Selling a Property With Tenants In Washington, D.C. (Dealing With TOPA)
In Washington D.C., rental property owners should be aware of tenants’ special rights before deciding to sell their property. Washington D.C. is known for being a tenant friendly area, considering the financial savings for both owners and renters. However, without knowing the specific laws of the Tenant Opportunity Purchase Act (TOPA), the monetary benefits can easily turn into a burden for property owners.
TOPA In A Nutshell
Real estate owners in Washington D.C. who want to sell their rental property while it is still occupied with tenants must follow the rules of TOPA. Under this law, owners of real estate must first offer this property for sale to the tenants currently residing in it. This allows these residents to take advantage of the sale and purchase a home in which they are already living. In fact, by law, property owners must send an offer of the sale by first class mail to the tenants and to the mayor of D.C. Once the offer is sent to the tenants, they have the opportunity to submit a written agreement to purchase the property within 30 days to both the property owner and the mayor. After 30 days has elapsed and no written offer has been received, property owners are welcome to move forward with the sale in the typical fashion.
Written Agreement To Purchase Real Estate Received From Tenants
If a written offer has been received from tenants who are interested in the sale, they now have 60 days to negotiate a contract with the property owner. At this point, the owner must submit the necessary forms to its tenants and allow them to move forward with the negotiation process. After negotiating a contract, the tenants have 60 days to secure lender financing. This timeframe can be extended by 15 days if the real estate owner has received a competing third-party request for purchase, allowing the tenant to match this price.
Moving Forward If Tenants Are No Longer Interested In The Property
Real estate owners can move forward with the sale after tenants have determined that they are not interested in purchasing the property. However, property owners only have 180 days to find a buyer before TOPA requires the whole process to repeat itself. In other words, after 180 days, the owners are required to submit another sale offer to the tenants and the mayor. Once this happens, the tenants have the opportunity to purchase the real estate again.
Tenant Rights Under TOPA
Tenants who demonstrate interest in purchasing a property do not have to disclose their financial stability, so a real estate owner has no idea whether or not a tenant has the capability to follow through with the sale. Tenants also have the right to assign the contract to a third-party, such as a developer, and can go through a process similar to contract flipping wherein the third party is able to make a profit on the sale.
How To Deal With Tenants Who Hold Up The Sale
In many cases, tenants will be looking for some sort of compensation in order to waive their rights to purchase a property. Ideally, real estate owners should simply work to negotiate with tenants in order to expedite the overall transaction. They often attempt to avoid disagreement with renters by offering financial incentives for tenants to move out early, such as giving back interest on a security deposit. One typical request from tenants is a free month of rent in exchange for moving out before their contract ends. In most cases, giving into these demands is likely the best choice in order to move forward with the sale.
Understand TOPA Like The Back Of Your Hand
In order to avoid falling into a legal battle, real estate owners who want to sell their rental property in Washington D.C. need to understand TOPA in its entirety. Basically, these owners need to offer their property to tenants before they offer the property on an open market. In most cases, tenants are not likely to be in a position to actually purchase a property and many will pass on the offer. At this point, real estate owners can continue with the sale in the traditional manner and search for a buyer.
Selling Rental Property In Maryland Or Virginia
Owners of real estate who have rental property in Maryland or Virginia are in a better position. In these states, the rules regarding interaction with tenants when selling a property are less demanding. For instance, property owners only have to give tenants a written 30-to-60 day notice that they must move out. This allows real estate owners to continue with the sale quickly without having to further negotiate with tenants.
Real estate owners who want to sell rental property in Washington D.C. need be compliant with the rules of TOPA in order to sell their investment in an open market. Those who are in a position to sell their real estate are welcome to contact us. You’ll be able to sell easily since we provide fast service and cash offers.