I wanted to discuss a potential change to a DC law that may make renting and selling your home or investment property a bit easier. Many of you are DC landlords or know someone who is. You are probably aware that DC is known to have some laws that strongly favor tenants’ rights. One of those laws – the Tenant Opportunity to Purchase Act (TOPA ) - was passed in 1980 with the intent to protect lower income tenants from being displaced from their homes when their landlord decides to sell the property to be redeveloped.
Under TOPA, tenants must be given an opportunity to purchase the property (matching the terms of a third party offer). But even if they cannot or don’t wish to purchase the property, TOPA gives tenants negotiating leverage to obtain some consideration to offset the impact of their home being sold by allowing them to sell or assign their TOPA rights. The laws also specifies time limits and processes associated with exercising those rights. There are certainly some success stories resulting from this law. For example, there are buildings where the original tenants organized and partnered with a third party developer to allow the original tenants to remain and become owners of their units, while their partner developers updated the building and sold the vacant units at market values. But there have also been some unintended adverse consequences.
Because TOPA was broadly drafted to capture ANY rented property – from a basement apartment in a row house to a single condo unit to a 200 unit rental building – if you have tenants in the property, you MUST give the tenants an opportunity to purchase the property on the same terms as offered by a third party buyer. And, because of the risks tied to non-compliance, even if your tenant has already moved out, you may still need to follow the TOPA process to ensure that title insurance can be issued on the property when sold without significant exemptions.
Essentially a secondary market for TOPA rights sprung up and some tenants (and tenant advocacy groups) have used those rights created under the law to extract substantial payments or other consideration from landlords trying to sell their property, and even from the buyers who have a contract to purchase the property. Sometimes the tenants offer up those rights to anyone who is willing to pay the highest price for them. While this may be appropriate when dealing with multi-family housing to give the tenants bargaining power with developers, individual unit owners are also subjected to the legal ability of their tenant to prevent the sale of a property or insist upon significant payments to allow the sale to proceed. Some have equated this practice to legal extortion or hostage-taking, since the sale cannot proceed unless and until the tenants TOPA rights expire (a lengthy process which can sometimes lead to the sales contract collapsing because of the delay) or until those rights are bought and paid for. The impact is that landlords of single family homes/condos are sometimes prevented from selling because they cannot or will not agree to the tenant’s terms. And in a tight rental market, it has prevented property owners from deciding to rent their properties because of the potential constraints on their ability to sell later, thereby making less housing available to meet the City’s needs.
In recent months, the DC Council and their committees have held hearings to receive input from homeowners, tenants, tenant advocacy groups, realtors, and the public at large about the benefits and abuses of the TOPA laws. As a result of that input, the DC Council Committee on Housing and Neighborhood Revitalization unanimously voted last week to send Bill 22-0315, the “TOPA Single-Family Home Exemption Amendment Act of 2018″, to the full Council for a vote. That Amendment would exempt from the TOPA requirements any single family property (including individual condo/coop units, accessory units like basement apartments, or single family homes). The Amendment grandfathers the protections of TOPA for elderly or disabled tenants in such single family units. The full Council is voting on this amendment on Tuesday, March 6th.
If you wish to let your views on this Bill be known by the DC Council, consider sending an email to the DC Council members indicating your support for this Amendment before Tuesday’s hearing. Here are the email addresses of the Council members:
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I’ll be watching the outcome closely, and will report on the results next month.