Legislation Requiring Tenants’ Right of First Refusal Gains Steam

Proposals to implement the policy are being seen from California to Massachusetts, including the most recent in Maryland.

2 minute read

An emerging housing policy is gaining steam in cities across the country. Touted as an anti-displacement measure, Tenant Opportunity to Purchase Act (TOPA) legislation requires a housing provider to notify their residents of their intent to sell, allot time for them to form a tenant association to collectively negotiate and secure financing to purchase the apartment community. This failed policy almost never results in renters’ purchase of the property. Instead, it allows third parties to interfere in real estate transactions, pressures owners to make payouts to relinquish purchasing rights and delays sales on the open market.

Washington, D.C. was the first city to implement TOPA in 1980. A new study on D.C.'s law shows that less than 5 percent of property offers result in a sale to residents, which may be due in part to the complexity of the law. When a building owner decides to sell, they must provide residents an offer to sell and within 7 days, if they request it, a litany of building and operational information. If the building contains five or more units, residents must form and incorporate a tenant organization and are given 45 days to do so.

The law then specifies a negotiation period for the two parties up to 240 days. If, after one year of the offer of sale, the owner has not entered a sale contract with the tenant organization or another buyer, the process of offering the property to residents restarts with all the same required timelines.

The ability of current residents to sell their right of first purchase to third-party developers adds even more complexity. These buyouts can be as much as $100,000 per unit. In this circumstance, there are no checks to keep existing communities in place or preserve existing affordable housing as was the intent of the policy.

Despite the pitfalls of TOPA, similar laws are being considered across the country with legislation or advocacy efforts appearing from California to Massachusetts, and in cities like New York, Chicago, San Francisco, Berkeley and Oakland. Baltimore, Md. signed their own TOPA legislation into law on October 16, 2023, and a similar law was recently vetoed by the governor in Colorado and would have given local governments the right of first refusal.

The National Apartment Association supports its affiliates in preventing damaging legislation like these TOPA laws from exacting harm to the real estate market and we continue to advocate as the voice of the rental housing industry at the federal level.

For more information on the TOPA, please contact Joe Riter, Senior Manager of Public Policy.