The Tenants' Opportunity To Purchase Act Is Dead: Yes and No

Written by Posted On Tuesday, 08 May 2018 12:33

TOPA -- the tenants' opportunity to purchase act -- was enacted over 30 years ago by the Council of the District of Columbia. It was designed to protect tenants from being kicked out of their homes by landlords who wanted to make more money selling the property.

Over the years, depending on who you were, TOPA was either hated or loved. Tenants called it "tenant capitalism"; landlords blasted it as "pure blackmail".

Why? Especially with single family homes, (including condos and coops), when a tenant received a TOPA notice that their landlord had a contract offer to buy, they would demand lots of money in order to release their TOPA rights.

All of this came to a head when the Council, on April 10, 2018, enacted a bill that to a large extent, eliminated TOPA from single family dwellings. The Council relied, in part, on a study that from October 26, 2009 through August 15, 2015, there were approximately only 19 successful TOPA sales to tenants, out of 398 TOPA offers to single family residents. In other words, although landlords fully complied with the TOPA laws and provided the necessary forms , less than 5 percent of those tenants actually ended up buying their home. The law is awaiting the Mayor's signature and then will have to wait out the 30 day period of congressional review before it becomes final.

Oversimplified, the new law abolished TOPA as it applies to single family dwellings, which includes a condominium or cooperative apartment. If you own a house with a basement that has a kitchen and bath facilities separate from the main dwelling house, and may even have a separate entrance, that is referred to as an "accessory dwelling". Even if there are tenants in both units, and this becomes law, it will be exempt from TOPA.

However, even though the landlord no longer has to issue the TOPA notice -- which had to be in English and Spanish, and copied to the Office of the Mayor -- the tenants still have to be given notice of a proposed offer. That notice also has to be provided to the DC Office of Tenant Advocate.

To complicate this even further, there are different requirements where certain tenants are elderly or have a disability. If such a tenant signed a lease to occupy a single family accommodation by December 31, 2017, and physically took occupancy by January 15, 2018, then a modified TOPA still exists. Such tenants must respond with 20 days after receiving the notice expressing interest in buying. Then that tenant has at least 25 additional days to negotiate a sales contract, and closing must take place at least 45 days thereafter. However, once again, if a lender needs more time, the tenant can have an additional 30 days in which to get lender approval and then take title. A tenant who is 62 years or older is considered elderly.

The Council was sensitive to the concerns of the real estate industry -- and many home owners -- that tenants were flipping (assigning) their rights to speculators for large sums of money and also delaying closing. The new law is very clear: the only consideration an elderly or disabled tenant can receive for selling its tenant rights is the "right to immediately use and occupy the tenant's unit for a period of 12 months following the sale and at the same rent charged at the date of the offer".

However, there are three different TOPA requirements. One is (or was) for single family properties; another was for properties with 2-4 units, and a third was for apartment buildings with 5 or more units.

The latter two remain alive and kicking. Tenants in those properties still have rights to purchase their property, although if you live in an over 5 unit complex, only a formal tenant association can speak and act for the tenants. There are different time frames in which the tenants (or their association) have to respond. For example, if you live in a two-four unit building, all tenants must respond expressing an interest in buying. However, if not everyone is interested, or if 15 days have elapsed since getting the TOPA notice from the owner, any one tenant can send in such a notice, which must be within 7 days thereafter.

The tenant (or tenants) have 90 days to negotiate a contract to buy, and if such a contract is entered into, the buyer has at least another 90 days in which to go to closing. However, if a lending institution gives the tenants a notice in writing that it needs more time. the settlement can be extended for another 30 day.

If you think that's complicated, let's look at the over 5 unit complex. Here, once all of the tenants get a TOPA notice, they have 45 days in which to form a tenant organization with the legal capacity to hold property. They then have 120 days to enter into a contract, and another 120 days to take title. Once again, if a lender needs more time, the landlord must extend the time in accordance with the lender's estimate of how long it needs.

Since its enactment, TOPA has been the subject of literally hundreds of lawsuits, some brought by landlords and others by tenants. I suspect that litigation will continue regarding the 2-4 and the over 5 unit requirements; only time will tell how the new law will fare regarding single family properties.

Rate this item
(0 votes)
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 LEGAL GROUP, 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.

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.