Q: I will soon be purchasing my first piece of investment property. I have future plans for purchasing a multi-unit building by mid-1985. I would then be under rent control in the District of Columbia. I was told that to avoid rent control, all I had to do was incorporate. How does one incorporate? Is it as easy as it sounds? And if it is so easy, why don't more people do it? A: The reason that most people do not incorporate when they buy real estate goes way beyond the question of rent-control coverage. However, it should be stated at the very outset of this column that as I read the D.C. rent control law, a corporation is not exempt under any circumstances from the coverage of rent control.
There are tax reasons for not incorporating, but you should discuss these issues with your own tax advisers. Additionally, while it is possible for a corporation to convey title, there are complications involved in such a conveyance, and here you should discuss this matter with your own attorney.
Let us look at the exemptions from rent control. D.C. law (Title 45-1516) contains a number of exemptions; some of these are: Any rental unit in any federally or District-owned housing accommodation (except certain units subsidized under D.C. law). Any rental unit in any newly constructed housing accommodation for which a building permit was issued after Dec. 31, 1975, or any rental unit in a housing accommodation for which the initial certificate of occupancy for the use was issued after Jan. 1, 1980. Any rental unit in any housing accommodation of four or fewer units, including any aggregate of four units, whether or not within the same structure.
It is this last section that has given rise to much discussion and litigation.
Generally speaking, if you own, directly or indirectly, four or fewer residential units in the District of Columbia, you are exempt from rent control. However, in order to be exempt, you must file with the rent administrator a claim of exemption statement. If there are any changes in ownership of the exempted housing accommodation, or a change in the owner's interest and any other housing which could invalidate the exemption claim, this must be reported to the rent administrator within 30 days of such change.
The law goes on to say that the housing accommodation must be owned by not more than four natural persons. Thus, as indicated, my reading of the law says that a corporation is not exempt under any circumstances.
There are other exemptions, but they are outside the scope of this discussion.
There are many owners of residential real estate in the District of Columbia who mistakenly believe they are exempt from the provisions of the rent-control laws. For example, a family owns one house which they are now renting. While this may be the only real estate they own, unless they file the exemption form with the rental administrator, they are not, in fact, exempt.
Here is a tip when filing that exemption form. Either take it directly to the rental housing office (located at the Rental Accommodations Office, Department of Consumer and Regulatory Affairs, Room 427, 614 H St. NW, Washington, D.C. 20001) and have them stamp a duplicate copy which you will keep in your files, or send the exemption form to the District office, registered, return receipt requested, so that you have proof that the form was filed.