with their congresspersons on a number of important issues. They will all then reconvene at the Grand Hyatt to discuss their experiences and successes at the Hill Visit Reception and Hospitality Parlor.

The CCIM Institute/IREM policy platform includes the following:

Banks in Real Estate Brokerage and Property Management

In 2000, the Federal Reserve and Treasury Department proposed a rule that would allow financial conglomerates to own and operate real estate brokerages and property management firms. Financial institutions hold a unique position in the business world that would give them unfair advantages in the real estate industry. IREM supports H.R. 111 and S. 98, which would prohibit the expansion of financial institutions into real estate brokerage and management.

Bankruptcy Reform: Congress has yet again taken up the important issue of bankruptcy reform this year and passed the House of Representatives by a wide margin on March 19. H.R. 975 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.

Depreciation of Tenant Leasehold Improvements: 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 non-residential property). These improvements, however, do not, by their nature, last for as long as 39 years. S. 576 and H.R. 1634 will allow the costs of leasehold improvements to be amortized over 10 years, making them more economically feasible for landlords.

ADA Lawsuits: While the Americans with Disabilities Act (ADA) does not allow plaintiffs to collect damages, their lawyers can collect legal fees. In some states, unscrupulous lawyers found a way to exploit this loophole by filing frivolous lawsuits against commercial property owners. These lawsuits are a burden on the legal system and well-meaning property owners and managers. In March, Congressman Mark Foley, CCIM® (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.

Expensing of Building Security Equipment: Since September 11, 2001, building owners across the country report that their security-related operating budgets have increased significantly and are still climbing. Currently, building owners would depreciate these security assets over a 5-7 years. H.R. 1259 would allow these costs to be wholly deducted in the year they are placed in service. This will help businesses and property owners to more immediately meet the security needs they are facing.

Real Estate Information Sharing and Analysis Center

In late February 2003, national real estate industry leaders and federal homeland security officials entered into an agreement establishing a formal public-private partnership to help protect U.S. commercial real estate assets against potential terrorist attacks. The partnership will facilitate the two-way flow of information between the federal government and the real estate industry regarding terrorist threats, warnings and response planning by supporting the development of a new Real Estate Information Sharing and Analysis Center (ISAC). CCIM Institute has entered into this agreement through a partnership with the National Association of REALTORS®.

The new Real Estate ISAC, a separately chartered not-for-profit being organized by The Real Estate Roundtable, will work to advance these overriding goals as identified by the Roundtable and its trade association partners:

(1) To encourage and coordinate information sharing and analysis that will enable the real estate industry to identify, assess and reduce vulnerabilities to malicious attacks, and to recover from any attacks as quickly as possible;

(2) To facilitate the industry’s reporting to government authorities of credible threats to real estate assets, and to assist the government in disseminating threat and warning information within and among the different sub-sectors of the real estate industry; and

(3) To encourage the development of, and serve as a central repository for sharing, building-security related practices as they are formulated by industry participants, trade associations, government agencies and other nonprofit and consulting organizations.

The ISAC is scheduled to begin formal operations by late spring. Information and alerts made available to CCIM Institute through this information sharing program will be sent to members and candidates via e-mail and will be posted on the CCIM Institute website. In addition, members will be able to access the ISAC website to obtain and share information by late in the spring of 2003.

NAR Insurance Task Force Meets With Major Insurers

Members of the NAR Insurance Task Force met with the senior management of the State Farm, Allstate and Farmers Insurance at NAR headquarters in Chicago on March 12 and 13th. Among the issues discussed were the use of insurance credit scores, cancellation of insurance coverage after closings, and the potential for current insurer practices in response to water claims to create a new class of stigmatized properties. The meetings were part of the Insurance Task Force's efforts to identify what actions NAR might take to address the current difficult insurance market. The Task Force will report its final recommendations to the NAR Leadership Team and CCIM Institute will be assessing those recommendations to determine if they require any amendments to current CCIM Institute Statement of Policy.

Federal Tax Package

Ways and Means Committee Chairman, Bill Thomas, has introduced H.R. 2, a bill embodying the President's long-term growth package. The centerpiece of the package is a proposal to eliminate the taxation of dividends at the shareholder level. H.R. 2 also contains provisions that would accelerate scheduled tax rate reductions and increase child and education tax credits.

While dividends taxation does not affect real estate directly, the mechanics of the proposal will have at least two indirect effects. First, the amount of capital flowing into low-income housing could be reduced and the low-income rental housing credit made less beneficial. Second, the exclusion of taxation on dividends (and certain accounting features that apply at the corporate level) could tilt investments toward securities.

Uncertainty about the likely revenue targets to be provided in the conference report on the Budget Resolution has had the effect of delaying House Ways and Means Committee mark up on any tax package. Chairman Bill Thomas (R-CA) had intended to mark up a tax bill the week of March 24 and to take it to the House floor the week of March 31. The process has been significantly delayed, not only because of the Budget Resolution (conference on Budget Resolution to occur April 11), but also because of debates about the merits of increasing the deficits and the unknown costs and duration of the Iraq war.

Toxic Mold Bill Reintroduced

Rep. John Conyers, (D-Michigan), reintroduced the “United States Toxic Mold Safety and Protection Act of 2002”, a far-reaching bill prescribing research, inspection and remediation standards to address the myriad of issues stemming from toxic mold. H.R. 1268, the 2003 bill, is practically identical to H.R. 5040 from last congress. That bill represented Congress’ first crack at federal mold legislation.

The bill, in effect, would create a national toxic mold hazard insurance program much like the federal flood insurance program in order to address the burgeoning number of claims against policies for costs related to mold clean-up and health hazards.

Careful analysis of the bill’s language reveals several areas of concern. In particular, Sections 201 through 206 addressing inspection requirements for residential properties, building code requirements and construction requirements.

H.R. 1268 does prescribe tax credits for toxic mold inspection and remediation. CCIM Institute will monitor this bill’s progress to ensure that these provisions are not removed from the bill.

Brownfield Cleanup Funds Closer to Accessible

By unanimous voice vote, the House Financial Services Committee approved a bill that would make changes to HUD's brownfields program in order to make it easier for local governments to access the program's funds. H.R. 239, the Brownfields Redevelopment Enhancement Act, is sponsored by Rep. Gary Miller (R-Calif). The bill has been placed on the House calendar for consideration.

FCC Inside Wiring Order

The Federal Communications Commission (FCC) released its long awaited Inside Wiring order in March. In a big win for real estate, the FCC declined to regulate exclusive contracts, and chose not to ban perpetual contracts. In the order the FCC stated, "the record did not demonstrate a need for government intervention with marketplace forces and privately negotiated contracts." IREM, as a member of the Real Access Alliance, had argued that the marketplace was working, and that the FCC had no standing with respect to contracts between private parties. In addition, the FCC supported our position against forced access laws, stating that "We continue to believe that mandatory access laws may impede competition in the MDU (multiple dwelling unit) marketplace and that they tend to preclude alternative (non-cable) MVPDs (multichannel video programming distributors) from executing MDU contracts." A full copy of the ruling is available at:

Terrorism Insurance Not Required by the FHA

HUD Secretary Martinez announced on March 11, 2003 that FHA will not require terrorism insurance for multifamily mortgages of less than $50 million. The requirement for properties over $50m will only apply to new mortgage applications and not existing mortgages. This threshold will be debated in a proposed rule to be released this spring.

Treasury Announces Executive Director of Terrorism Risk Insurance Program

On March, 19, 2003, Treasury announced that Jeffrey S. Bragg, former Administrator of the Federal Insurance Administration during the Reagan Administration, has been named Executive Director of the Terrorism Risk Insurance Program (TRIP), established by the Terrorism Risk Insurance Act of 2002.

Beginning in April 2003, Mr. Bragg will be responsible for implementing the operation requirements of the Act, managing the TRIP program, and ensuring that an appropriate mechanism for processing claims for Federal payments under the Program is in place.

Mr. Bragg brings 25 years of experience in the insurance and insurance-related information technology industries. As former Administrator of the Federal Insurance Administration, he administered the National Flood Insurance Program, as well as the Federal Riot Reinsurance Program and the former Federal Crime Insurance Program.

Netscan Contract Helps Track State Legislation & Regulation

The CCIM Institute in partnership with the Institute of Real Estate Management approved a contract with the Virginia-based company NETSCAN iPublishing for their legislative and regulatory tracking databases, LegAlert and RegAlert respectively.

Since January 1, CCIM and IREM Legislative Affairs’ staff have been fine-tuning keyword searches for the LegAlert and RegAlert databases to run on a daily basis in order to identify pending state legislation and regulation that would potentially impact the commercial real estate investment, brokerage and management industries. At the same time, staff is determining the best and most efficient way to transmit this information to the CCIM and IREM Chapters. Reports have been submitted to a handful of CCIM and IREM Chapters and the goal is to provide these reports on a consistent, monthly basis and post reports for all states on the Government Affairs website. In addition, Legislative Affairs is able to accommodate specific research requests submitted by members.

CCIM Institute Legislative Staff
Chuck Achilles, IREM VP Legislative & Research, 312.329.6020, cachille@irem.org

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