KENNETH G. LADEN used his to buy a 35-millimeter camera, pay part of his tuition and patten his savings account. Joanne A. Miles used hers to go skiing for a week in the French Alps. Jane C. Gwyn invested hers in an $800 sofa and a down payment on a condominium.
Their instant money did not come from a good day at the track but from a good month at the negotiating table. All three were tenants at Stanton Manor, a five-story building on Capitol Hill which was sold to a developer who was anxious to convert the property to condominiums and did not care to wait months or years for the tenants' legal challenges to be resolved. The solution? An inducement to leave that was too sweet for tenants to pass up.
To anyone who has been aslppe for five years, all of this may seem absurd. The owner had good title to the property, and after all, he gave tenants 120 days' notice to move out. The explanation, of course, is the bundle of legal rights which long-powerless tenants have received in Washington and many other cities.
At Stanton Manor, for example, the newly formed tenants' association was arguing that a recent amendment giving tenants in such buildings a right of first refusal applied in its case. The developer had signed a contract to buy, but had not gone to settlement, and it was unclear which event was relevant to the amendment's effective date. It was during a break in the hearing that the developer took the tenants' leader aside and suggested that they try to work it out themselves.
The tenants never realized their dream of buying the 50-mit building and forming a cooperative, and the developer refused to offer them the $6,000 inducement the tenants suggested. But the developer did pay the 10 or so tenants still in the building several thousand dollars each to get them out and allowed them to stay up to three months rent-free after the original eviction date. "It appeared to be adequate compensation," tenant association president Laden said.
It is testimony to the high temperature of condominium fever that developers are willing to convert buildings and pay tenants the large sums that they sometimes must. In a city like Washington, where single-family homes are beyond the reach of the hordes of young professionals who have invaded the city, condominiums often seem to be the only answer.
Sales more than doubled between 1977 and 1978, and no one sees any sign that this trend will reverse. Moreover, building owners and developers maintain that rent control has made renting so unprofitable that it makes little sense to buck the condominium trend.
With demand for condominiums so strong, developers have less reason to fear that they won't recover the cost of large tenant settlements and, with today's high interest rates, developers are eager to put their units on the market and get the cash to pay off their construction loans. Paying a stubborn tenant a couple of thousand dollars can almost begin to look like a bargain.
"I'm a Tiger"
STANTON MANOR is not the only building in town where tenants have received generous "relocation assistance." The 10 holdouts at the Farnsboro, a few blocks northwest of Dupont Circle, were able to pocket some $3,200 each after the $4,000 in legal expenses were paid. That settlement compared favorably with the $750 originally offered by the developer. In addition, he agreed to give two elderly tenants lifetime tenancies in renovated efficiencies with rates never to exceed 25 percent of their incomes, though there is a floor of $170.
Perhaps the leading example of tenant success, at least in those buildings where tenants eventually did have to move out, is Holly Myers. She had been living at the Farnsboro for only a few months in a $190 efficiency. "She made out like a bandit," a fellow tenant observed admiringly. A fulltime graduate student in anthropology, Myers said recently that she was using the money to meet the daily costs of living.
There are others in Washington who could have banked even more money but have turned down enticing offers and stayed put. Further uptown, at 4707 Connecticut Ave. NW, lives Gloria R. Corn, who is president of her building's tenant association and prides herself on being scrappy. "I may look like a pussycat, but I'm a tiger that you can't get by the tail," she told one would-be developer who finally gave up efforts to buy the building after Corn refused to move out in exchange for a five-figure "bribe."
In Georgetown, the Hammond Court Tenants' Association rejected a settlement package that many tenants would have snatched up in a minute. The developers had offered the tenants the right to buy three of the finished condominiums for $100,000 each (compared to public offerings likely to average twice that), lifetime tenancy for an elderly couple and $100,000 to be divided among the residents of the other 10 units represented by the tenants' association. The tenants made a counterproposal, and the developer said he would consider it.
A month later, it was nothing more than a distant memory.Higher interest rates had raised the developer's financing costs, he had found a clerical error which had resulted in a $380,000 underestimate of renovation costs and the D.C. Court of Appeals had ruled against the tenants in their suit claiming right of first refusal. The developer came back with a lower offer and when the tenants did not spring for it, he withdrew that offer as well.
While Hammond Court tenants may have missed the boat on the fattest offer yet made by a developer here, at least they still have their apartments. That, of course, is what most enants associations are fighting for. Nevertheless, it seems unlikely that they can hold out forever, because someday their two remaining legal challenges will reach the end of the line.
Occasionally, a group of tenants actually succeeds in taking over the building themselves. At Beecher Low Rises in Glover Park, just off Wisconsin Avenue, the owner agreed to give the tenants an 18-month option to buy 6 of the 10 buildings that make up the complex. The tenants have obtained a mortgage commitment from a large lender and some low-interest rehabilitation money from the city. For the past 10 months they have been managing the six buildings themselves. "It's working out better than anyone had a right to expect," association president Richard Brady reported.
Much more common than the big settlement and the tenant purchase are outcomes like the one at 3900 Tunlaw St. NW, where those who decided to move rather than buy a finished condominium got an extra seven months beyond the original eviction date and from $100 to $250 in "moving expenses." As Amy C. Gilbert, the tenants' leader, put it, "It's not a group of fighters in this building." In still other buildings, tenants fail to organize and generally pose few problems for developers.
"A War of Nerves"
WHAT IS IT that sets a property like 3900 Tunlaw apart from a Stanton Manor, where the developer ends up writing the tenants' association a fat check? As Gilbert suggests, part of the difference can be explained by tenants' individual and collective stubbornness. Older ones tend to be less willing to put up with the pressure of a protracted fight. When the developer of the Farnsboro posted his initial $750 offer, several tenants decided to take the money and run.
The developer's situation can vary, too. Hammond Court, for example, was sold at what many consider to be a low price, thus giving the developer more leeway in his budget. A second major factor for a developer is the added cost he must carry for every day that he has to postpone hitting the market with hsi condominiums. If these costs are on the high side, he will be more inclined to sweeten the deal so that holdout tenants will move out.
Whatever the factors in the negotiations between tenants and developers, neither side pretends to be fond of the process. "It's really a war of nerves," one Farnsboro tenant said. One developer described it as a "very unpleasant" experience. Stanton Manor's Laden said, "It's a roller coaster emotionally. You find angles, and then you see you've interpreted the law incorrectly. It changes weekly."
If a developer finds the prospect so distasteful or time-consuming that he is unwilling to go through it, he can hire someone to do it for him. Madge DiNitto Associates of Boston came into Washington last year to reduce the occupancy at sprawling McLean Gardens, and DiNitto stands ready to tackle more conversions. "We have a way of dealing with tenants in a sensitive way but still accomplish our goals," she said. "It requires the most sophisticated sort of hand-holding."
Who ultimately pays for the trips to the French Alps and the $800 sofas? Developers generally try to negotiate a contract that forces the seller of the property to bear some of those costs, so in effect, tenants who receive big settlements may be getting a piece of their landlords. For the most part, though, the expenses are passed on to the ultimate consumer -- as they are in most businesses. So if a hard-nosed group of tenants extracts $40,000 from the developer, he will spread that over the 50 or 100 units he is selling. In Washington's high-priced market, such a hike is not likely to cause much reaction. But developers emphasize that there are limits on the prices they can charge, even in Washington.