5525719 Resolution 21-122, TOPA Bona Fide Offer of Sale Clarification Emergency Declaration Resolution of 2015

A RESOLUTION

                                                        

21-122

 

IN THE COUNCIL OF THE DISTRICT OF COLUMBIA

 

June 2, 2015         

 

 

To declare the existence of an emergency with respect to the need to amend, on an emergency basis, the Rental Housing Conversion and Sale Act of 1980, to clarify that a bona fide offer of sale for a housing accommodation with 5 or more units, for purposes of demolition or discontinuance of housing use, made in the absence of an arm’s length third-party contract, is based on current, applicable, matter-of-right zoning regulations or laws, or by an existing right to convert to another use, that the offer may take into consideration the highest and best use of the property, and to establish the right of a tenant organization to a determination of the appraised value of a housing accommodation under certain circumstances.

 

RESOLVED, BY THE COUNCIL OF THE DISTRICT OF COLUMBIA, That this resolution may be cited as the “TOPA Bona Fide Offer of Sale Clarification Emergency Declaration Resolution of 2015”.            

 

Sec. 2. (a) There exists an immediate need to amend sections 103, 402, and 411 of the Rental Housing Conversion and Sale Act of 1980 (“the Act” or “TOPA”), to clarify that a bona fide offer of sale for a housing accommodation with 5 or more units, for purposes of demolition or discontinuance of housing use, made in the absence of an arm’s length third-party contract, is based on current, applicable, matter-of-right zoning regulations or laws, or by an existing right to convert to another use. Further, there is an immediate need to clarify TOPA that a bona fide offer of sale may take into consideration the highest and best use of the property; and finally, to establish the right of a tenant organization to request a determination of the appraised value of a housing accommodation under certain circumstances.

(b) Last September 23, 2014, in an attempt to clarify the term “bona fide offer of sale", and thereby preserve the TOPA rights of the residents at Museum Square and other similarly situated tenants, the Council passed Act 20-434, the Tenant Opportunity to Purchase Emergency Amendment Act of 2014. Law 20-166, the Tenant Opportunity to Purchase Temporary Amendment Act of 2014, the substantively identical temporary version of the emergency bill, went into effect on February 26, 2015, and will expire on October 9, 2015.

(c) Unfortunately, both acts were drafted too broadly and inadvertently covered all TOPA sales, and not just those occurring without a third-party contract, like at Museum Square. As a result, all TOPA sales retroactive to January 1, 2014, were suddenly required to have included two appraisals of the housing accommodation. Due to concerns of the title insurance industry, this all-encompassing retroactive appraisal requirement has stalled a significant number of transactions in the residential real estate market for previous and current TOPA sales. As a result, the collection of recordation taxes has been adversely affected, which in turn has had the potential of reducing funding available to the Housing Production Trust Fund.

(d) These new emergency and temporary bills are being moved to expeditiously remedy this situation and were drafted in consultation with many stakeholders from all sides of the issue over a period of many weeks.

(1)   These bills replace the relevant section of TOPA law, D.C. Official Code § 42-3404.02, and essentially return this subsection to its pre-emergency and pre-temporary language. This means that TOPA will no longer require all TOPA sales to have two appraisals, regardless of whether there is a third-party offer.

(2)   These bills require that a bona fide offer of sale for a building with 5 or more units based on a landlord’s intention to demolish or discontinue housing use, in the very limited circumstance where there is no third-party offer, must be based on current, applicable, matter-of-right laws and regulations, or by an existing right to convert to another use. The offer may take into consideration the highest and best use of the property. This requirement ensures that a bona fide offer of sale will be based on the present value of the property, and not some speculative future value.

(3)   These bills protect the elderly residents of Museum Square and other similarly situated tenants by including a retroactive provision for housing accommodation with 5 or more units, for purposes of demolition or discontinuance of housing use, made in the absence of an arm’s length third-party.

(4)   These bills establish a tenant right to request an appraisal, if the tenants believe that an offer, in the absence of a third-party offer, is too high. They direct tenants to jointly select an appraiser with the landlord, but if they cannot agree, then the appraiser is selected by DHCD’s Conversion and Sale Administrator. The cost of the appraisal is split 66/33 between the landlord and tenant (roughly $40-$65 per tenant). The time the appraisal takes is added to the negotiation period allowed tenants.

(5)   These bills grandfather-in tenant organizations that, prior to the effective date of the TOPA Bona Fide Offer of Sale Clarification Emergency Amendment Act of 2015, have registered the tenant organization with the Mayor and have reasonably relied upon Act 20-434, the Tenant Opportunity to Purchase Emergency Amendment Act of 2014, and Law 20-166, the Tenant Opportunity to Purchase Temporary Amendment Act of 2014, by requesting an appraisal of their housing accommodations as required under those bills.

 

Sec. 3. The Council of the District of Columbia determines that the circumstances enumerated in section 2 constitute emergency circumstances making it necessary that the TOPA Bona Fide Offer of Sale Clarification Emergency Amendment Act of 2015 be adopted after a single reading.

 

Sec. 4. This resolution shall take effect immediately.