Tenants of the Swarthmore Apartments at 1010 25th St. NW assembled in the lobby of the 40-year-old apartment house last week to hear Raymond Howar, whose mother owns the 88-unit building, explain why it was being put up for sale.
The tenants, who are sharply divided over whether to try to buy the building or grant the owner rent increases in return for a guarantee that the building not be sold, listened as Howar explained, "Frankly, I'd rather not sell. My dad built this building."
However, Howar said, rent control, inflation and rising utility costs had made continued operation of the apartment house unprofitable Howar said that his mother, whose equity in the building was more than $1 million, had made only $12,000 on the building last year.
"If that million had been in a time deposit account, she would have earned $75,000 on it," said Howar. He said that due primarily to rent control, his family intended to get out of the apartment rental business.
The family recently sold two apartment buildings and still owns four in the District and two in Arlington.
On March 15, 21 members of the Swarthmore Tenants Association, which was formed in January primarily to fight rent increases requested by Howar, sent a letter to Howar's attorney expressing interest in buying the building. On March 28, the attorney, David Sacks, sent a letter to every Swarthmore tenant, offering to sell the building for $1.8 million.
Under the D.C. Rental Housing Act, which went into effect in March, land-lords who want to sellapartment buildings must give tenants who have expressed an interest in buying the buildings, a 45-day option on the property. For the Swarthmore tenants, this period will wxpire May 14. Howar said the several other buyers were interested in the property.
At last week's meeting, some tenants objected to the fact that payment for the building is required to be in the form of another investment property designated by Howar and that Howar has refused to allow an engineer to inspect the building for the tenants association.
"You're throwing a serious road-block in the path of the tenants," said one resident.
Howar replied that such property trades were common and that in the case of a cash transaction his mother would have to pay a substantial capital hains tax. He said that if the tenants negotiated a "good faith contract" to purchase the property, they would then have a 30-day period in which to inspect the building.
"We're putting together small folk with small money," said Ann Loikow, president of the tenants association, in an interview after the meeting. "It's hard to get people to commit thendelves financially until we have an engineering report that the building is sound."
On April 14, the tenants association put letters under apartment doors asking residents interested in buying their apartments to contribute $25 each toward the cost of hiring a lawyer and a structural engineer. According to Loikow, the group received more than 50 affirmative responses.
Betty Tihey, a resident who is not a member of the tenants association, called this action by the association " intimidation."
"I think everyone felt intimidated by it," said Tihey. She said she was particularly angry about the letter's statement that "if we do not hear from you by Tuesday, we will assume that you are not interested and we will match up your apartment with another buyer."
Tihey said she was disturbed because some residents were not in a position to buy their apartments. She sid that she arranged the meeting with Howar to hear his case and to explore alternatives to wither buying the building or leving it.
Loikow said she had a list of about 30 non-tenants interested in buying an apartment in the building, which would either be run as a cooperative or turned into condominiums. She said that Swarthmore tenants who committed themselves to buying an apartment now would be given the most favorable prices.
"But we have no intention of kicking out anybody," said Loikow. She said the group was exploring ways to help the apartment building's lower income residents, many of whom are elderly, stay.
Hower said that even if the D.C. Rental Accommodation Office approves the rent increases he requested, whic would amount to slightly more than 20 percent this year, he still thinks it would be unprofitable to continue operating the building.
In response to questions, Howar said he would conseder retaining the building if the tenants agreed to rent increases that would allow his mother a reasonable return on her investment. Under D.C. rental law, landlords can raise rents if 70 percent of the tenants petition the rent control agency to authorize the increase. In return, Howar said, he would work out an agreement to continue operating the apartment house for a certain number of years.
Tihey said she would try to from a new group to negotiate such an agreement with Howar. "There's been too much hostility created by this group," Tihey said of the tenants association.
Loikow said the tenants association would be willing to negotiate an agreement with Howar but that the group's main effort at present would be to try to force Howar to allow an engineer to inspect the building.
"If he won't let us do that, then he's not negotiating with us in good faith," said Loikow.