Now DC Gov’t Requires Second Right of Refusal…How Many More Mistakes can DC Make?

A special thank you to Sarah Gentry with Kass, Mitek & Kass (who specialize in residential and commercial real estate) for helping me obtain copies of the recently passed law.

Before reading this I have to say that this is a completely biased post and is strictly my opinion on a law that was passed on December 24th, 2008.  With some footwork and some investigation an associate of mine was able to forward me DC’s newest detriment to the growth and prosperity of the city.

Here it goes…

“(Subsection 41-3404-31 District’s opportunity to purchase certain housing accomodations)

(a) Before an owner of a housing accommodation may sell a housing accommodation comprised of 5 or more units, the owner shall provide to the Mayor, on behalf of the District, and the Mayor shall have, an opportunity to purchasethe housing accommodation in the same manner, except as otherwise provided by this subchapter, as the opportunity to purchase is provided to a tenant under subchapter IV of this chapte.

(b) The Mayor may assign the opportunity to purchase pursuant to subchapter 42-3404.36.

(c) The Mayor shall have the same remedies and rights to enforce owner complaince with this chapter as a tenant or tenant organization would have against an owner for violation of this chapter….

Law 17-286, the “District’s Opportunity to Purchase Amendment Act of 2008″,

Limitations

(a) The District’s opportunity to purchase shall be subordinate to the right of a tenant.

(b) To exercise its right under this subchapter, the Mayor shall provide a written statement of interest to the owner and tenant within 30 days of the Mayor’s receipt of the copy of the offer of sale required by subchapter 42-3404.03….

Procedure for District to effectuate purchase

(a) The Mayor shall have not less than 150 days from the date of the owner’s receipt of the Mayor’s written statement of interest…to negotiate a contract for sale.

(b) For every day of delay in providing information by the owner as required by this chapter, the negotiation period shall be extended by one day.

(c)…

(d) The Mayor shall have up to 60 days after the date of execution of a contract of sale to complete settlement.

Assignment of District Rights

The Mayor may assign the opportunity to purchase provided under this subchapter to a person that:

(1) Demonstrates the capacity to own and manage, either by itself or through a management agent, the housing accomodation and related facilities for the remaining useful life of the housing accommodation; and

(2) Agrees to oblicage itself and any successors in interest to maintain the affordability of the assisted housing development…

Rules

Within 60 days of Devember 24th, 2008, the Mayor…shall issue rules to implement the provisions of this subchapter”

Just the facts, ma’am:

As the owner of a 5 unit+ building with a minimum of 25% of those units deemed affordable, the only way to sell that building for development either to vacate or to sell while occupied but you must first now not only offer them the first right of refusal (Tenants Opportunity to Purchase Act) but you also have to offer the Mayor the first right as well.

If within the first 30 days of offering, the DC government decides they could potentially be interested in buying the building they must notify  you within 30 days, but the tenants still have first right (remember, the tenants have a 60 day period to match the asking price, after a 15 day right of interest – thereby rendering DC’s decision meaningless for 75 days from the date of first offering). If the Mayor  is interested, they have NO LESS THAN 150 DAYS to negotiate a contract – which could potentially fall through.  If the owner and the Mayor enter into a contract to purchase, they District has up to 60 ADDITIONAL DAYS to purchase, which is assignable to a owner of their choosing (HMMM…I WONDER WHO THEY WILL CHOOSE…WHAT IS THE PROCESS FOR BECOMING AN APPROVED OWNER?).

If, both the Mayor and the Tenants decide not to purchase, and you decide to vacate the building for condo conversion, which could potentially increase the tax revenue for the city but the increase in ownership, you have to buy out the tenant association – thanks TENAC – and then have to work for 18 months keeping your recently vacated building from becoming reclassified under the new Vacant Property Tax (AKA Class 3 Tax Rate) increasing the properties annual taxes to 10% of the current year’s tax assessment value.  If the owner of the building can not develop, sell, or re-occupy, the city takes possession of the property for non-payment of taxes and gets the property anyway.

To summarize: City to  landlords and developers – lets make it more difficult to develop, own, sell and finance any piece of property that you own, tax you at a drastically higher rate if you dont keep affordable housing in your buildings, make it nearly impossible to vacate to convert to condo’s (which would bring in increased taxes from the exponential growth of taxpayers on the same property), force the occupancy of your premises and to top if off we will complain when there is a budget shortfall in the system for infrastructure like schools, transportation and services.  (See Cranes are Ready, Financing Isnt)

Now, my question to everyone who cares about the future of the city is:

What is one substantial reason that ANYBODY would want to invest in property in the district?

I’m having a more and more difficult time substantiating an answer and I love DC.

Read the new law HERE