Today we're talking about new TOPA regulations and how they affect property owners that having tenants. The new regulations affect sellers of tenant-occupied properties.
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If you're buying or selling a property, do you know about TOPA rights? It's an important thing to understand to protect yourself in a real estate transaction.
TOPA is the Tenant Opportunity to Purchase Act. In Washington DC, landlord laws are very stringent, so you have to be careful when dealing with properties that have tenants. You must understand those timelines of when you serve notice to tenants and what their rights are as tenants under those notices, as well as the assignability of those rights. You want to work with a real estate professional who can properly maintain a transaction and be a consultant for you in these situations.
Keep in mind the recent change in TOPA regulations, as well, because it is important relative to the companies that underwrite your title insurance. Just recently on the jurisdictional addendum in Washington DC, there was a change to add a clause titled 'Tenancy.' Under this clause, it states specifically that 'seller represents the property that is or is not subject to an existing residential lease or tenancy at the time seller decided to sell.'
New TOPA changes could affect anyone selling a property with a tenant.
It's very subjective, but the new regulation essentially says that you can't sign listing paperwork with an agent until 1) the lease on the property has expired and 2) the security deposit has been returned to the tenant in order for you not to be subjected to TOPA rights.
This means having to go back to that tenant—even if they moved out three months ago—if you signed listing paperwork before returning the security deposit to that tenant. You'll then be subject to TOPA rights, and will have to track them down, serve them the proper notices, and go through those various processes. This change is because underwriters of the policy now see it as a liability if you had a tenant in that property within three to four months of signing listing paperwork. They want to know that the tenant isn't coming back to you and making any claims for the security deposit or monetary reasons, like rent that wasn't returned.
This is especially important with a lot of people selling units right now in the Washington DC area. More specifically, we're seeing people who owned condos and were using them as investment properties with tenants and are now going to sell them. Be sure to talk to your real estate professional to make sure they’re aware of these new changes to help ensure you have a smooth transaction.
If you have any questions for me about these changes, give me a call or send me an email. I'd be happy to offer my expertise.