The D.C. Council is considering amending a law that gives renters the first shot at buying their homes when their landlords decide to sell to now include bankruptcy cases.
The proposed amendment to the Tenant Opportunity to Purchase Act of 1980 (TOPA) would require even bankrupt landlords to ask their tenants if they want to organize a buyout, and would set the cost at 105 percent of the original purchase price, plus any additional investments made to the property since the initial purchase.
Housing advocates say that unscrupulous landlords have exploited TOPA’s current bankruptcy exemption to kick tenants out and then sell to developers, diminishing the amount of affordable housing in the city.
But real estate agents who oppose the amendment say it would delay property sales and bog down bankruptcy proceedings.
Councilmember Anita Bonds, at-large Democrat and chair of the Housing Committee, conducted a public hearing on the proposed TOPA amendment Monday.
Rachel Rintelmann, an attorney with the Legal Aid Society of D.C., testified that landlords filing for bankruptcy is “a way to avoid repairs obligations and push through quick sales for the property.”
Ms. Rintelmann and other advocates pointed to Bethesda-based Sanford Capital, a D.C. landlord that has been fined for deplorable living conditions at its properties, and the notorious firm’s bankruptcy case at Terrace Manor.
The Legal Aid Society worked with the D.C. attorney general, the legal aid group Bread for the City, and D.C. law firm Arnold & Porter for several years in opposing Sanford Capital, which used TOPA’s bankruptcy exemption to sell Terrace Manor near Shipley Park in Southeast instead of following city ordinances for basic repairs to heat, sewage and structural issues.
“In the opinion of the bankruptcy court in the Terrace Manor case, the TOPA law as written allows for an owner to file bankruptcy and avoid TOPA,” Taylor Healy, senior attorney at Bread for the City, testified Monday.
Arnold & Porter testified that it donated about $1 million in pro-bono legal services to the tenants in the 61-unit apartment over just nine months working on the case. In September, the Terrace Manor tenants won a $360,000 settlement for the neglected repairs, and were able to persuade Sanford Capital to sell to a buyer who promised to their rights.
“Because TOPA expressly does not apply in bankruptcy cases, factors such as the wishes and needs of the tenants cannot be considered,” Ms. Rintelmann said.
Attorney Blake Biles of Arnold & Porter testified there are practical impediments to housing rights when sales are diverted to bankruptcy courts instead of the TOPA, such as the need for specialized legal representation and the requirement that the sale close as soon as possible.
But attorney Roy L. Kaufmann of the D.C. Land Title Association, which represents real estate agents opposed to the amendment, testified that “it would delay sales and it would perpetuate problems being suffered by the tenants.” Few developers would want to buy and invest in bankrupt properties in need of repair if tenants could organize to buy back the property using TOPA afterward, he said.
“They’ll put their money in bonds or something easier than suffering the risk of going into a distressed property with distraught tenants,” said Mr. Kaufmann.
Ms. Healy disagreed, saying she believes the amendment would allow bankruptcy judges to factor-in a developer’s ability to effect repairs and keep housing affordable in the bidding process.
Ms. Bonds also took issue with Mr. Kaufmann’s remarks, saying she doubts there would be difficulty in finding buyers for any property in the District, where a 457-square-foot plot of grass in Adams Morgan was recently marketed for $70,000.
Ms. Bonds will reconvene the committee on the amendment on Friday.
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