In 1980, the DC City Council enacted the first iteration of what is now known as the TOPA law – the right of tenants to purchase rental properties in which they live. The Tenant Opportunity to Purchase Act, or TOPA, affords tenants the ability not only to negotiate meaningfully with their landlords, but also to match terms from third party offers.
TOPA was enacted to combat the decline of rental housing in the District. The City Council determined that the rate of depletion of rental units was very high, and wanted to allow tenants the opportunity to organize and stay in their current property. The City was also concerned about the lack of affordable housing, as the housing stock was aging and beginning to turn over.
Many developers moved in to the District to substantially rehabilitate properties and/or to convert multi-family housing to condos. Even small multifamily buildings of 10 or fewer units were easy pickings. The District itself is small in land size, and height restrictions prevent skyscrapers from being built. This means one thing: when supply is restricted and demand remains the same or even increases, prices just go up. As we have seen over the last 15-20 years, both rents and selling prices have skyrocketed. As it stands, cap rates for residential portfolios hover around 4-5%, some of the nation’s lowest.
Accordingly, city planners wanted to create road blocks to owners and developers from eliminating the affordable rental housing stock. TOPA was enacted, in large part to make it more difficult to drive tenants out and replace them with higher market rate residents. Furthermore, rent restrictions and thorny eviction laws were put into place. By way of example, currently, so long as a tenant is paying rent, they cannot be evicted even if their lease has expired.
Over time, efforts were made to circumvent the TOPA laws. DC TOPA attorneys concocted creative structures to sell properties without triggering the definition of “sale” in the statute. However, DC has continued to modify the law to adjust for these efforts, and has even gone so far as to direct courts to construe the law to create the most favorable outcomes for tenants as possible. Few exceptions exist – mostly for events like tax sales, bankruptcies, foreclosures and estate distributions that no one would claim should trigger tenant purchase rights (but even in these scenarios, issues may arise). Furthermore, because of the potential liability and the aggressive efforts by some TOPA attorneys, title companies tend to take extremely conservative positions as to what they will require in due diligence before they agree to insure a conveyance transaction. Currently, any time a DC landlord puts a property on the market with a tenant in it, or wants to terminate the housing use altogether, convert the property to a cooperative, or demolish the property and rebuild, the DC landlord has to provide an “Offer of Sale” form to the tenant, which includes a right for the tenant to buy the house, and a Right of. First Refusal to match purchase offers from third parties. There are a variety of deadlines and procedural steps, including filings with the District’s Rental Conversion and Sale Division of the Department of Housing and Community Development, that mark each step.
Hiring a DC TOPA attorney or representative is essential if you want to navigate these provisions – whether it be converting a property to a condo regime, rehabbing and/or selling the property, evicting the tenant, forming a tenant association, waiving and/or negotiating rights, or simply purchasing. Give us a call today or enter your information in the message screen for a free consultation.