Tenant rights in the District of Columbia are paramount in relation to those of others, including subsequent owners. That is the decision of the District of Columbia Court of Appeals, in a decision handed down on May 3, 2007.

The Wilson Courts Tenants Association represented the tenants in a 20 unit building in SE Washington. On June 21, 2004, the building was sold to a limited liability company, but the tenants did not learn of the sale until 6 days later.

Under the Tenant Opportunity to Purchase Act (referred to as TOPA), before a landlord can sell rental property, the tenants must be given a written copy of the offer of sale, and have the right to negotiate to purchase the property themselves. The language of the DC statute reads in part: before an owner of a housing accommodation may sell the accommodation, ... the owner shall give the tenant an opportunity to purchase the accommodation at a price and terms which represent a bona offer of sale.

The landlord must give each tenant and the Mayor a written copy of the offer of sale by first class mail and must post a copy of the offer of sale in a conspicuous place in common areas of the housing accommodation if it consists of more than 1 unit.

Furthermore, even should the tenant (or the tenant organization) not be able to negotiate a sales contract, before the landlord can sell the property to a third party, the tenants have a 15 days right of first refusal to match any third party contract.

The buyer and the limited liability company argued that the burden of providing the TOPA notices rested with the landlord, and not the contract purchaser. The buyer also tried to argue that it was a bona fide purchaser, without notice of any irregularities regarding TOPA, and thus the case should be dismissed against it.

The trial court (Superior Court) agreed with the defendants, and held:

There is nothing in the statute that puts any obligation on the current owner. Therefore, taking all the facts even in a light most favorable to Plaintiff, Defendant (LLC) could not have violated the statute as it was the subsequent owner and not the seller of the property.

The Court of Appeals disagreed. In Wilson Courts Tenants Association, Inc. v 523-525 Mellon Street, LLC, the Court affirmed that superiority of tenant rights in the District of Columbia.

After reviewing the legislative (and judicial) history of TOPA, the Court concluded that the clear intent of the law reflects the absolute priority of the tenants= rights ... and the conditional nature of third party purchaser's rights. According to the Court, the DC Code (i.e. TOPA) contains two pivotal policies:

1. a third party who wishes to purchase an accommodation only has a conditional right, a right conditioned on the exercise of tenant rights under the Act; and

2. the right of the third party to purchase is governed by the presumption that such purchasers acts with full knowledge of tenant rights and public policy under the Act.

The case was sent back to the Trial Court.

TOPA has, over the years, provided many tenants with the opportunity to own their own home, condominium or cooperative apartment. But it is not without criticism. While tenants often refer to the Act as a tenant capitalization measure, many landlords complain that it is nothing more than tenant blackmail. The law provides different time frames in which the tenants can negotiate and go to settlement from date of receipt of TOPA notice. For example:

• single family home: up to 180 days,

• 2, 3 and 4 unit building: up to 240 days,

• 5 or more units: only a tenant association can respond and act on behalf of the tenants. If such an organization exists (or is created when the TOPA notice is received), the association has up to 360 days.

Clearly, these delays have a chilling effect on many landlords. However, some landlords B recognizing that time is money B have avoided entering into third party contracts, working instead with the tenants or their association, and have successful sold their property to the tenants in a much shorter period of time.

Eric Rome is the Washington attorney who represented Wilson Court. Asked to comment on his successful case, he responded:

The case affirms the priority of tenant rights and is consistent with experience and common sense. A purchaser needs to look very closely when it is represented to it that the tenants have failed to organize and assert their rights in a multifamily building. The message is that a Purchaser cannot turn a blind eye and later claim that the tenants may not enforce their rights against it directly, since it cannot claim innocence.

It would appear that the tenants at Wilson Court may be on their way to home ownership, which is the underlying concept of TOPA.

Published: June 4, 2007

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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.