In 2001 my landlord sold my apartment complex to the National Cathedral. It wanted to replace our apartments with a visitors’ center. I managed to stay put and buy my unit because of a DC law called the Tenant Opportunity to Purchase Act (TOPA).
TOPA gives tenants’ associations the right to refuse contracted sales of their buildings and to purchase them instead for the contracted sale prices. There are lots of TOPA stories. This one is mine.
I learned about the sale of my building from the Northwest Current. When I read the headline my stomach dropped. I’d only been in my apartment for a year. It was affordable, close to work, and pet friendly. I had also just adopted a dog. I didn’t know if I could find another pet-friendly building nearby.
My fears weren’t unfounded. Tenants are usually vulnerable during building sales. In many cities new owners can institute steep rent hikes, refuse to renew leases, or convert to condo. They can even tear buildings down. Fortunately, as I would find out, DC has protections against these tactics.
A few days later several of my fellow tenants organized a meeting in the alley behind our property. They explained the TOPA process and the rights it gives tenants. It sounded fantastical to me. The most I’d ever gotten as a tenant was an $80 check from a landlord who waited 4 days to fix my broken stove. And, he only issued it after I researched the housing code and told him he was legally required to reimburse me.
Here’s how TOPA works
When residential property is sold in D.C. landlords are required to give tenants a TOPA Notice, or Offer of Sale, which informs them that they may refuse the sale and purchase the property instead for the contracted sale price.
Tenants must then incorporate as a tenants’ association, if one does not already exist, and submit a letter of interest within 45 days of receiving the offer of sale. The tenants association can then request information from the landlord including floor plans, itemized operating expenses, utility rates, capital expenditures for the previous 2 years, a recent rent roll, and a list of vacant apartments.
The tenants’ association then has a 120 day period to exercise their right of first refusal and negotiate to purchase the property. If the tenants’ association signs a contract with a deposit they have an additional 120 days to secure financing. After the purchase is complete the tenants’ association can convert to condominium or co-operative or remain rental.
My conversion experience
My tenants’ association decided to refuse our sale. Our biggest hurdle was finding the 26 million dollars necessary to match the initial sale price.
The city provides loans and technical assistance to help majority low income tenants’ associations purchase their buildings, but we weren’t eligible since most of us were professionals. Private loans weren’t an option either. As a new tenants’ association we didn’t have a bank account or credit history. We would need a developer to help us buy the property.
The process of selecting a developer usually involves substantial ‘horse-trading.’ For their part tenants want low/stable housing costs. In buildings converting to condo, like ours, that meant below-market prices for our units. Tenants also want repairs their landlords often neglected to make for years. In our case we needed new boilers, repairs to decaying joists, increased electric voltage, and new plumbing risers.
For their part, developers want to make a profit, and the best way to do that in buildings where tenants want to convert to condo, is to secure some empty units that can be sold at market rates. As such, developers negotiate for the right to offer tenants a buyout, a sum of money a tenant takes in exchange for relinquishing rights to her unit.
My tenants’ association found a developer and converted to condominium in late 2002. Just over 30% of my fellow tenants stayed put. Another 30% took buyouts ($7,000 for studios, $10,000 for 1-bedrooms, and $12,000 for 2-bedrooms). The remaining units were vacant at the time of conversion.
I purchased my 1-bedroom unit for $162,000. For me the TOPA process was both exhilarating and terrifying. I loved my condo and my neighborhood. The Cathedral was my front yard. I could walk to work and the grocery store. And, suddenly I felt like I lived in a small village instead of an anonymous city. My fellow tenant convertors and I walked each other’s dogs, swapped spare keys, shared drinks (and hangovers), and helped each other through heartaches, job losses, and the like.
But, I was also worried. As an academic I wondered how I would pay my mortgage if I didn’t get tenure, and whether I’d be able to sell the condo quickly if I needed to. I also worried that I’d be house poor—able to make the mortgage but scrimping to cover everything else. My unit was in poor shape: 20 year old carpet, peeling wall paper, grungy cabinets and a stove that wasn’t up to code.
Looking back, I laugh at my worries. Although I paid a below market price, I worried the market was out of control and that my unit was over-valued. Little did I know that property values would appreciate rapidly after I purchased my unit and that its value would never fall below my purchase price, even during the recession. At the end of the day, I was lucky. My building was sold at a favorable time and my tenants’ association leaders (Laura, Matthew, Patty and Stephen) were tenacious.
TOPA doesn’t always work so well. The process is also very different in buildings that opt to remain rental because of the city’s rent control statute. I will explore these issues in future posts, but it’s worth considering here what makes TOPA so powerful.
First, TOPA gives tenants a legal way to stay put when their apartments are sold. Although building sales can happen at any time, they are especially common during gentrification. In fact, the city council introduced the TOPA statute in 1979 in response to a then ongoing condo conversion boom associated with gentrification near downtown.
Tenants who can’t afford homeownership can also use TOPA to keep their buildings rental. In fact, a city statute passed at the same time as TOPA only allows a building to convert to condo if 50% (+1) of units vote to convert.
Having a legal right to stay put is exceptionally rare for tenants in the U.S. Most cities offer no or minimal protections for tenants whose buildings have been sold.
Second, TOPA gives tenants market power during gentrification. Lots of people benefit from gentrification, but tenants aren’t usually among them. Cities get increased tax revenue. Landlords sell aging building for big profits. Developers turn disinvested buildings into luxury housing with price tags to match. Tenants, by contrast, are usually forced out of their homes. TOPA changes that by giving tenants market power. They can buy their units and build equity, take buyouts and use them to pay down debt or build up savings, or stay rental and negotiate with their development partner for building improvements. For once, tenants don’t get the short end of the stick.
I believe affordable housing should be a right and I know the commodification of housing has contributed to rising unaffordability nationwide. Until we can convince cities to provide affordable housing, however, TOPA can at the very least give tenants a fairer shake in the game we’re now playing. TOPA doesn’t change the game, but it has changed who can play it.