The District’s 30-year-old Tenant Opportunity to Purchase Act, or TOPA, is designed to prevent tenants from being kicked out by landlords planning to sell their properties. It gives renters an opportunity to buy the properties, at least the right of first refusal.
In July, the D.C. Council revised the law – exempting most single-family homes, including those with basement rentals also known as “accessory dwelling units.” The council opted to exempt single-family homes based largely on a study showing that only 5 percent of renters ended up buying their homes under the previous law.
If you’re a renter disappointed that you won’t be able to buy the single-family house you’re in, you might be interested to know that there are two exceptions – if the tenant is more than 62 or disabled and if they signed a lease before March 31 and moved in by April 15 they are entitled to a modified TOPA.
The law is a little complex, so let’s take this example:
John owns a D.C. condo and Gale is his tenant. John has just listed the property for sale with a real estate company for $650,000. Gale does not qualify for the modified TOPA. Prior to July 3, John had to send a single-family TOPA form to his tenant. Now, he only has to send Gale a notice that he
intends to sell. A copy of the form (referred to as “Form 1) must also be sent to the D.C. Office of Tenant Advocate as well as to the D.C. Department of Housing and Community Development (DHCD). Since TOPA is not applicable in our example, John is free to sign a contract with anyone and ultimately go to closing. Of course, Gale still has all of the other rights available to tenants here in the District, and still has the right to buy if she submits an offer which is accepted.
But now let’s change the facts: Gale is either over 62 or disabled and meets the calendar requirements spelled out above. She receives Form 1. By law, she must advise John within 20 days after receiving the form that she may be eligible for the new TOPA. Gale officially advises John by sending him Form 2 which explains her status. That form is called “Letter to Landlord.”
Proving that Gale is over 62 is not difficult. All she needs is a passport, a driver’s license or some other document reflecting her age. But proving disability is more difficult. Accordingly, Gale sends another form (Form 4 called “Response Letter to DHCD” if claiming elderly or disabled status). To protect the privacy of the tenant, that form only goes to the District, which will determine if Gale qualifies.
If the city certifies her as eligible, John must then send her a form that either tells her he has or does not have a third party sales contract. Once Gale receives either form, she has 20 days to advise John of her interest in buying. She then has 25 days to negotiate a sale contract with John. If that is accomplished, Gale has an additional 45 days to go to settlement. That can be extended to 75 days if a lender indicates it needs a little more time.
The interesting question: Can Gale assign her TOPA rights to a third party? One of the main reasons TOPA was recently amende is that many tenants were assigning TOPA rights for lots of money, much to the disadvantage of the landlord. And often landlords were literally held hostage by tenants demanding money in order to release their TOPA rights.
Yes, Gale can assign her TOPA rights, but she cannot receive any financial payment for the assignment. The assignee can only give Gale is a 12-month extension of her lease after it expires and at the same rental rate.
Tenants living in houses with only two to four units or in buildings with five or more apartments remain under the old TOPA law.
The new law will clearly make it easier for single-family homeowners (as well as owners of condos and co-ops) to sell without having to go through a time-consuming process, and will discourage the efforts by tenants to stall the process in order to get more money. Since its inception many years ago, there have been numerous lawsuits in which plaintiffs (often tenants) were seeking guidance
on the impact of TOPA on a specific set of facts.
Only time will tell if the modified TOPA is judgment proof.
The new forms can be found here.