The Tenant Opportunity to Purchase Act was enacted in the District of Columbia to give tenants the right of first refusal for the purchase of the property that they occupy. The original intent was to help protect renters in multi-unit buildings from having their homes sold out from under them. It would give a group of tenants in an apartment building, for instance, the ability to band together and purchase the building being sold for fair market value. That all sounds great, right?
Well, over the years, a law intended to protect renters has ended up often being overly punitive to homeowners. In fact, a law firm actually set up shop on Capitol Hill for the sole purpose of representing tenants who wanted to sell their TOPA rights or rights of first refusal to the highest bidder. This is problematic for several reasons. It essentially creates a situation where renters are dictating the market value of a a home. Let’s say a homeowner wants to sell her home and she has a tenant currently residing there. She receives three offers for the purchase of her home. Buyer A has offered $500,000, Buyer B has offered $515,000, and Buyer C has offered $530,000. However, the tenant has the right to buy this property for fair market value or assign his rights to a buyer for consideration (money). If Buyer A offers the tenants more money for the ability to purchase the property, the seller must take that offer despite the fact that it is the lowest of the three. The market would say that the home is worth what someone is willing to pay for it. In this case, the value of the home is artificially affected by the assignment of the tenant’s TOPA rights. Check out this article from Urban Turf explaining the finer details of the law.
On March 6th, the DC Council voted on whether to amend TOPA to exclude single-family homes from having to comply with the process. With only two “no” votes, the Council decided to move forward with the the Single-family Home Exemption Amendment Act of 2018. The change would still require homeowners to notify tenants of their intent to sell and give them the opportunity to purchase the property just like anyone else might.
The TOPA debate has been going on for years, trying to strike a balance between protecting tenants from potentially predatory landlords and keeping homeowners from being taken advantage of by potentially predatory tenants. The bill will still have to go through a final vote before it is signed into law.