I own a single-family house in the District and have just entered into a contract to sell the property. I do not live in the house, but have rented it for a number of years to a nice family. I have been advised that I must give my tenants some sort of right to purchase, but I thought that because I am exempt from rent control, these tenants' rights do not apply. Can you help me to understand the law?
If you own four or fewer rental units (or houses) in the District, and if you file an exemption form with the rental accommodations office, you are exempt from some of the provisions of the rent control law.
But the law giving tenants the so-called "right of first refusal" has nothing to do with rent control. The D.C. Council enacted the rental housing conversion and sale act several years ago. Part of that act is titled "Opportunity to Purchase." It applies to all owners of rental property in the District, with some exceptions that are not relevant here.
If you intend to sell your house, you must give your tenants an opportunity to purchase it. There are two ways to do this. You can find a potential purchaser and then give your tenants the statutory amount of time to negotiate their own contract. Or you can start out by sending your tenants a notice that you want to sell the property, and give them time to negotiate a contract..
I am often asked which course is the best. Depending on your relationship with the tenants -- and, of course, their financial abilities -- you probably would find it more advisable to deal directly with the tenants. You have to work with them anyway, and if you discuss this opportunity with them first, you at least will get a sense of their interest. You also might avoid paying a real estate commission.
Whichever approach you take, the law requires that the owner give the tenants a reasonable period in which to negotiate a sales contract. A reasonable period is defined as not less than 60 days from the time they receive the notice. The tenants have the right to request certain information from the owner, including a floor plan of the building, an itemized list of monthly operating expenses, utility consumption rates and expenditures for each of the two preceding calendar years.
If the tenants request this information and it is available, the owner must provide it within seven days of receiving a written request. The negotiating period is extended by one day for each day the owner delays in providing the information.
If the owner signs a contract with a third party, the tenants still have the right to conclude their negotiations within the 60-day period. Additionally, all tenants have a separate, absolute right of first refusal for 15 additional days in which to match the third-party contract.
The law requires that the tenants and the owner bargain in good faith. It lists these indications of a lack of good faith: The failure of an owner to offer the tenants terms at least as favorable as those offered to a third party.
The failure of an owner to make a contract with the tenant that substantially conforms with the price and terms of a third party contract.
The intentional failure of a tenant or an owner to comply with the provisions of the law.
However, a 1983 D.C. Court of Appeals case (Columbia Plaza Tenants Association v. Antonelli) makes it clear that the owner can consider the financial ability of the tenants. District law prohibits owners from taking from the tenants a good faith earnest money deposit of more than 5 percent of the contract sale price.
In the event the tenant does not contract to purchase the house and a new contract with another party that intends to occupy the property is entered into, a tenant is entitled to a 90-day notice before vacating.
Benny L. Kass is a Washington attorney. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed, stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington D.C. 20036. Readers may send questions to him at this address.