Liz’s Story
Liz grew up in a small town in Maryland and moved to the DC area to attend college. She used money from an insurance settlement to purchase a duplex near campus. While attending college, she shared one of the units with two roommates. The other unit was rented by three more students from the university. After graduation, she had no problem keeping the duplex fully rented so she kept the property and continued to rent both units while she worked in the DC area. Now she has the opportunity to take a job closer to her hometown, where her parents still live. Income from the rental helped pay her fees and expenses for school, but even though she is moving less than 80 miles away, she is ready to be done with the maintenance and repairs and with chasing down renters to collect payment.
When she made her decision to sell the multi-family property, Liz did some research into the process for selling rental property in Washington, DC. The more research she did, the more concerned she became about trying to handle the sale herself or even listing it with an agent. During her research, she came across our website. When she saw that Akin Developers buys “unwanted rental property” she contacted us for a consultation.
After speaking with her during our consultation, we were able to connect her with a real estate attorney from our network of professionals who was able to more thoroughly explain the Tenant Opportunity Purchase Act (TOPA) and other related laws and regulations. The attorney walked Liz through the process and ensured that all filings and notices were done properly and within the specified time constraints.
TOPA – A Brief Explanation
Tenant Opportunity Purchase Act (TOPA) assigns certain rights to tenants in a rental property. Primarily, in anything other than most single-family homes, tenants must be offered the First Right of Refusal for purchasing the property if the property owner intends to sell. There is a very detailed process to be followed and specific timeframes for the various steps of the process. Failure to comply with any or all of that process can have legal implications and can cause the time to restart, significantly delaying the sale of a rental property.
For Liz, complying with the Tenant Opportunity Purchase Act (TOPA) meant she was required to provide, by first class mail, a copy of the offer to sell, to each of the tenants and, at the same time also to the Mayor. There are several very specific details and items of documentation required to be included in the offer to sell. These requirements include providing physical and financial details from the last two years.
The tenants then have 15 days to state their interest to purchase the property together, as a group. If within that 15-day period the tenants, as a group, do not submit a written statement of intent to purchase, any tenant may, individually, submit a statement of intent to purchase. At that point, a seven-day waiting period begins. If a statement is issued either as a group or individually another 90-day period begins for negotiating a contract. The process continues with several other waiting periods involved and can take more than 6 months to be completed.
Moving Forward with the Sale
In Liz’s case, none of the six tenants submitted a statement of interest. They were all students at the university and were simply interested in a place to live until they graduated and found employment. The next step in the process, by law, was to provide to the tenants, in writing, a 48-hour “Notice to Access the Property” for viewing by potential buyers. Still working with the real estate attorney we had referred her to, Liz complied with this requirement. After an inspection of the property, we were able to give Liz a fair offer, which she accepted pending successful compliance with all TOPA regulations and requirements.
The property was in an excellent location near the university and public transportation. It had been well-maintained and only needed some updates and small improvements, so we at Akin Developers were interested in maintaining the property as rental units. One of the current tenants would be graduating shortly and did not wish to renew her rental agreement once it expired in six weeks. The other five, however, did want to remain at the property and, Liz made arrangements for a time to be scheduled to discuss the details of the new rental agreement with the tenants once we had closed on the sale of the property.
Since we use our own cash money to purchase properties, rather than going through the process of prequalifying for a mortgage loan with a bank or other financial institution, we can close more quickly,
Outcome
Liz accepted our offer and we scheduled the closing for 3 weeks later. One of the tax attorneys in our network was able to advise Liz on what to expect regarding the tax implications and what her options were to reduce the amount of taxes on the sale of the property. With the complexity of TOPA and other regulations, Liz told us that working with us and other recommended professionals from our network, made the entire process less stressful.
Liz introduced our realtor to the current tenants and we were able to reassure them that other than making their payments to a different landlord, very little would change on their end. They were satisfied with the terms of the new rental agreement that would be implemented once their current agreement expired in a few months. Liz was able to accept the job offering near her parents. The tenants were able to remain in their current location. Akin Developers took ownership of a nice rental property near the university and, we all walked away happy.
