QBecause of a string of recent landscaping and renovation efforts, I am afraid that the owner of my rent-controlled D.C. apartment building is looking to sell. To be prepared, I want to learn about our options ahead of time, both for tenants looking to buy and those looking to continue renting. What options do we have and what laws apply? How do you recommend we research more? -- Washington
A There is definitely a lot of condo conversion these days. According to Delta Associates, an Alexandria-based real estate research firm, in 2003 there were about 2,900 apartment units that converted to condominiums or planned to convert. In 2004, that number grew to 7,400, and so far in 2005, it has increased even more, to 8,800 units. In the next three years, local developers plan 47,000 new or redeveloped condo units.
And in the past few years, it has been true that owners have tried to cash in on the recent climate of lower interest rates and a rise in the popularity of condos among first-time home buyers.
Similar factors are encouraging renters to buy -- ample supply and low interest rates.
"A lot of companies, big and small, across the country are converting apartment buildings into condominiums because they are making so much money and people can buy them because interest rates are so low," said Michael Semko, in-house counsel for the Alexandria-based National Apartment Association.
But there are still plenty of apartment residents who do not wish to buy. As they watch what is going on around them, they fear that happenings in their buildings are really subtle signs that the landlord is considering conversion.
Some of the things that renters have told me are causing them to worry include landlords who, mid-12-month lease, tried to get renters to agree to go month-to-month; major construction projects that substantially upgraded a building's common areas or individual units; change in building ownership or management; and a constant flow of contractors and official-looking people surveying the building.
These actions do not necessarily mean landlords plan to turn their buildings into condominiums. Obviously, apartment owners often plan construction projects to enhance a building's appeal and in turn charge more rent. They are businesspeople who are trying to make a profit.
Instead of worrying about your landlord's long-term plans, learn what you can do in case your suspicions about condo conversion come true.
Renters officially learn buildings are slated for conversion when landlords send them a legally required notice. "All jurisdictions have some sort of notice provision that says you need to inform your existing apartment residents that you're intending to convert the units into condominiums," Semko said.
Sometimes, a landlord's condo conversion plans can bring benefits for existing tenants. That's because renters in the District may have "right of first refusal," meaning they have first priority for buying their home.
"The District offers more protection than most jurisdictions in the country," said Shaun Pharr, senior vice president of government affairs for the Apartment and Office Building Association of Metropolitan Washington, which represents the city's landlords.
As is often the case in the District, the technicalities are complicated. Owners of buildings covered by the rental law -- just about all of them, even if rent is not capped -- must follow specific steps to start the condo conversion process.
Under D.C. law, an owner who wishes to convert has to give written notice to each tenant and to the mayor requesting an election, whereupon the residents would vote on a condo conversion. Tenants have 30 days from receipt of that notice to form a tenant association, if one does not already exist. Then the tenant organization gives notice to all tenants, the owner and the mayor of a proposed election.
The tenant organization must conduct that election within 60 days of receiving the owners' request for it. Each household that has resided in the building for at least 90 days before the election (essentially just a month before the owner proposed the conversion) has one vote, and if more than 50 percent of voters approve the conversion, the owner can proceed. If 50 percent or less of the households do not vote to approve the election, or if there is coercion or fraud of any sort, the owner cannot propose another conversion for a year.
In the first 60 days after the election, tenants who have stayed in substantial compliance with the lease have the exclusive right to buy their units at the same price they are being offered to the general public.
The law also mandates that an owner pay up to $500 in relocation expenses for any tenant who does not buy a unit or get a lease option of at least five years. The owner must give tenants who do not want to buy 120 days before terminating the lease and is required to give tenants 62 years and older a much longer-term lease so as not to displace them.
Pharr said a major factor in conversions in the District is the strength of the tenant organization. That's because the organization can negotiate with the owners or prospective owners. "They could negotiate a discounted purchase price or keeping the building as a rental rather than converting. The sky's kind of the limit in terms of what a creative and enterprising tenant organization and their legal counsel might approach the owner with as far as alternative terms," he said.
It's generally in an owner's best interest to negotiate, considering that the tenants hold the power to decide the building's fate.
But Pharr, whose association has frequently squared off against tenant groups, maintained that a tenant organization may not actually represent all tenants' interests. "In one sense tenants are seemingly masters of their own fates. Yes, there is a right of refusal wielded by the organization, but in a lot of these scenarios" -- including when third parties are coming in to buy buildings, which changes the rules somewhat -- "it's volatile and unpredictable. Some renters might get a payoff and take the money and run, but there are still outcomes that result in displacement of people who didn't want to be displaced and permanent loss of affordable rental housing," he said.
Unlike the District, most jurisdictions don't have rent-control laws -- Takoma Park is the only other local jurisdiction that does.
Although there are many variables, the basic steps of a condo conversion in most other jurisdictions usually include the landlord's initial notice to tenants, a right to purchase the unit, and an agreement that the landlord will not just kick a resident out and will give tenants adequate time to find another place to live if they do not intend to buy their unit. Usually owners are required to file a series of documents with local real estate commissions or other government entities along the way.
In Virginia, for example, landlords must file paperwork to start the process and give formal notice to residents that includes an offering price for the unit that resident occupies, the projected condo expense, the assessment against the unit, relocation services if there are any, and a 60-day exclusive right on the part of the resident to purchase the unit. A tenant can then stay until the end of the lease term plus 120 days on a month-to-month lease. Elderly tenants are also given extra protection.
So if you're worried or curious about a possible condo conversion in your building, ask the landlord, building owners or people surveying your building. Before you are faced with the conversion dilemma, form a tenant association if your building doesn't already have one, because such an organization can help you learn more about your rights, negotiate with your landlord on other topics and create a sense of community in your building.
Do you have questions, comments or ideas about apartment life? Contact Sara Gebhardt via e-mail at firstname.lastname@example.org or by mail, c/o Real Estate Editor, The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.