The Tenant Opportunity to Purchase Act (TOPA) is a hot topic in Washington DC. In 1980, TOPA was an honorable regulation set forth to combat the gentrification in the District. Essentially this act gave tenants a first shot at purchasing the home they were renting, if their landlord decided to sell the property. This process is structured with procedures that allow the tenant enough time to get financing, negotiate a contract and settle with the landlord.

Tenant Opportunity to Purchase Act (TOPA) Process

Tenant Opportunity to Purchase (Single Unit Building)

Landlord Makes Offer Of Sale

Before selling a home that is a rental location, the landlord must provide the renter with what is known as the “Offer Of Sale.” If there is a third party contract already in place, the landlord must provide a copy to the tenant within seven days of the request.

Request For Information

Once receiving the “Offer Of Sale,” the tenant can request information within seven days about the home. This includes info like a floor plan, itemized list of operating expenses, utility consumption rates, and capital expenditures for the past two years.

Statement Of Interest

The tenant then must deliver a written “statement of interest” to the landlord and Mayor (by way of DHCD’s Rental Conversion and Sale Division). This statement must be either delivered in person or sent by certified mail within 30-days of receipt of the “offer of sale” by tenant or Mayor (whichever is later).

Tenant TOPA Negotiations

The law allows a minimum a 60-day negotiation period once the landlord receives the tenant’s “statement of interest.” The 60-days can be extend by a single day for each day that the landlord fails to provide information required by the Tenant Opportunity to Purchase Act. An additional 15-days can be added to the negotiating period if the landlord enters into a contract with a third party. This is known as the “right of first refusal period” where the landlord and tenant must negotiate in good faith. At this point, the tenant has an opportunity to match the contract.

• The Landlord may not require the Tenant to prove financial ability to purchase as a condition to entering into a contract, and the Landlord may not require the Tenant to pay the purchase price in installments unless the Landlord provides financing on terms reasonably acceptable to the Tenant.
• The Landlord, however, may require the Tenant to pay a deposit of up to 5% of the contract sales price in order to make a contract. The deposit is refundable in the event of a good faith failure of the Tenant to perform under the contract.
• Instead of purchasing the building outright, a Tenant can assign or sell his or her rights to other groups. Using this right, a Tenant can use his or her rights to negotiate better building conditions, limit rent increases or for other benefits.

Tenant Opportunity to Purchase Act Settlement

The tenant has at least 60-days to secure financing and/or financial assistance to purchase the home. If the lender states in writing that financing will be made in 90-days after contracting, then the landlord is required to grant that extension to the tenant.

Start Over Period

If the landlord does not enter into a sales contract within 180-days of the “offer to sale” then the Tenant Opportunity to Purchase Act process must start over with a NEW “offer to sale.”

Tenant Opportunity to Purchase (2-4 Units) Process

Landlord Makes Offer Of Sale

Before selling a rental accommodation of 2-4 units the landlord will provide an “offer of sale” to the tenant, even if there is a third party contract in place. Again the landlord will have to provide a copy of that contract within seven days of the request by the tenant.

Request For Information

Once the tenants’ receive the “offer of sale”, they may request additional information about the property, which the landlord would have to provide within seven days. This includes floor plans, itemized list of operating expenses, utility consumption rates, capital expenditures (for the previous two years), most recent rent roll, list of tenants and a list of vacant apartments.

Statement Of Interest

To exercise the “right to purchase” collectively, the tenants must deliver this in writing to both the landlord and the Mayor (at DHCD’s Rental Conversion and Sale Division). It has to be sent by either certified mail or delivered in person within 15-days of the receipt of sale by the tenant or the Mayor (whichever is later). If the tenants fail to do so collectively, an individual tenant will have an additional seven days to exercise the “right of purchase” through a written “statement of interest” on his or her own behalf.

Individual Tenant Right to Purchase

• If the Tenants acting together do not submit a written Statement of Interest in the 15 day period, then an individual Tenant has 22 days from receipt of the offer of sale or receipt of the offer of sale by the Rental Conversion and Sale Division, whichever date is later, (i.e. 7 days after the 15-day period for the group of Tenants has expired) to provide a statement of interest to both the Landlord and the Rental Conversion and Sale Division.
• On or before the 22nd day, the individual Tenant must provide his written statement to both the Landlord and the Rental Conversion and Sale Division either by sending the statement by certified mail or by hand delivery. This means that the Tenant must hand deliver the acceptance letter by the 22nd day or mail the acceptance letter by certified mail no later than the 22nd day.

Tenants Negotiations

The current law allows a minimum 90-day negotiation period after the current landlord received the tenants’ “statement of interest.” The 90-days can be extended one day for each day the landlord fails to deliver information required by TOPA. The 90-days can also be extended by 15-days (during the right of first refusal period), if the landlord enters into a contract with a third party before or during the negotiation period. If the tenants collectively fail to reach an agreement with the landlord, than an individual tenant may extend the negotiation period for an additional 30-days.

• The Landlord may not require the Tenants to prove financial ability to purchase as a condition to entering into a contract, and the Landlord may not require the Tenants to pay the purchase price in installments unless the Landlord provides financing on terms reasonably acceptable to the Tenants.
• The Landlord, however, may require the Tenants to pay a deposit of up to 5% of the contract sales price in order to make a contract. The deposit is refundable in the event of a good faith failure of the Tenants to perform under the contract.
• Instead of purchasing the building outright, Tenants can assign or sell their rights to other groups. Using this right, Tenants can use their rights to negotiate better building conditions, limit rent increases or for other benefits.

Tenants Opportunity to Purchase Act Settlement

Tenants will have not less than 90-days from the date of securing financing and financial assistance. If the lender states in writing that a decision regarding financing will be made within 120-days after contract the landlord is required to grant that extension.

Start Over Period

If the landlord has not entered into a sales contract within 240-days of the “offer of sale,” the TOPA process must start over with a new “offer of sale.”

Tenant Opportunity to Purchase (5 or More Units) Process

Landlord Makes Offer Of Sale

Before selling the rental accommodation, the landlord must provide the tenants with an “offer to sale,” regardless of whether a third party contract is already in place. If there is a contract offer with a third party, the landlord must provide the tenants with a copy of the contract within seven days of the tenants’ request.

Request For Information

Once the tenants receive an “offer to sale,” the tenants may request additional information about the units. The landlord must provide this information within seven days. This information will included, floor plans, itemized list of operating expenses, utility consumption rates, capital expenditures (for the previous two years), most recent rent roll, list of tenants and a list of vacant apartments.

Tenant Organization Required For Tenant Purchase

Only an incorporated tenant organization may exercise the right to purchase an accommodation with more than five units. If such an organization doesn’t currently exist, than tenants must form and incorporate a tenant organization.

A Tenant Organization Registration Application includes:
• Names and contact information for Tenant Organization officers and the Tenant Organization’s attorney (if any);
• Copies of the certificate of incorporation, the articles of incorporation and bylaws; and
• Documentation that the Tenant Organization represents at least a majority of the occupied units at the time of registration.
o Note: When determining if the Tenant Organization represents a majority, Tenants who have worked for the Landlord in the last 120 days or have lived in the housing accommodation less than 90 days are not counted toward the majority. Such individuals can, however, join the Tenant Organization.

Remember that the Tenant Organization should also include a letter indicating interest in purchasing the housing accommodation.

Tenant Organization Submits Statement Of Interest

If a tenant organization does NOT already exist, the recently formed tenant organization must deliver a “statement of interest” and “application for registration” within 45-days of receipt of the “offer of sale” by tenants or the Mayor (whichever date is later).

If a tenant organization DOES already exist, the existing tenant organization must deliver the same documents within 30-days of receipt of the “offer of sale” by the tenants or the Mayor (whichever date is later). Once registered, the Tenant Organization will be the sole representative of the Tenants and the offer of sale is an offer to the Tenant Organization.

The tenant organization must send the “statement of interest” and “application for registration” to both the landlord and the Mayor by certified mail or deliver it in person.

Tenant Organization Negotiations

The current law allows a minimum 120-day negotiation period after the current landlord receives the tenant’s “statement of interest.” The 120-day period can be extended one day for each day the landlord fails to deliver information required by the Tenant Opportunity to Purchase Act. The 120 days can also be extended by 15-days with the tenant’s right of first refusal period, if the landlord enters into a contract with a third party before or during the negotiation period.

• The Landlord may not require the Tenant Organization to prove financial ability to purchase as a condition to entering into a contract, and the Landlord may not require the Tenant Organization to pay the purchase price in installments unless the Landlord provides financing on terms reasonably acceptable to the Tenant.
• The Landlord, however, may require the Tenant Organization to pay a deposit of up to 5% of the contract sales price in order to make a contract. The deposit is refundable in the event of a good faith failure of the Tenant to perform under the contract.
• Instead of purchasing the building outright, a Tenant Organization can assign or sell its rights to other groups. Using this right, a Tenant Organization can use his/her rights to negotiate better building conditions, limit rent increases or for other benefits.

Tenant Organization TOPA Settlement

Typically the tenant organization will have 120-days after the date of securing financing. There are also extension provisions, particularly if a lending institution estimates in writing that a decision with respect to financing will be made within 240-days after the date of contracting. The landlord shall afford an extension of time consistent with the lenders’ written statement.

Start Over Period

If the landlord has not entered into a sales contract within 360-days of the “offer to sale,” then the TOPA process must start over with a new “offer to sale.”

The Current State of TOPA

While the Tenant Opportunity to Purchase Act was created to help tenants find affordable living options in Washington DC, TOPA is under a scrutinized review due to a provision that allows the tenant to transfer the rights to purchase. Local DC real estate agents have seen abuse of this act in countless circumstances. This provision dubbed as the “pay to play” provision has set forth situations where tenants will seek significant sums of money in a transfer of their right to purchase.

Instructions For Preparing And Issuing A Notice Of Transfer Of Ownership Interest can be found using the following links:

Notice Of Transfer (1 Unit)

Notice Of Transfer (2-4) Units

The rules around TOPA have definitely been muddied over the years. If you are a tenant or landlord who is need of an expert to help carefully guide you through this complex process, call us at (202) 463-1965 or send us a message. Our FREE CONSULTATION will help put your mind at ease.

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