Two days after the option to buy their apartment house expired, members of the Swarthmore Tenants Association told D.C. Del. Walter Fauntroy that their efforts to buy the building are being thwarted by the owner's refusal to allow an engineer to inspect the 40-year-old building.
Under the D.C. Rental Housing Act, which went into effect in March, landlords who want to sell apartment buildings must give tenant groups who have expressed an interest in buying the building a 45-day option on the property. For tenants of the Swarthmore Apartments at 1010 25th St. N.W., the 45-day period ended May 14. But tenants say they will continue their attempt to buy the building and turn it into cooperatives or condominiums.
"Frankly, I have other options," said James Howard, vice-president of the tenants association. "I can move, but my next door neighbor is 90 years old. What will happen if she gets thrown out into the street?"
Brian E. Frosh, an attorney hired by the tenants association, told the group at a meeting last week that he had received a letter from David Sacks, attorney for Raymond Howar whose mother owns the building. The letter said that the owner would authorize an inspection only after the tenants had signed a contract to buy the building for $1.8 million and had made a 5 percent deposit. The contract, Sacks' letter said, would be contingent on the inspection. Howar has maintained that such inspection procedures are standard.
"It's extremely difficult if not impossible for the tenants to raise $90,000 before they have an expert opinion on the structural soundness of the buildings and the mechanical systems, though we think that ultimately they will be able to raise it," said Frosh.
"Howar is being unreasonable and perhaps illegal in not allowing access to the physical structure, said Johnnie Barnes, a legislative assistant to Fauntroy. "How can you make a judgement on whether the building is worth buying without an inspection? An inspection is certainly necessary to get financing."
Barnes said that Fauntroy's staff would set up a meeting between the tenants association and the Department of Housing and Urban Development official and would work with HUD and with local government officials in trying to obtain financing for the group.
"Financing will be the biggest obstacle," said Frosh. He said that to obtain conventional financing the tenants would need between $180,000 and $360,000 in cash in addition to the $90,000 deposit. To obtain financing through HUD, Frosh said, might take up to two years.
Association members at the meeting last week voted to authorize Frosh to negotiate with Sacks to buy the building on behalf of the tenants association. The tenants also authorized Frosh to negotiate for a voluntary rent increase in exchange for Howar's agreement to continue operating the building as rental apartments for a set period, during which the tenants would have the option to buy the building. Such an agreement, authorized under D.C. law if 70 percent of the tenants agree, would give the Swarthmore tenants more time to obtain financing, according to Frosh.
"If we do agree to a rent increase, there'll have to be a quid pro quo from Howar not to use the increases to convert the buildings to condominiums," said Howar. Under D.C. law, landlords can convert rental property to condominiums if the rents are high enough to make the building a luxury apartment house.
In a telephone interview, Howar confirmed the tenants' statements that he had applied for a certificate of eligibility for condominium conversion in March, but had been turned down. He scheduled for May 30. Under emergency legislation that will lapse June 1, rents at the Swarthmore, which range from $174 to $257, are too low to put it in the luxury class. After June 1, the required rent levels will presumably revert to the figures named in the Rental Housing Act of 1977, which are lower than the Swarthmore rents. However, the mayor has proposed legislation that would raise the rent levels above the current Swarthmore rents.
According to Robert Alcorn, treasurer of the tenants association, 56 of the building's 87 tenants have said they are interested in buying their apartments and have completed financial questionnaires indicating their ability to make a financial commitment. Alcorn said that about 30 non-tenants have also expressed interest in buying the apartments. Officers of the association said they hoped to sell some of the units to people who would rent the apartments to present tenants unable to afford the purchase of an apartment.
Howar said he had not yet signed a contract to sell the building to another purchaser, but that several prospective buyers had expressed interest in the property. Howar's lawyer said he wanted to arrange a "like kind" transaction, in which the buyer would purchase another building and trade it to Howar in exchange for the Swarthmore. Such a transaction would enable Howar to avoid a substantial capital gains tax.