Q: We live in an apartment house in the District and have just received a notice that our building is being converted to a condominium. Can you give us some suggestions as to the law on conversions in the District, and some tips on how we should next proceed? We want to purchase the unit.
A: You are not alone. It appears that many of Washington's finest apartment buildings are being converted into condominiums, now that the District has lifted the moratorium.
The first thing I suggest you do is to talk with your neighbors to determine if they also plan on purchasing their apartments. As the old expression goes, "in unity there is strength." If there are others who intend to purchase, suggest to them that you should all join forces in your negotiations with the developer/converter, the lender, and even with the attorney you may decide to hire to represent your interests. It certainly makes sense, in my opinion, for all of you to share expenses, as best you can.
Ultimately, you and your neighbors will be the nucleus of the condominium association, and you might as well start learning to work together as soon as possible.
The law in the District of Columbia specifically requires that, if the building is eligible for conversion, tenants be given at least 120 days notice of conversion before they can be served with notice to vacate. During the first 60 days of this 120-day notice period, the tenant has the exclusive right to contract for the purchase of the apartment unit. If the tenant does not contract during that period, during the next 60-day period, and subtenant occupying the apartment unit has the exclusive right to contract for the purchase of the unit.
It is important to note that this exclusive right to contract must be on the same terms and conditions as those offered by the converter (the seller) to the general public.
You must watch your dates carefully. The law specifically states that "if the notice of conversion specifies a date by which the apartment unit shall be vacated, then such noticed shall constitute and be the equivalent of a valid statutory notice to vacate." In other words, if you do not elect to purchase the unit, you will be asked to leave the apartment on the date specified in the letter.
Let's assume you decide to buy the unit. You then must be given a document known as a "public offering statement" which contains a number of items, including the name and principal address of the declarent, a description of the budget (including reserves for capital expenditures, contingencies and improvements), a statement based on the report of a qualified architect or engineer as to the present condition of all structural components and major utility installation in the condominium, and copies of all relevant legal documents, including the declaration and bylaws. Needless to say, most consumers find this public offering statement couched in highly technical legalese. You should obtain the assistance of a condominium specialist, familiar with D.C. law and procedure. As suggested earlier, the fees for this specialist can be divided between you and your neighbors, thereby keeping down the costs for all of you. After all, when it comes to the determination as to whether to buy or not, there are many common concerns affecting all your interests.
Once you have reviewed the public offering statement, you will be asked to sign a contract to purchase the unit. Before you sign, have your attorney review it carefully, so that your best interests are being protected. Don't be misled by the fact that you have 15 days in which to cancel this contract. The law specifically states that there is a 15-day period of grace following the date of execution of the contract by the purchaser or the receipt of the current public offering statement, which is later.
Many condominium converters use this 15-day period as a "selling tool" to convince a prospective purchaser that their interests are being protected at all times. But bear in mind that this 15-day cancellation period does not give you the right to make changes in the contract. Basically it is an all-or-nothing alternative. You can either cancel the contract or accept it, as you see fit. I suggest that the time to negotiate terms in the contract is before you sign the contract - not afterward.
For example, who will pay the closing costs? Who will pay the transfer tax, which is 1 per cent of the entire sales price in the District of Columbia? What kinds of warranties accompany the property? Is the swimming pool or the parking lot extra, or do they "convey with the property?"
These questions should all be raised prior to your signing the original contract.
One you have decided this is the condominium for you, and you have signed the contract, you will be asked to give a "good faith deposit" to the developer of the condominium. The law in the District of Columbia is quite clear that any deposit made in connection with a condominium unit shall be held in an interest-bearing ascrow account, and the earned interest (at passbook rate) shall be credited to the purchaser's deposit at settlement. Don't forget to insist on the interest when you finally settle on your unit.