Saturday, 25 November 2017

The Tenants Opportunity to Purchase Act: Can It - Should It - Be Amended?

Written by Posted On Tuesday, 11 July 2017 16:22

TOPA - the Tenants Opportunity to Purchase Act - has been around in the District since 1980. It has probably generated more litigation than any other law enacted by the D.C. Council. It is loved by tenants who call it "capitalism" and hated by landlords who call it "blackmail."

For many years, every amendment enacted into law was designed to strengthen the rights of tenants. However, for the first time, there is a bill pending in the council that would slightly diminish tenant rights.

D.C. Council member Anita Bonds (D-At Large) introduced the TOPA Accessory Dwelling Unit Act of 2017, which, oversimplified, would exempt owner-occupied, single- family homes with accessory dwelling units - such as basements or garage apartments - from TOPA.

What the measure essentially would do is drop a provision that requires landlords selling their property to give tenants the right of first refusal to buy it - an often laborious process that has tied up home sales. But the bill –if enacted–is extremely limited in scope. It does not exempt all single family homes, only those with an accessory dwelling.

What is an "accessory dwelling unit"? The zoning code definition is a "dwelling unit that is secondary to the principal single household ... but which has kitchen and bath facilities separate from the principal dwelling and may have a separate entrance." In other words, what we sometimes call a "mother-in-law suite."

And there are even more restrictions on this proposed TOPA exemption. The upstairs apartment must be occupied by the owner. And one of the apartments must contain at least two-thirds of the total square footage of the entire house.

Under these conditions, the property owner would not have to go through the laborious process of complying with TOPA. Why the bill? According to Ms. Bonds, "some tenants have abused the spirit of the law by delaying the sale of the property for up to 6 months and demanding large amounts of money from the owner in exchange for not exercising the TOPA law."

Thus, says Ms. Bonds, a "growing cottage industry of TOPA lawyers" has been created and this "adds to the overall cost of a single family home sale which is passed on to the buyer and decreases affordability."

Councilmember Bonds is correct in her analysis of TOPA, but why limit the exclusion to single family homes that have an accessory dwelling? The same problems exist in single family homes where there is no basement. Real estate prices in the District are high enough; Ms. Bonds clearly recognizes that TOPA adds to the cost of all single homes.

How is the average homeowner to know the square footage of his property? Will she have to retain an architect which will increase the cost? And what if the owner lives in the basement, because he wanted to get a higher rent from upstairs? Why should that owner be discriminated against?

From my experience, if a landlord owns and rents out a single family home, and wants to sell, she will ask the tenants if they are interested in buying. The landlord would be delighted to have the tenants buy, because he may save having to pay a real estate commission (or at least part of the commission). And those tenants are also going to want to delay the process to induce the landlord into paying money in exchange for not asserting TOPA rights.

At first, I though this bill was a good first step. On reflection, it is a band-aid that not only does not address the Councilmember's concerns but in fact will create more litigation.

The Council should bite the bullet and repeal TOPA for all single family dwellings in the District. A hearing on the bill is scheduled for September 21, 2017, at the Council's office.

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Benny L. Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of Kass, Mitek & Kass, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

www.kmklawyers.com

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