Q You recently wrote about tenant rights and single-family houses in the District. I am a landlord and own two properties in the Washington -- one has four units and one has 10 units. Do my tenants have any rights if I want to sell my properties?
A Yes, tenants have strong rights in the nation's capital. As a landlord, you must fully understand these rights.
In general terms, before a landlord can sell his property, the tenants must be given the right to buy it. The law is called the Tenant Opportunity to Purchase Act; it grants what are commonly referred to as TOPA rights.
Any contract that you enter into with a third party is conditional upon the exercise of tenant rights. According to the law, "Third-party purchasers are presumed to act with full knowledge of tenant rights."
Under TOPA, a landlord must provide tenants with an offer of sale. This can be done either before or after the landlord has signed a contract with a third party. This offer must include the asking price, a statement as to whether there already exists a third-party contract, and a statement that the owner shall make available to the tenants, within seven days after receiving a written request, certain information about the property, including a floor plan of the building (if one exists), and an itemized list of monthly operating expenses.
Additionally, tenants have the absolute right to sell or assign their rights to yet another third party. In many cases, especially involving buildings with many tenants, tenants have sold their rights to developers. In exchange for these tenant rights, the new developer converts the property into a condominium or a cooperative. The developer gives cash to each tenant who decides to vacate the property or a substantial discount if that tenant opts to purchase a unit.
Some landlords call this "tenant blackmail," while some tenants call this "tenant capitalism." No matter which point of view you take, the fact remains that the TOPA law is on the books and must be followed.
TOPA contains three set of rules, depending on the number of tenants in the property.
* Single-family accommodations. If a tenant lives in a single-family home, including a condominium or cooperative apartment, the tenant has 30 days from the time the offer is received to advise the landlord that he is interested in buying the property.
If such a statement of interest is presented in writing to the landlord, the tenant then has an additional 60 days to try to negotiate a contract with the owner of the property. If such a contract is entered into, the tenant has to settle 60 days thereafter. However, if a mortgage lender needs additional time in which to process the loan and provides a written statement to the owner the tenant has an additional 30 days in which to go to closing.
* Two to four-unit accommodations. The landlord must make an offer to all the tenants. When they receive the offer, they have 15 days in which to jointly advise the landlord that they are interested in purchasing the property. If this time has elapsed, and no joint statement of interest has been made, then any one of the tenants in the building can provide an individual statement of interest. However, individual tenants only have seven more days in which to advise the landlord of their interest in purchasing.
If a statement of interest has been delivered to the landlord -- either by a single tenant or jointly from the group -- there is a 90-day period in which to negotiate a contract. However, should negotiations fail, the owner is obligated to provide an additional 30 days for any one of the current tenants to enter into a purchase and sales contract.
If there is a contract, the tenants have an additional 90 days in which to go to settlement. Once again, however, should a lender estimate in writing that additional time is required, the landlord must provide yet another 30 days before settlement.
* Accommodation with five or more units. If the building contains more than four rental units, TOPA makes it clear that only a valid tenant association has the right to take advantage of the law.
The landlord must send the TOPA notice to all tenants, advising them of their right to form a tenant organization. It must be a corporation. If there is a tenant corporation already in existence, that organization must provide the landlord (and the District) a statement of interest in purchasing within 30 days from receipt of the landlord's TOPA notice. If there is no corporation, the tenants have 45 days in which to organize and submit their statement of interest.
Once the landlord has been notified, the tenant corporation has 120 days in which to negotiate a sales contract. If there is a contract, the corporation has 120 days from the date of the contract in which to go to settlement. Again, if a lender provides a written statement that it needs more time, the landlord/owner must give the tenants up to an additional 120 days in which to close on the property.
It must be noted that if there are five or more rental units in the property, only the tenant corporation has the right to speak -- and negotiate -- on behalf of all the tenants. Tenants who do not join the tenant corporation will not be able to participate in any of the benefits which the tenant association may obtain through its negotiations.
Right of First Refusal
Regardless of the size of the building -- and even if the tenant or the tenant organization is unable or unwilling to enter into a contract with the owner -- the law provides the tenants with an absolute 15-day right of first refusal.
This means that if the tenant or the tenant corporation can match the contract from the third party, the tenants have the right to purchase. The clock does not begin to run on this until all the other time dictated by the law has expired.
There are many rules and many complex issues that cannot be covered in this short column. Whether you are a landlord or a tenant, you should seek competent legal and financial counsel before you take any steps to sell or buy.
The city's Department of Consumer and Regulatory Affairs has published forms that are easy to use and understand. They are available in Room 7238, 941 N. Capitol St. NE. These forms walk all parties through the process.
Benny L. Kass is a Washington lawyer. 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 also send questions to him at that address.