TOPA: In DC for over 40 years and now in Maryland as well

On October 1, 2024, Maryland entered the world of "TOPA" Tenant Opportunity to Purchase Act

On October 1, 2024, Maryland entered the world of TOPA. Tenant Opportunity to Purchase Act (“TOPA”) generally seeks to mitigate tenant displacement from rental housing due to an intended sale of a property. However, the legislation and implementation of the law can vary greatly from jurisdiction to jurisdiction. While these laws have been part of our landscape in the District of Columbia for over four decades (the Rental Housing Conversion and Sale Act of 1980), just this October 1, 2024, TOPA became statewide Maryland. In recent years, DC has scaled back the reach and application of TOPA in providing for a “single-family” exemption. The single-family exemption became law in July 2018 and amended the existing law to remove these properties from the requirements of TOPA. Conversely, Maryland has now made it a requirement that tenants of 1, 2, or 3 residential units be offered the opportunity to purchase the property they have been living in before the owner can sell on the open market.

Before the amendment in DC, it was common for tenants of single-unit properties to be paid sizeable amounts for the rejection or assignment of their TOPA rights. The single-family exemption in DC applies (with limited exception) to “(A) a housing accommodation, whether freestanding or attached, and the appurtenant land that contains: (i) one single-family dwelling; or (ii) one single-family dwelling with one accessory dwelling unit or (B) a single rental unit in a condominium, cooperative, or homeowners association.” The exemption does not apply if a tenant is an elderly tenant (over 62) or is a tenant with a disability as of the date of the offer of sale, and the tenant signed a rental agreement to occupy a single-family accommodation or a unit in a single-family accommodation by March 31, 2018, and took occupancy by April 15, 2018. As we get further away from 2018, the occupancy and written lease requirements have made more “single-family” properties exempt from TOPA every year. Moreover, and also of great consequence, the amendment in 2018 shortened the TOPA response timeframes and removed a tenant’s right to receive consideration from a third party for an assignment of their rights.

Common to both TOPA laws is that they provide two rights to the tenants: an offer of sale right and a right of first refusal. In addition, the laws have somewhat similar timeframes for responses (that are much more reasonable than DC’s original law and in line with customary closing timelines of today), along with notification provisions which require delivery of the TOPA notices to the appropriate landlord/tenant office(s) in the jurisdiction where the property is located. Like the DC laws, the new Maryland TOPA provides for a number of transfers that are exempt from the law including, but not limited to transfers to some family members, court ordered transfers, and transfers from the owner to their trust. Unlike DC, the Maryland TOPA rights are not assignable and Maryland has already promulgated regulations on this law that will be very useful for real estate practitioners, as well as landlords and tenants, in navigating these waters. What is yet to be determined is whether the law will have a significant impact on tenants not being displaced, be an undue burden on sellers and the real estate community or fall somewhere in-between. Neither of these laws is affordable housing legislation …, that is a subject for another day.

For more information on TOPA in the District of Columbia consult: https://dhcd.dc.gov/page/rental-conversion-and-sale-forms

For more information on TOPA in Maryland consult: https://dhcd.maryland.gov/TurningTheKey/Documents/HB693-FAQ.pdf

The opinions expressed herein are not to be construed as legal advice provided by the author or any affiliate thereof.