Consider the following hypothetical situation: "A" is the executor of a substantial estate and is responsible for liquidating the estate's assets for distribution to the heirs. Among the assets are two large apartment buildings: located in the District of Columbia. "A" lists the two buildings with a broker and within a few months has both buildings under contract. Believing that he is adequately addressing the rights of the tenants, "A" ensures that the contracts provide that each Buyer shall honor all existing leases. However, as illustrated by the following summaries, "A" has not in fact fully addressed the rights of the tenants under existing law.
1) Non-Condominium Apartment Buildings
The District of Columbia Code provides that prior to selling a "housing accommodation," the owner must give the tenant an opportunity to purchase it. The term "sell" is broadly defined by the Code to include situations such as the extension of an option to purchase, the relinquishment of possession of the property, and the assignment of all rights and interests relating to the property.
The owner must provide each tenant and the Mayor with a written copy of the offer of sale. The offer must include, among other disclosures, the asking price and material terms of sale, a summary of tenant rights, and a statement as to whether a contract with a third party exists for the sale of the housing accommodation. The right of any such third party to purchase the housing accommodation is conditional upon the exercise of tenant rights as stated in the Code. Thus, third party purchasers are presumed to act with full knowledge of these tenant rights, regardless of whether or not the tenant rights are disclosed in the purchase contract.
If the housing accommodation consists of five or more units, the tenants must form and act through an incorporated organization. The organization must apply for registration with the Mayor within 45 days of receipt of a valid offer. The owner must then allow the tenant organization a minimum of 120 days to negotiate a purchase contract and additional time to secure financing.
In addition, a tenant or tenant organization also has a right of first refusal during the 15 days after receiving from the owner a valid third party contract to purchase the accommodation. If the contract is received during the 120-day negotiation period described above, the 15-day period commences at the end of the negotiating period. The owner must bargain in good faith with the tenant and offer a price and terms that are at least as favorable as those offered to a third party.
Therefore, in this case, "A" must provide the tenant organization, if one is formed, with a copy of the existing purchase contract as well as an offer to sell in compliance with the applicable requirements of the Code.
2) Apartment Buildings with a Condominium Regime in Place
Suppose that the second apartment building in the District of Columbia has been subjected to a condominium regime, although no units have ever been sold. In this situation, the tenants do not have a right to purchase the entire building, but rather only their individual unit. This is because the condominium regime, which permits the sale of units, makes the unit, and not the building, the "housing accommodation" under the Code. In addition, because a contract to sell the entire building to a third party is not deemed to be a contract for a particular unit, no tenant would have a right of first refusal as to such a contract. Similarly, the tenants organized as a whole would not be entitled to receive an offer to sell from the owner and would not have a right of first refusal to buy the entire building. An owner must offer individual tenants an opportunity to sell their particular unit. They would have a right of first refusal if the owner held a third party contract for the tenant's individual unit.
Therefore, in this case, "A" is obligated to offer each tenant an opportunity to purchase his or her individual unit, with no right of first refusal involved unless "A" holds a third party contract to purchase that particular unit.