If you rent in DC and the building owner decides to sell your building, you have powerful rights to negotiate during the sale. But, critics say, some tenants are abusing these rights. Two bills this fall would change the way the Tenant Opportunity to Purchase Act (TOPA) works for some renters.
TOPA is a law that gives tenants a chance to buy their residence before the owner sells to a third party. Carolyn Gallaher, a Greater Greater Washington contributor, wrote a TOPA overview and how it can be a tool for tenants who want to continue renting in a pair of stories last year.
TOPA has preserved affordable housing, but has created headaches for some homeowners
While this process has helped to preserve over 1,400 affordable homes and apartments in the last decade, TOPA can create headaches for sellers, particularly when it’s a single-family home. The DC Association of Realtors (which has campaigned against TOPA for years) created a webpage listing some TOPA single-family home horror stories, like:
A man was renting the basement of a home. The owner agreed to a contract to sell the home, and the contract allowed the tenant to continue renting the basement at the previously agreed-upon rate of $1,600 per month. The tenant refused to accept the deal and threatened to drag out the sale for as long as possible, before he was finally persuaded to sign off on it — for the price of $30,000. He stayed on as a basement tenant, and he was able to extort the homeowner for the cost of more than 18 months of rent
Or in one case, where the tenants were a pair of attorneys,
The tenants took the full 60-day negotiating period but never came to a meeting with the owner, then they took the full 15-day period to match the offer, which they did not. They were then given 90 days to bow out of the transaction for good, and after holding out for 88 of those days, they finally bowed out.
There’s a big difference between a company that owns a large residential building that wants to put it up for sale and a couple living in a rowhouse with a tenant in the basement. Everyday people who are trying to sell their house don’t have the same level of experience and sophistication in real estate as companies that are in the business of buying and selling buildings.
TOPA requires someone who has a tenant and wants to sell their property to give the tenant a chance to buy it. First the owner finds a buyer and agrees on a price and other sales terms. Then the law gives tenants time at each of several steps so they can register interest in buying, line up financing, and do other things needed to buy the property. This also has the effect of delaying the sale by several months. If the tenant ends up not going through with the purchase, the seller can sell to the original buyer, who might not be interested any more because of all the delays.
Two councilmembers try to reform TOPA
The difficulty TOPA can cause for single-family home sellers is why Councilmembers Anita Bonds (D-At Large) and Brianne Nadeau (D-Ward 1) introduced separate bills that would limit TOPA’s application in these situations. Bonds’ legislation would exempt a second unit in a building, such as a basement, carriage house, or garage apartment, as long it takes up less than a third of the building and the owner lives in the main unit. It would also shorten deadlines that tenants in single-family homes must meet in order to take advantage of TOPA.
“Analysis shows that single-family home TOPA offers of the past several years only very rarely resulted in tenant purchases of homes,” Bonds said June 6 when she introduced the TOPA Accessory Dwelling Unit Amendment Act. “Significant controversy has arisen over whether TOPA is being misused by some tenants to exact large amounts of money from housing providers in exchange for the tenants agreement to not necessarily drag out the TOPA process,” she added. “We know that this was not the intent of the law, and so we have to address it,” Bonds told NBC4 in May.
Nadeau’s bill, the Home Sale Facilitation Amendment Act, would bar tenants in owner-occupied single-family housing from doing what’s called “assigning” their TOPA rights and shorten deadlines for single-family home TOPA actions.
Under TOPA, tenants can assign their right to purchase to a buyer that plans to make money by selling or renting the property. In exchange, the tenants may negotiate favorable terms such as renovations, limits on rent increases, or a cash payment.
Nadeau’s bill would prohibit tenants in all owner-occupied single-family home situations from assigning their TOPA rights. They could still exercise the right to purchase on their own behalf, however. Bonds’ bill, on the other hand, exempts residents in certain units from TOPA entirely. That means they can’t assign TOPA right to a third party and they can’t exercise TOPA rights on their own behalf.
“If you look at the purposes of the act, one of the purposes was to increase bargaining power for tenants,” Rick Eisen, a D.C. real estate and housing attorney who wrote TOPA for the Council in 1980, told me. “Having the right to assign your rights increases bargaining power.”
“Their ability to assign their rights at least gives them some control over the situation and what happens going forward so they can use their assignment rights to negotiate a continued tenancy, rent freezes, or cash buyouts” they can use to find a new place to live, said Andrew McGuire, an attorney who represents tenants and tenant assignees in TOPA situations. “The reality is it does give the tenants some amount of leverage.”
Bonds couldn’t be reached for comment for this story, but an aide told me her approach to TOPA has shifted since she introduced the legislation. The bill she introduced in in June was a starting point for discussions Bonds has held with stakeholders in the housing community, which led to changes she will propose to improve the legislation, the aide said. The aide declined to elaborate, saying the proposals will be laid out at a Sept. 21 hearing. Nadeau’s bill hasn’t been scheduled for a hearing, though it’s possible some of the ideas would make it into Bonds’ revised bill.