Task Force
-----to review----
Chapter 53A
     Tenant
Displacement
-----of the------
Montgomery
County Code

Richard Luchs, Esq.                                        Report to County Executive
Chair

Ralph Cole

Jim Conley                                                             Douglas M. Duncan

Elizabeth B. Davison

Elbridge James                                                         Montgomery County, Maryland

Lesa Hoover, Esq.

Greg Milward                                                                                          MARCH 2001                                                               

D. Scott Minton                                                                            

Tara Seeley                                                                                       

Martin Stanton, Esq.

Charles W. Thompson, Jr. Esq.                                        

Gustavo Torres                                                                                   

Roger Winston, Esq.

Paul Yentis

Transmittal Letter

Membership Roster

Executive Summary

Summary of Specific Actions

Background: Chapter 53A

Public Purpose
Administration and Application of Chapter 53A

Task Force Recommendations

Overview
Specific Actions

Subcommittee Reports

Housing Stock
Rental Agreement
Luxury Rental Buildings
Right of First Refusal by Tenant Organization: Contract Definition
Right of First Refusal by Tenant Organization: Exercising
Tenant Relocation Benefits
Chapter 53A: Definitions

Background Information

Task Force Process

Appendices (copies available upon request)

Minutes of  Task Force Meetings

March 22, 2001

The Honorable Douglas M. Duncan
County Executive
Montgomery County, Maryland

Dear County Executive Duncan:

On behalf of the Task Force to Review Chapter 53A, Tenant Displacement, of the Montgomery County Code ("Task Force"), I am pleased to transmit to you the final report.

The mandate of the Task Force was to review Chapter 53A and determine what administrative and legislative changes are needed to improve its effectiveness. The task assigned proved to be complex and challenging and we are proud of both our analyses of the problems and the alternative solutions we have presented.

In our view, adoption of these proposals would produce a more effective, more efficient, and more responsive statute that will provide the public sector and tenant organizations with greater opportunities to preserve affordable housing in Montgomery County.

I am available, at your convenience, to discuss these recommendations in greater detail. For each of us appointed to the Commission, it has been an honor and privilege to have served.

Respectfully Submitted,

 

Richard Luchs, Esq.
Chairman

Richard Luchs, Greenstein DeLorme & Luchs, P.C.

Ralph Cole, Woodside Manor Tenant Association
Jim Conley, Carey Winston Company
Elizabeth B. Davison, Department of Housing and Community Affairs
Elbridge James, Progressive Montgomery
Lesa Hoover, Apartment and Office Building Association of Metropolitan Washington
Greg Milward, Greater Capital Area Association of Realtors
D. Scott Minton, Housing Opportunities Commission
Tara Seeley, Montgomery Housing Partnership
Martin Stanton, Silver Spring Regional Advisory Board
Charles W. Thompson, Jr., Office of the County Attorney
Gustavo Torres, Casa of Maryland
Roger Winston, Linowes and Blocher
Paul Yentis, Yentis & Associates

Esly Caldwell, Progressive Montgomery
Maria Edison, Department of Housing and Community Affairs
Vickie Gaul, Office of the County Attorney
Joe Giloley, Department of Housing and Community Affairs
Juin Killingsworth, Department of Housing and Community Affairs
Renee McLean, Department of Housing and Community Affairs
Damian O’Doherty, Greater Capital Area Association of Realtors
Dan Sachs, Housing Opportunities Commission
Zachary Smith, Housing Opportunities Commission

EXECUTIVE SUMMARY OF RECOMMENDATIONS

The shortage of affordable rental housing leaves low- and moderate-income tenants with limited options. In the last year alone, low vacancy rates coupled with rising rents have contributed significantly to the shortage of affordable housing in Montgomery County, Maryland. The preservation and acquisition of affordable multifamily rental property, threatened with sale or conversion, is of vital importance in providing additional housing options for low- and moderate-income residents of Montgomery County.

In 1981, Chapter 53A, Tenant Displacement, of the Montgomery Code was enacted in response to the County’s shortage of affordable housing. Chapter 53A provides the County, the Housing Opportunities Commission, and bona fide tenant organizations with opportunities to purchase multifamily rental property under the right of first refusal. In addition, Chapter 53A provides certain protections to minimize tenant displacement and requires owners to provide relocation benefits to tenants who are displaced as a result of the sale or conversion of multifamily rental property.

In the last year alone, there has been significant activity in the sale and conversion of older multifamily rental housing property in the county. While conversion—through rehabilitation—is essential to the continued viability of multifamily rental properties, the cost often threatens their affordability.

Because of these current housing trends, the County Council, at the request of the County Executive, enacted emergency legislation to extend the sunset date for Chapter 53A until June 30, 2001. As part of the one-year emergency extension, a Task Force was established to review and make recommendations for modifying Chapter 53A.

The Task Force, comprised of 14 representatives from tenant and community based organizations, the real estate industry, the non-profit housing development industry and the public sector, was created by County Executive Douglas M. Duncan with a mandate to review Chapter 53A and determine what administrative and legislative changes are needed to improve its effectiveness. This report is respectfully submitted in completion of that task.

SUMMARY OF SPECIFIC ACTIONS

I. Affordable Housing Stock

• Increase the number of rental units subject to Chapter 53A by amending it to include rental facilities with 4 or more units, as opposed to its current application to facilities with 10 or more units.

II. Tenant Displacement

• Increase the length of rental agreements from 3 years to 5 years. For the first three years, all tenants would be covered, as is the case under current law. However, for the last two years, an additional 20 percent of the tenant population, determined to be low- or moderate- income, would be covered. Under this arrangement, the right of first refusal currently extended to a tenant organization would be abolished.

• Require periodic reporting of landlord compliance under rental agreements.

• Adjust the amount of rental assistance provided to tenants yearly in accordance with the Consumer Price Index for the Baltimore-Washington Metropolitan Area.

III. Tenant Purchases *

• Provide technical assistance to tenant organizations considering a purchase under Chapter 53A.

• Increase the time period in which the tenant organization must file with the County for certification from thirty (30) days to forty-five (45) days.

• Clarify provisions set forth in Executive Regulation 19-97 to provide tenant organizations with guidelines on how to become certified.

• Increase the time period in which a tenant organization must exercise the right of first refusal from sixty (60) to ninety (90) days.

• Require a tenant organization to have a specific minimal percentage of controlling ownership interest in the partnership, joint venture, or corporation that is partnering with the tenant organization to purchase the rental facility.

* The recommendations contained in this section will be applicable only if the right of first refusal extended to tenant organizations is maintained.

The Task Force identified a wide range of issues relevant to preserving affordable housing in Montgomery County and minimizing tenant displacement when property is converted or sold. The issues have been organized into three core areas: I. Affordable Housing Stock; II. Tenant Displacement; and III. Tenant Purchases. The Task Force recommendations regarding each of these areas are summarized below.

Under current law, pre-1981 multifamily rental properties with less than 10 rental units are exempt from Chapter 53A. The Task Force determined that extending the authority of Chapter 53A to include multifamily rental properties with 4 or more units, would enable the County and tenant organizations to have a greater opportunity to preserve low- and moderate-income housing. According to data prepared by DHCA, there are 56,211 multifamily units in the unincorporated areas of Montgomery County that are subject to Chapter 53A. An analysis of this data reveals that 968 additional units, representing 189 multifamily rental facilities, would be subject to Chapter 53A if such an amendment is enacted. The Task Force determined that expansion of this law would make the right of first refusal an additional option in addressing a number of smaller rental properties that historically have not been well-maintained.    Task Force Recommendation (Task Force Member O’Doherty abstaining): Increase the number of rental units subject to Chapter 53A by amending it to include rental facilities with 4 or more units, as opposed to its current application to facilities with 10 or more units.

The current law exempts multifamily rental facilities constructed after February 5, 1981. There was great discussion and debate among the Task Force Members as they considered whether or not to recommend removal of this exemption. Proponents of an amendment to remove the exemption contend that a significant number of units constructed since February 5, 1981, are moderately priced and are providing a substantial number of affordable units. Proponents further contend that removing this exemption would not adversely affect development of rental facilities in the county. Several Task Force Members recommended that if such an amendment were adopted, the exemption could be phased out over a five-year period. Members of the real estate industry contend that removing this exemption would negatively affect overall rental facility development in the county and would result in less development of new rental facilities. They further noted that much of the recent development of and investment in multifamily facilities located in the county was made with the understanding and expectation that properties constructed after February 5, 1981, would be exempt from Chapter 53A. According to these members, the removal of this exemption would set a precedent that would discourage development and investment in the county.   Task Force Recommendation: No consensus was reached to remove the current exemption for multifamily facilities constructed after February 5, 1981.

Industry members expressed concern that the legislative intent of Chapter 53A is not realized by requiring luxury rental facilities to comply with the right of first refusal requirement. It was proposed by several industry members that luxury rental facilities be exempt from the right of first refusal requirement.     Task Force Recommendation: The Task Force determined that the issue is worthy of further discussion, but that there is not enough information to make any recommendations or understand the implications of such an exemption.

Pursuant to Section 53A-3(e), apartment building owners may opt out of the right of first refusal requirement if the contract purchaser enters into a three-year rental agreement with DHCA. The Task Force considered the advisability of increasing the rental agreement to five years in duration in return for modifying the right of first refusal provision extended to tenant organizations. As proposed, the three-year provision would cover all tenants residing in the property at the time the rental facility is transferred. Increases in rent during this three-year period would not exceed the County’s voluntary rent guidelines unless there was substantial and necessary rehabilitation to the property. In addition to this three-year provision, up to 20% of the tenants, based on certain guidelines, would be covered for an additional two years, thus making the rental agreement for this 20% of the tenants five years in duration. Under the proposed five-year agreement, the right of first refusal currently provided to a tenant association would be abolished. The right of first refusal afforded to the County and HOC would remain in effect. Supporters contend that tenant purchases are very limited and the realization of five-year rental agreements would go further in protecting low- and moderate-income tenants. Task Force Recommendations (Task Force Member Hoover abstaining): Increase the rental agreement to 5 years in duration with the above referenced conditions.

The current law exempts apartment building owners from the right of first refusal requirement if the contract purchaser enters into a three-year rental agreement DHCA. As a condition to receiving this exemption, the contract purchaser must agree to retain the property as a rental property for three years and limit rent increases in any twelve-month period to an amount set forth in the agreement. Although DHCA has established a process to monitor compliance with rental agreements, there is currently no requirement for owners to submit reports to the County on a periodic basis. As proposed, a periodic reporting requirement would allow DHCA to monitor compliance with rental agreements.    Task Force Recommendation: Amend Executive Regulation 22-97, Three Year Agreement Not to Convert, to require periodic reporting of landlord compliance under rental agreements.

Section 53A-4(c) requires an owner of a multifamily rental facility to provide financial assistance to a tenant who is displaced as a result of conversion. As defined by the applicable statute, conversion means "changing the use of rental housing to nonresidential; demolition of at least one-third of rental housing in a 12-month period; displacing tenants from at least one-third of the occupied units in rental housing within any 12-month period; and any other act which has the effect of ceasing the operation of the property as rental housing." Conversion does not include establishing a condominium or cooperative. In 1997, the maximum amount of relocation benefits was increased from $750.00 to $950.00. Although the Task Force did not identify any problems encountered by tenants who have received relocation benefits pursuant to Chapter 53A, the Task Force recognized that the cost of living has increased moderately since 1997. The Task Force suggests that increases in the tenant relocation benefits be established annually and the increase be tied to the Consumer Price Index for the Baltimore-Washington Metropolitan Area.    Task Force Recommendation: Establish annual increases in the amount of tenant relocation benefits based on the change in the Consumer Price Index for the Baltimore-Washington Metropolitan Area.

The Task Force identified the following amendments that will be necessary should a tenant organization retain the right of first refusal.

The Task Force discussed whether providing technical assistance to tenant organizations will assist in removing the barriers that sometimes deny tenant organizations an equal opportunity to purchase multifamily housing under the right of first refusal. Through the provision of technical assistance, the County—or an organization contracted by the County—will provide specific types of information that will enable tenant organizations to participate meaningfully and effectively in the purchase of property under Chapter 53A.    Task Force Recommendation: Amend Chapter 53A to allow DHCA to provide technical assistance to tenant organizations considering a purchase under Chapter 53A.

According to Executive Regulation 19-97, Section 1.1, a tenant organization has thirty (30) days in which to file for certification with the County in order to be legally eligible to exercise the right of first refusal. The Task Force discussed the current thirty (30) day time period set forth for certification and concluded that such an abbreviated timeframe would almost certainly preclude a tenant organization from exercising its right of first refusal.    Task Force Recommendation: Increase the time period in which the tenant organization must file with the County for certification from thirty (30) days to forty-five (45) days.

Under Executive Regulation 19-97, Certification of Tenant Organization, a tenant organization is given certain information regarding the requirements and the procedures for certification with the County.    Task Force Recommendation: Clarify the process for certification of a tenant organization under Executive Regulation 19-97 to provide a newly forming tenant organization with specific guidelines on how to become certified.

Pursuant to Section 53A-3(a)(3), (c), and (d), a tenant organizations’ right of first refusal remains open for sixty (60) days after the offer is received. The Task Force determined that an additional thirty days would provide tenant organizations with more of an opportunity to organize and gather the necessary resources.

Task Force Recommendation: Increase the time period in which a tenant organization must exercise the right of first refusal from sixty (60) to ninety (90) days.

Under current law, a "tenant organization" is defined as an association of tenants that: (1) represents tenants of at least 5 units or 30 percent of the occupied rental units of the housing, whichever is greater; and (2) is certified by DHCA. The Task Force discussed whether or not a tenant organization that creates a partnership with a third party to become joint owner, where the tenant partner does not have controlling interest in the partnership, constitutes a bona fide tenant purchase. The Task Force concludes that a tenant organization needs to be able to join with another entity to realistically be able to exercise the right of first refusal. The Task Force did not develop a definition of what constitutes a bona fide contract when a tenant organization attempts to purchase real property through a partnership, joint venture, or corporate transaction.    Task Force Recommendation: Require a tenant organization to have a specific minimal percentage of controlling interest in the partnership, joint venture, or cooperation that is partnering with the tenant organization to purchase the rental facility. Furthermore, any entity (partnership, joint venture, or corporation) utilizing the right of first refusal provision must be structured in a manner that prohibits conversion of the rental facility to another use thereby circumventing the requirement that the rental facility be retained as affordable housing.

Pursuant to Section 53A-3 (a), unless the contract purchaser enters into a three-year agreement, the right of first refusal must be offered to the County, HOC, and any tenant organization. The Task Force considered whether or not to extend the right of first refusal to non-profit organizations. Supporters contend that extending this right to non-profit organizations will increase the production of affordable housing and allow the County to meet the affordability needs of low- to moderate-income families. Opponents contend that it would unduly complicate the process by having additional entities involved without a commensurate increase in public purpose being realized.    Task Force Recommendation (Task Force Member Seeley dissenting): Do not amend Chapter 53A to extend the right of first refusal to non-profit developers in the county.

Members:

Jim Conley, Jr.
Carey Winston Company

Daniel Sachs
Housing Opportunities Commission

Martin Stanton
Silver Spring Advisory Board

Contributors:

Joseph Giloley
Department of Housing and Community Affairs

Issues Addressed by the Subcommittee

1. Should the authority of Chapter 53A be extended to include multifamily buildings with less than
    10 units?    If so, what would be the recommended number of units?
2. Should the exemption for multifamily buildings built after 1981 be deleted?
3. Would expanding the application of Chapter 53A assist in dispersing affordable housing throughout
    the country?

Summary:

        It is the opinion of all subcommittee members that the authority of Chapter 53A needs to be extended to include rental facilities of 4 or more units as opposed to the present cut off point of 10 units. This extension is seen as necessary so that the right of first refusal would be an available option to address a number of problem properties primarily in the Long Branch and Takoma Park areas. The extension of the right of first refusal to 4 or more units would bring approximately 1,100 more units under the statute. While it is agreed that it would be the rare instance when the right of first refusal would be exercised on properties under 10 units, having such a statutory option would enable the County to prevent the transfer of such a property to a purchaser who has proven to be a problem landlord. There was also some discussion and interest in reducing the number of covered units to 2. DHCA will be looking into this issue and getting back to the task force.

        There was no agreement regarding the exemption for multifamily rental facilities built after 1981. HOC supports eliminating the exemptions as does Mr. Stanton. Jim Conley does not. Mr. Roger Winston also participated in the subcommittee discussion and he is opposed to lifting the exemption. It was both Mr. Conley’s and Mr. Winston’s position that lifting the exemption would have a negative affect on the rental facility development in the County. In addition, they took the position that it would send a less than desired public message if the County were to renege on the promise made in the current law to exempt all new construction after 1981.

        Mr. Sachs is not convinced that the lifting of the exemption would result in any negative affect on the rental facility development market. He is also of the position that many of the units that have been constructed since 1981 are currently moderately priced and are providing a substantial number of affordable units. Due to this affordability, he is of the position that the County, HOC, etc. should have the option to purchase such properties if it is deemed in the public interest. As an alternative to a lifting of the exemption all at once, Mr. Sachs proposed that the exemption could be phased out over a five year period with 20% of the non exempt properties coming under the first right of refusal provision per year starting in July of 2002.

        Expanding the application of Chapter 53A will assist in dispersing affordable housing throughout the County. The majority of rental facilities constructed since 1981 have been built in areas other than down County.

Rental Agreement Subcommittee Report

Members:

Jim Conley, Jr.
Carey Winston Company

Roger Winston
Linowes and Blocher

Contributors:

Joseph Giloley
Department of Housing and Community Affairs

Dan Sachs
Housing Opportunities Commission

Issues Addressed by the Subcommittee

1. Should the rental agreement cover a period longer than three years?
2. What impact would a change have?
3. Should Executive Regulation 22-97 include a provision for monitoring the rental agreement?

        There was a far-reaching discussion regarding the advisability of increasing the length of the rental agreement beyond 3 years. The discussion ranged from a simple extension to 5 years with the substance of the rental agreement being the same as under current law to an extension to five years in return for modifying the first right of refusal provisions. There was an agreement that the proposed five-year extension would include the following:

1. Three (3) year agreement that would cover all tenants residing in the property at the time the rental agreement was signed and the property was transferred.   Increases in rent during this period would not exceed the County's voluntary rent guidelines unless there was substantial and necessary rehabilitation taking place.

2. In addition to this 3 year agreement that would cover all tenants, up to 20% of the tenants who would be eligible based on yet to be determined income guidelines, would be covered for an additional 2 years, thus, making the rental agreement five years in duration.                

        In return for a purchaser agreeing to a five-year agreement, the right of first refusal currently provided to a tenant association would not be applicable to the sale of the property. However, the right of first refusal afforded to the County and HOC would still be in effect.

        It was the consensus of the subcommittee members that the realization of five-year rental agreements, as described above, would go further in protecting low/moderate income tenants—as opposed to tenant association purchases which would be very limited in number.

        The impact of the change discussed above is quite obvious as it significantly reduces the scope of a tenants’ association first right of refusal. However, the potential to preserve a substantial number of units in the affordable range via five-year agreements appears, in the opinion of the subcommittee, to be a prudent trade-off.

        While the issue of whether or not Executive Regulation 22-97 should include a provision for monitoring and enforcement of rental agreements was not discussed, it is only reasonable to include in 22-97 a provision that will require owners of properties that are subject to rental agreements, to report on a periodic basis regarding compliance. DHCA can work with owners to fashion such a reporting process that is effective and yet not burdensome.

Recommendations:

• Increase the rental agreements to 5 years with the above mentioned conditions.
• Amend Executive Regulation 22-97 to require periodic reporting of compliance with rental agreements.

Members:

Elbridge James
Progressive Montgomery

Renee McLean
Department of Housing and Community Affairs

Damian O’Doherty
Greater Capital Area Association of Realtors

Issues Addressed by the Subcommittee

1. How does the inclusion of high rent facilities affect the affordable housing stock?
2. Where are the high rent facilities located?
3. Should such facilities be exempt from the right of first refusal?

        The subcommittee discussed "what constitutes luxury housing." The subcommittee decided that it would look to the definition of "affordable housing" for guidance. All agreed that a definition is certainly needed before any recommendations are made to the Task Force. The subcommittee recommends that a definition of "affordable housing" should follow the national standard. In defining luxury housing, one would need to index properties by some formula.

        The subcommittee also discussed how the inclusion of high rent facilities would effect the affordable housing stock in the county. It was noted that the MPDU Law preserves protections for moderate-income tenants in those units that are subject to the 20 year rental restrictions that are required at time of construction.

        Mr. Elbridge James elaborated on the importance of protecting the sense of community that exists in all rental markets. He asserted that no matter what the price of the unit, tenants should be given an opportunity to protect their leasehold interests and community with a right-of-first-refusal. Mr. Damian O’Doherty and Ms. Renee McLean pointed to the legislative findings of 53A -- which state that the legislation’s purpose is to protect "affordable housing." Mr. James also stated that because the threshold for a bona fide purchaser may be elevated, it is necessary to allow these more sophisticated tenant organizations to pursue a right of first refusal.

        Discussion concerning the location of the luxury units ensued. Many of the units are METRO-accessible. Ms. James and Ms. McLean noted that the stock might shift towards luxury apartments if the exemption is granted. Mr. O’Doherty suggested that such a shift would only occur where the market would allow. Mr. O’Doherty and Ms. McLean noted that the intent of the applicable law is to preserve affordable housing, yet under the current law, resources are expended to monitor compliance at facilities that are primarily considered "luxury" rentals.

Recommendations: The subcommittee did not reach consensus on this issue.

Right of First Refusal by Tenant Organization
(Contract Definition) Subcommittee Report

Members:

Ralph Cole
Woodside Manor Tenant Association

Lesa Hoover
Apartment and Office Building Associaiton (AOBA)

Vickie Gaul
Office of the County Attorney

Daniel Sachs
Housing Opportunities Commission

Tara Seeley
Montgomery Housing Partnership

Paul Yentis
Yentis & Associates

Contributor:

Richard Luchs
Greenstein Delorme & Luchs, P.C.

Issues Addressed by the Subcommittee

1. Definition of a bona fide tenant organization?
2. Should non-profit organizations be permitted to exercise the right of first refusal?

        The current regulations do not appear to require that the association of tenants be formalized so that it has the capacity to hold legal title to real estate. The majority of those present felt that it may make sense to impose such a requirement, but no specific agreement on this issue was reached.

        The subcommittee also discussed what constitutes a bona fide offer of sale and more specifically whether a tenant organization, once certified, should be permitted to join with a for-profit or nonprofit entity in order to exercise the right of first refusal.

        Generally, the members of the subcommittee felt that a tenant organization needs to be able to join with another entity in order to realistically be able to exercise its rights of purchase under the Act, but views differed significantly as to whether or not the tenant organization must also hold a controlling interest of the entity formed to acquire title to the subject real estate or some smaller percentage of the interest in ownership. All present agreed that a tenant organization be required to have at least some degree of legal interest in the real estate so that the process does not develop into one where for-profit organizations are vying for acquisition of the property with the ultimate result of displacing tenants, as opposed to retaining affordable housing.

Recommendation:

• Require a tenant organization to have a specific minimal percentage of controlling ownership interest in the partnership, joint venture, or corporation that is partnering with the tenant organization to purchase the rental facility

Right of First Refusal by Tenant Organization
(Exercising) subcommittee report

Members:

Esly Caldwell
Progressive Montgomery

Ralph Cole
Woodside Manor Tenant Association

Jim Conley, Jr.
Carey Winston Company

Richard Luchs
Greenstein, DeLorme & Luchs

Zachary Smith
Housing Opportunities Commission

Contributors:

Joseph Giloley
Department of Housing and Community Affairs

Issues Addressed by the Subcommittee

1. Review process for certification of tenant organization (Executive Regulation 19-97).
2. How can tenant organizations more effectively exercise their right to purchase?
3. What additional assistance can be provided to tenant organizations? For example: education/outreach, technical resources. Who should provide the assistance? What role, if any, should the County play?

        The subcommittee discussed the current time periods made available for the exercise by a tenant organization of the right of first refusal. All present agreed that the current sixty (60) day time period needs to be extended to ninety (90) days and that the current thirty (30) day period provided to a tenant organization needs to be extended to forty-five (45) days. All other time periods would remain the same.

        The subcommittee also discussed the need for clarification of procedures and provision of technical assistance to tenants so that they know how to go about forming a tenant organization and exercising their rights. Richard Luchs agreed to provide a copy of a section from the D.C. Rental Housing Conversion and Sale Act of 1980 which addresses the formation of tenant associations under District of Columbia law.

        The subcommittee also discussed specific types of technical assistance which would be provided, including, without limitation, lists of organizations which are familiar with Chapter 53A and could step in quickly to assist a tenant organization in exercising its rights and the potential for the Housing Opportunities Commission to provide funding to pay for the cost of exercising rights by tenant organizations which choose to do so. A discussion also ensued about a greater involvement by representatives of the County, but it was agreed that whatever role the County plays, it is necessary to avoid any participation which may be viewed as creating a conflict of interest.

Recommendations:

• Provide tenant organizations with technical assistance and adequate resources to assist them with considering and implementing a purchase.
• Increase the time period in which the tenant organization must exercise the right of first refusal from sixty (60) to ninety (90) days.
• Clarify provisions set forth in Executive Regulation 19-97 to provide newly tenant organizations with guidelines on how to become certified.
• Increase the time period in which the tenant must file with the County for certification from thirty (30) days to forty-five (45) days.

Members:

Juin Killingsworth
Department of Housing and Community Affairs

Issues Addressed by the Subcommittee

1. Should the amount of relocation benefits be increased?
2. If so, what amount is recommended? And why?

• No specific recommendations were made.

Chapter 53A-Definitions subcommittee report

Members:

Vickie Gaul
Office of the County Attorney

Roger Winston
Linowes and Blocher

Contributor:

Joseph Giloley
Department of Housing and Community Affairs

Issues Addressed by the Subcommittee

1. Review definitions for clarification.

This section provides information regarding the right of first refusal statute in other jurisdictions. Members of the Task Force reviewed this information as they debated the particular recommendations. This information is included to provide the background for the recommendations from the Task Force.

Rental Housing Conversion and Sale Act (D.C. Code § 45-1601 et. seq.)
District of Columbia

The District’s Rental Housing Conversion and Sale Act (D.C. Code § 45-1601 et. seq.) and the corresponding regulations (DCMR Title 14, Chapter 47) provide tenants with, among other things: (1) the right to purchase a rental property before it may be sold to a third party, discontinued from use or demolished (the Right of First Refusal); and (2) the right, subject to a vote of a majority of the tenants, to approve or deny the conversion of a rental property to a condominium or cooperative (the Conversion Approval Act). The law indicates that these rights were established to address a severe shortage of rental housing in the District (especially affordable rental housing) and the growing rate of conversion of rental properties to condominiums and cooperatives.

With respect to the Right of First Refusal, the law indicates that tenants in a rental property are entitled to purchase the property on terms no less favorable than those agreed to by a third party purchaser. Tenants are also afforded certain preferred purchase rights such as minimum time deadlines to make an offer for the subject units, negotiate a contract, and close the sale. The time deadlines vary depending on the number of units in the property. For instance, a tenant of a single family unit has 30 days from receipt of an offer of sale from the seller/landlord to submit a written statement of interest to purchase the unit, and an additional 60 days to negotiate a contract of sale. The law provides additional time to close the transaction (up to at least 90 days, including the initial 60-day negotiation period) and allows for extensions of the time deadlines in certain instances. If 180 days elapse from the date of a valid offer and the seller has not sold or contracted to sell the property, the seller is required to comply anew with these requirements. Longer time deadlines are established with respect to two- to four-unit accommodations, and even longer deadlines apply to accommodations of five or more units. Thus, with respect to accommodations of five or more units, the tenants generally have 45 days after receipt of an offer of sale from the seller/landlord to form and register a tenant organization, then at least 120 days to enter into a contract with the seller, and then at least 120 additional days (with an extension of up to 240 days, including the initial 120 days) to close the transaction. Under certain circumstances, these deadlines may also be extended further, and the owner may be required to reinitiate the entire process if it has not sold or contracted to sell the property within 360 days of a valid offer.

        If the building is to be renovated, demolished, sold on a contract requiring an empty building, or converted to hotel, motel, apartment hotel, or other commercial use, Virginia law requires owners to provide tenants with a 120-day notice to vacate from any building containing at least 4 residential units. While it is not required, the developer is strongly encouraged to make a payment to each tenant to help with the cost of moving.

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