Bulletin: DC2009001

Dear Associates:

As you all know, residential tenants in the District of Columbia have been given significant rights pursuant to the Rental Housing Conversion and Sale Act of 1980 ("TOPA"). These rights include the right to enter into and consummate a contract for the purchase of any residential accommodation before it can be offered for sale by the owner (the so-called tenant purchase right) and a right of first refusal once the rental accommodation is under contract for sale to a third party.

Under legislation that was recently passed, the District of Columbia now also has a right of first refusal in addition to the rights granted to tenants. The highlights of the District's Opportunity to Purchase Amendment Act of 2008 (D.C. Law L17-0286, herein the "Act") are as follows:

1. The Act only applies to sales of housing accommodations of 5 or more units.

2. Before a housing accommodation of 5 or more units may be sold, notice of the proposed sale must be sent to the Mayor. Presumably, the tenant notice of sale which is currently required to be sent to the Department of Housing and Community Development also satisfies this requirement. However, the rules to implement this new provision have not been issued yet.

3. The Mayor is granted the same right to purchase as is granted to the tenants. However, the Mayor's right to purchase is subordinate to the tenants'.

4. To exercise the right of purchase, the Mayor must deliver to the owner and tenants a written statement of interest within 30 days of receipt of the owner's notice of sale.

5. The Mayor may only exercise the right to purchase if 25% or more of the housing accommodation units are "affordable units". The Act contains a definition of "affordable units". As an underwriting matter, we will always assume that the property meets this requirement since we are not in a position to make these determinations.

6. The Mayor's right to purchase is assignable.

7. The Mayor has not less than 150 days from the date of delivery to the owner of the statement of interest to negotiate a contract. This time period is extended by 15 days in the event that a tenant organization is formed and registered.

8. The Mayor is obligated to issue rules to implement the Act. As of the date of this bulletin, no rules have been issued.

In order to confirm that the appropriate notice has been given, it is imperative that agents contact the Department of Housing and Community Development and ask that they deliver copies of all TOPA notices that have been received with respect to the property you are underwriting.

As a reminder to all of our agents, TOPA continues to be a significant source of litigation and claims. Because of that, all Title Commitments and Title Policies (both owner's and lender's) which insure residential rental property must contain an exception for TOPA unless a Stewart Underwriter approves its deletion. Please see Stewart Bulletin DC000018 for further guidance on this issue.

If you have questions relating to this bulletin, please contact District of Columbia Underwriting Personnel or Stewart Legal Services.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.