TOPA Laws in DC impacting a transaction for an investor

[Juan Zabala]

I was wondering if anyone has had any issues with the TOPA laws in DC. For those who don't know, TOPA stands for the Tenant Opportunity to Purchase Act. This law gives the tenants of properties in Washington DC the first right of refusal to purchase the property. So let's say a seller puts their multi-family property on the market for $500,000, the tenants have the right to purchase it. The tenant can forfeit their rights to purchase the property or they can assign their rights to a third party who can purchase on their behalf. Here's the dilemma, the person who gets those rights assigned to them can hold back the process up to 6 months without ever purchasing the property. What these folks who get assigned the TOPA rights do is try to negotiate the leases for the current tenants and/or negotiate a buyout. They'll say, "pay me $20,000 and don't increase the rents on the tenants for the next 2 years". The seller will then have to agree to these terms in order to sell the property or wait nearly 6 months to sell the property. I have been working on a deal for a buyer in DC and we have been unable to get a clear title because of the TOPA laws and the clearances. Has anyone had to deal with these type of issues in DC or anywhere else around the country? If so, how did the transaction turn out for you?  Also, please feel free to correct me if I am misinterpreting how the TOPA system works. I appreciate y'all! 

[Russell Brazil]

I deal with TOPA all the time. 99% of the time its no problem. The times it is a problem is when the landlord or agent involved actually give the tenants the idea that they should get something from the sale. So if both just keep their mouths shut and ask them to sign the topa forms with a mobile notary, its usually smooth sailing.

Conversly, multiple times Ive come to a property that the deal fell apart because of TOPA, and we can get a better deal on it with the seller willing to take less to get a firm commitment that we will close. I closed a 4 unit property in Logan Circle that way that had previously been under contract for $1.75 million, and we got it for $1.5 million after TOPA messed up 2 previous contracts on the property.

[Juan Zabala]

Thank you for this response. I am curious to know how long it has taken you to close a TOPA deal. We've been on this for month. We were delayed in part because of the eviction moratorium that DC government had in place last year. On average, how long has the TOPA process taken you? 

[Marian Huish]

@Juan Zabala I've had a 'TOPA gone bad' deal take 18 months to close as once the lawyers get involved, it's slow-going.  Both parties ended up paying substantially over & above the contract price to get the deal done.  Just keep prodding & be patient.  Best of luck.

[Jeremy D.]

@Juan Zabala

I bought a TOPA house. Added like 3 months to get the tenants to settle on getting their security deposit back plus $5k. Don’t know the exact terms the tenants got but it held it up for me.