- January 10, 2006
- All Offices Authorized to Issue Title Insurance in the District of Columbia
- Tenant Opportunity to Purchase Act
As you all know, residential tenants in the District of Columbia have been given significant rights pursuant to the Rental Housing Conversion and Sale Act of 1980 ("TOPA"). These rights include the right to enter into and consummate a contract for the purchase of any residential accommodation before it can be offered for sale by the owner (the so called tenant purchase right) and a right of first refusal once the rental accommodation is under contract for sale to a third party.
TOPA continues to be a significant source of litigation and because of that, we are issuing this Bulletin to highlight Stewart Title Guaranty Company's ("Stewart Title") current requirements for insuring title on residential rental real estate in the District of Columbia and to institute several new requirements on a going forward basis.
All Title Commitments issued in connection with the sale of ALL real estate in the District of Columbia must contain a requirement substantively similar to the following:
The Company must be furnished proof that no portion of the Property is leased for residential purposes. If any portion of the Property is leased for residential purposes, Company must be furnished proof that the requirements of the Rental Housing Conversion and Sale Act of 1980, as amended, have been complied with and otherwise comply with the Company's then applicable requirements for the removal of an exception for the rights of tenants under the Rental Housing Conversion and Sale Act of 1980, as amended.
If it is determined that any portion of the property has been leased in the past six (6) months for residential purposes, the Title Policy (both owner and lender) must contain an exception substantively similar to the following (unless Underwriter approval is given for its removal):
Rights of tenants under the Rental Housing Conversion and Sale Act of 1980, and all amendment thereto and regulations thereunder
Removal of this exception requires specific Underwriter approval. Factors which we will consider as to whether to eliminate the exception will include:
1. As a general rule, transactions under $5,000,000 will not be approved for removal of the exception.
2. For transactions above $5,000,000, we will consider removal of the exception. However, in order to approve this, we will require some or all of the following:
a. Evidence that appropriate notice was furnished to each tenant (both mail and posting) and the District of Columbia of the offer to sell the housing accommodation to the tenant(s).
b. Evidence of the proper formation and recognition of a tenant association for the purpose of exercising all of the tenants' rights under TOPA.
c. Evidence that the tenant association and all tenants have elected not to purchase the property including a specific written waiver of any and all rights under TOPA.
d. Evidence that the required right of first refusal was offered to each tenant and that each tenant has specifically elected not to exercise this right in the form of a written waiver.
e. Affidavit as to Compliance and Indemnity Agreement from the Seller, Purchaser and any designated guarantors with respect to all claims under TOPA.
f. Such other requirements as we deem appropriate based upon the facts and circumstances of the transaction.
3. Please note that pursuant to the recently enacted amendments to TOPA, a new series of forms and procedures are to be implemented by the District of Columbia in instances where the seller is asserting that its transaction is exempt from TOPA. At this point in time, these procedures and forms have not been finalized. Accordingly, under no circumstances shall the exception for TOPA be removed from the Title Policy based upon a claim of exemption until such time as you receive further guidance from us.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.