DC Council amends TOPA
In the midst of the oversight season, the Council pressed forward with its legislative agenda. On March 6, 2018, they passed a somewhat controversial TOPA Amendment, exempting owner-occupied single family homes.
TOPA applies to the owners of rental housing accommodations regardless of the number units. Where an owner wants to sell tenant occupied property, they must give the tenant(s) notice of the sale and a opportunity to purchase.
The amount of time that the tenant(s) have to exercise their rights and purchase the property varies, depending on the size of the buildings. Single family homes have the shortest timelines, while 5 or more unit buildings have substantially longer.
The reason for the TOPA Amendment
The proponents of the Amendment argue that the Law was not functioning properly as to single family homes.
The leglislative purposes of TOPA are prevention of displacement and creation of home ownership where sales remove rental units from the market.
In recent years however, the criticism has been that TOPA is not achieving these legislative ends. This is due, in no small part, to the proliferation of opportunist developers and attorneys, buying out tenants’ TOPA rights for cash consideration. As a result, the rental units are removed from the market and the tenants are displaced (albeit with some cash in their pocket).
The practice of flipping TOPA rights for cash, has a disproportionate impact on single family homeowners, whose sales are impeded and sometimes halted. This adverse effect on working class homeowners is not in the name of affordable housing, or anti-displacement. Instead, it serves to enrich predatory developers and attorneys who buy-out Tenants for a pittance so they can retain the bulk of the equity. This is not the purpose of TOPA.
The impact of the TOPA Amendment
The Amendment was just adopted last Tuesday and will not take effect until after the Congressional review period. As such, the practical impact of the change is subject to speculation.
The new Law is intended to benefit homeowners who have rented out portions of their houses. They will legally be able to sell the property without waiting for TOPA timelines to run their course. However, this may not be the dramatic improvement that it seems.
The TOPA Amendment does not terminate a tenancy
So let’s say you are an owner with a tenant in your spare bedroom.
You list your property for sale and get a contract in a week. Under the Amendment, you can just close right? Not necessarily. You are selling the house with some guy living in it. The sale is subject to the tenancy, he doesn’t have to leave. Is the family who just bought the house going to close and move in with some creepy dude living there? Is their lender going to let them? Probably not.
As the seller, you can evict a tenant where you contracted to sell to an owner occupant. However, that process, even under ideal circumstances, takes 90 days or longer. Previously, an owner could not deliver the 90 day notice until the end of the TOPA period. So now it takes approximately three (3) months to deliver a single-family property vacant, instead of 4-7 months. An improvement, but not necessarily the radical change advertised.
On the other hand, where a home has a separate rental unit, the buyer might be glad to have a rent paying tenant. In that case the TOPA exemption can be a huge benefit.
Consequently, the impact may largely depend on your individual factual situation.