TOPA Laws Move Forward Despite Shortcomings

by | Sep 21, 2020 | Rental Property Management Tips

Landlords in Massachusetts are lobbying their state legislature to reject a proposal that would require rental property owners there to offer a first right of refusal to purchase any properties brought to market.

Referred to as TOPA laws, the acronym first was introduced in the 1980s when Washington, DC passed the Tenant Opportunity to Purchase Act. TOPA rules generally require landlords to allow tenants — and in some cases former tenants and their associates — a time frame within which to purchase the property where the landlord cannot close on an alternative offer. In Massachusetts, the proposed time frame is six months.

In opposing the move, local rental association MassLandlords cites the difficulties that Washington, DC has experienced with TOPA since its adoption more than thirty years ago. There, single family homes also were subject to the right of first refusal, even where the renter did not occupy the entire property and if the tenant had vacated prior to the six-month notice period.

According to research by MassLandlords, in the vast majority of cases, Washington, DC tenants did not purchase the property. Still, homeowners attempting to sell single-family properties needed to obtain a waiver of the TOPA rights to secure a title commitment and close a purchase contract. Tenants soon found they could exploit TOPA to demand a buyout from property owners who needed to close within the time specified in the contract.

A local real estate association confirmed that, in hundreds of cases, the owners were forced to pay anywhere from $10,000 -$100,000 for the waivers. Tenants who did not receive these payments from owners auctioned their rights to third parties, throwing the sales process into chaos, and costing buyers.

As a result of this abuse of the TOPA rules — and extensive lobbying by local real estate agents — Washington, DC lawmakers recently amended the law to exclude single-family homes. Lawmakers are hoping that the move will entice more homeowners to offer basement apartments and in-law suites without fear of falling into a legal quagmire.

Yet, it appears the Massachusetts proposal is still on the table. MassLandlords argues that the bill would do nothing to prevent displacement of tenants, that tenants already have the right to put in an offer on any property, and that a simple notice of sale requirement is all that it would take to give tenants the opportunity to purchase without ambiguity as to what is “owed” the tenant and without hampering the property owner’s ability to transact on their properties.

Several cities have taken an interest in TOPA. As recently as January, Portland, Oregon’s City Council was pondering a similar move. Lawmakers in Minneapolis say they are studying the issue, and New York City, Los Angeles, Oakland, and Berkeley officials have expressed interest. San Francisco recently passed a variant, dubbed COPA — Community Opportunity to Purchase Act, and a handful of nonprofits have taken advantage of the opportunity to purchase certain buildings within that city.

Lawmakers argue that, without some form of first right of refusal, developers will use the weakened economy to buy up distressed real estate with the intent of gentrifying areas within  low-vacancy cities and displace low-income tenants already living there.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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