At Crestview Apartments on upper Wisconsin Avenue NW, they're celebrating with their fingers crossed.

Five months ago, tenants in the 88-unit building began a fight against American University's plan to buy their building and transform it into a student dormitory. The plan would displace many elderly tenants.

On Tuesday, the tenants received what they considered a leap toward victory, an agreement from the school stating that it would back out of a fight to stop the tenants from purchasing the building, which is now up for sale.

Under the city's Rental Housing Conversion and Sale Act, tenants have the right to match an offer made on their building. Most of the Crestview tenants, many of whom are on fixed incomes, decided to try to buy their building at 3601 Wisconsin Ave. NW.

"We're mostly poor and middle-income people. We can't afford to move," said Pauline Pike, the third-floor captain who has lived at Crestview for nearly five years and pays $322 a month for a one-bedroom apartment.

What the tenants feared, though, was that American University, which already rents 34 units in the building, would override them in any vote associated with the tenants' attempt to buy the building.

The tenants also feared that AU would use funds received for it through a proposed issuance of city revenue bonds to purchase Crestview.

But Donald Myers, AU treaurer and vice president for finance, said that the bond funds would not be used to buy the building and said such concerns were "self-inflicted, completely fabricated by the tenants association."

Myers said the $53 million from the revenue bonds is to finance the purchase of Immaculata College at Tenley Circle, build a sports center at the university, and pay off old debts.

"We are required by law that the money be used only for what the project says," Myers said. "If some will be used for old debts, even that wouldn't affect Crestview since Crestview could not be an old debt."

During the past five months, the tenants wrote letters, collected petitions and lobbied the City Council to stop the university from purchasing the building.

The letters received by tenants this week said the university had agreed that it "will not use any funds from the sale of District of Columbia revenue bonds to purchase the building . . . will not participate in any tenant election on the issue of converting the building to condominiums . . . and will not take any legal action to avoid the contract of purchase between the tenants association and the owners of Crestview."

The agreement will become part of the bond contract between the city and AU. Meanwhile, Crestview tenants have incorporated and made a counteroffer of $2 million to the building's owners, matching the offer made earlier by the university. The owners have accepted the tenants' offer, and settlement is expected shortly.

They have made a $100,000 down payment on the building, received bids from contractors on the cost of renovating the building, and chosen a firm.

Seventy-five percent of the residents will remain in the building, and those moving will be given a $3,000 relocation payment. The apartments will sell to tenants for $27,000 for a first-floor efficiency to $52,000 for one-bedrooms. For outsiders, the sales prices would range from $80,000 to $100,000.

Myers said the conversion will hurt AU. "The university was renting 34 units and hoped to keep them," he said. "We have a serious shortage of housing."