Court Affirms Tenants' Rights When Buildings Are Sold

Tenants' rights in the District take priority over other rights, including those of subsequent owners of buildings, according to a recent ruling by the D.C. Court of Appeals.

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

The association sued the new owner, saying it didn't get a chance to exercise its rights under D.C. law to try to buy the building. Under the District's 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 they have the right to negotiate to purchase the property themselves.

The language of the D.C. 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 fide offer of sale."

The landlord must send each tenant -- and the mayor -- a written copy of the offer of sale by first-class mail. The landlord must also post a copy of the offer of sale in a conspicuous place in common areas of the housing accommodation if the property consists of more than one 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-day right of first refusal to match any third-party contract.

In this case, the buyer, a 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 knowledge of any irregularities regarding TOPA, and thus the case against it should be dismissed. (The tenants had also sued the seller, but that party could not be found.)

The trial court, D.C. Superior Court, agreed with the buyer 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 . . . 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 its May 3 ruling in Wilson Courts Tenants Association Inc. v. 523-525 Mellon Street LLC, the court affirmed the superiority of tenants' 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 a third-party purchaser's rights. According to the court, the D.C. law contains two pivotal policies:

"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."

"The right of the third party to purchase is governed by the presumption that such purchaser 'act[s] with full knowledge of tenant rights and public policy' under the Act."