Commercial Broker Quarterly: Fall 2003 - GWCAR, Greater Washington Commercial Association of REALTORS(R)

CBQ >> Fall 2003 Issue

Mendelson Proposes Legislation To Re-define "Sale"

by Mary Rudolph, Vice President of Public Policy/DC

Bill 15-133: the Rental Housing Conversion and Sale Act of 1980 Amendment Act of 2003

DC Councilman Phil Mendelson introduced a bill (co-sponsored by Councilman Adrian Fenty) that seeks to amend the current Rental Housing Conversion and Sale law. The bill would dramatically change the law with respect to the type of transactions that would trigger the tenants' right to purchase a rental housing unit.

The current law dictates that a "sale" is a transfer of 100% of all interests in a property within a period of one year. If two parties make an agreement to transfer interests in a property in a manner that does not meet this test, it is not considered a "sale" invoking a tenant's right to purchase. Bill 15-133 would redefine "sale" to "a[ny] transfer of an economic interest in real property."

Mendelson's proposed changes fail to address the complex realities involved in the creation and financing of rental housing, or reflect an understanding of the serious damage they would do to investment in the District's rental housing stock.

Because it would apply to all transfers of economic interest, it would unfairly burden those who are disposing of interest in real estate for a variety of other reasons such as estate planning or shifting investment or cash flow strategy. Such a move would seriously compromise the city's efforts to get people to invest in and rehabilitate rental housing in DC.

Second, because recordation of the transaction is the first notice, tenants' rights would be triggered only after the sale was complete, and therefore affect the integrity of the title.

Third, the tax code definition of "transfer of economic interest" was made very broad for other, entirely unrelated, reasons and Mendelson's incorporation of that definition expands the impact of this bill beyond the behavior he wanted to restrict.

Fourth, while tenant advocates concentrate solely on the tenants' first-right to purchase, they fail to acknowledge that where new investment has occurred, it almost always result in improvements by to the property being purchased.

Finally, information about how this particular tenant right has been exploited to stop, delay or increase the cost of building sales has not yet been discussed. Indeed, tenants who have had no intention of purchasing a rental property in stages of conversion have exacted large settlements out of purchasers or sellers who wish to close in a timely manner.

GWCAR will vigorously oppose Bill 15-133. Given DC's political landscape, it will require a concerted effort by REALTORS^® to keep Bill 15-133 from being enacted. Please contact Mary Rudolph at 202.841.5334 or maryrudolph@gcaar.com to relate your experiences with the existing tenant first-right law and to discuss how you can assist in contacting the DC Council.