When Karolyn Rancourt moved into The August apartments in DuPont Circle two years ago, she didn't have the slightest idea that a loophole in D.C. law could bar her from the opportunity to own her one-bedroom apartment.
Last summer, the owner of the 77-year-old, four-story apartment building announced plans to sell it. Rancourt and other members of the building's tenant association jumped at the offer. They established a nonprofit organization, expressed their intentions to buy and learned a lesson in real estate law.
Once their interests became known, the building owner withdrew the offer and threatened to use a loophole in the rental law that allows owners to sell only part of a building to bypass the tenants, Rancourt said.
The experience of The August apartments' tenants illustrates the problems of residents who want to buy the buildings where they live. The D.C. Council's Committee on Consumer and Regulatory Affairs is taking a comprehensive look at the city's legislation governing rent control and rental housing sales.
Under the 23-year-old District law, owners who decide to sell multifamily property are supposed to give tenants the first right to buy the building.
But the law is in force only if the owner sells 100 percent of the property within a year. If an owner sells even 95 percent of a building, and then waits a year and a day to complete the final 5 percent of the sale, tenants lose their right of first refusal.
Rancourt and her neighbors were surprised to learn of the real estate loophole and the fact that their building had been sold using the same formula in 1999.
"We were never notified that there was a sale," Rancourt said. "We were never given the opportunity to make an offer to purchase our building. We were never even notified of the existence of new ownership."
Efforts to reach the owners of The August for comment were unsuccessful.
D.C. Council member Phil Mendelson (D-At Large) last week introduced an amendment to the city's "Rental Housing Conversion and Sale Act of 1980" that would clarify the rights of tenants to buy housing before the owners transfer their "controlling interest" in the property.
The 95-5 transaction is described as a "loophole" that threatens the 1980 city law, a law that Mendelson strongly advocates after his own tenant association purchased its building in the late 1970s.
"One of the reasons this legislation is important is because it is a way of ensuring that affordable rental units can be kept affordable and can be purchased by the tenants," Mendelson said. "If you don't have the right of first refusal, you can't purchase it."
The August Tenant Association has filed a lawsuit against the building's current owners and its former owners, Rancourt said. They believe that the 1999 sale of the building was a "blatant violation" of the law governing their tenant rights.
"This device robs tenants of their opportunities to become homeowners," she said.