Chapter 6.32
TENANT OPPORTUNITY TO PURCHASE*
Sections:
6.32.010 Legislative findings.
6.32.030 Tenant opportunity to purchase.
6.32.050 Contract negotiation.
6.32.060 Earnest money deposits.
6.32.070 Exercise or assignment of rights.
6.32.090 Single-family rental facilities.
6.32.100 Rental facilities with two to six rental units.
6.32.110 Rental facilities with seven or more rental units.
6.32.120 Obligations upon foreclosure.
6.32.140 Enforcement of tenant opportunity to purchase rights.
6.32.150 Statutory construction.
* Legislative History: Ord. No. 1986-45, 11/10/1986; Ord. No. 1992-36, 11/23/1992.
6.32.010 Legislative findings.
The Council of the City finds that, in the interest of providing home ownership opportunities to City residents and to promote the conversion of rental facilities to owner-occupied housing, including condominiums and housing cooperatives, it is necessary and appropriate to require that the owners of rental facilities in the City offer the tenants, tenant association, and the City an opportunity to purchase the rental facility before the rental facility may be sold to a third-party purchaser. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-800)
6.32.020 Applicability.
A. All sales of rental facilities in the City are covered except those as follows:
1. To a family member;
2. Limited by the terms of a bona fide mortgage or deed of trust;
3. To a mortgagee in lieu of foreclosure;
4. Under a court order;
5. From one co-tenant to another by operation of law;
6. To the State or a local government;
7. Of a minority title interest; or
8. Of an accessory apartment.
B. This law is in addition to and is not intended to abrogate any other right of first refusal to buy rental housing provided by Montgomery County or other applicable law, except to the extent that those provisions conflict with the provisions of this law. If the provisions of this chapter conflict with another provision of applicable law, the provisions of this chapter control. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-801)
6.32.030 Tenant opportunity to purchase.
A. Before an owner may settle on the sale of a rental facility, the owner shall give all tenants an opportunity to purchase the rental facility at a price and under terms which constitute an offer of sale in accordance with the requirements of Section 6.32.040 and shall comply with the time periods set forth in Sections 6.32.090, 6.32.100 and 6.32.110, as applicable.
B. All contracts with third parties shall be subject to the rights of the tenant(s), a tenant association or the City to purchase the rental facility under this chapter. The time periods for negotiation of a contract of sale and for settlement under this chapter are minimum periods. The owner may give the tenant(s), the tenant association or the City a reasonable extension of time to purchase the rental facility, without liability under a third-party contract. Third-party purchasers are presumed to act with full knowledge of tenant rights under this chapter and the requirements in Chapter 6.28, Sale of Rental Facilities—Notice and Disclosure Requirements. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-802)
6.32.040 Offer of sale.
A. The owner shall provide a written offer of sale to the following before going to settlement on the sale of the rental facility to another party:
1. To each tenant in the rental facility;
2. To any registered tenant association within the rental facility; and
3. To the City of Takoma Park, Maryland.
B. An offer of sale must:
1. State the asking price and material terms of the sale. If a third-party contract for the sale of the rental facility exists at the time the offer of sale is made, then such offer shall state that the tenant(s), registered tenant association and the City have the right to purchase the rental facility under this chapter at the same price and on substantially the same terms and conditions as the third-party contract of sale for the rental facility;
2. State that the owner shall make available to the tenant(s), registered tenant association and the City, within seven calendar days of receiving a written request for the information:
a. For multifamily rental facilities: A complete copy of any third-party contract to purchase the rental facility, a floor plan or other architectural and engineering plans or specifications of the rental facility, all documents required under Chapter 6.28, Sale of Rental Facilities—Notice and Disclosure Requirements, and an itemized listing of monthly operating expenses and capital expenditures for each of the two preceding years. The owner shall, at the same time, provide the tenant or tenant association with the most recent annual rent stabilization report filed with the City, a rent roll, a list of tenants, and a list of vacant apartments.
b. For single-family rental facilities: a complete copy of any third-party contract to purchase the rental facility and all documents required under Chapter 6.28, Sale of Rental Facilities—Notice and Disclosure Requirements.
3. For every day of delay by the owner in providing this information, the time period for the tenant or tenant association or the City to express interest in purchasing the rental facility or to negotiate a contract with the owner for purchase of the rental facility, as applicable, shall be extended by one day.
C. An offer of sale shall be sent by first-class mail or personally delivered to each tenant, registered tenant association and to the City Manager. The offer of sale shall also be posted in a conspicuous place in the common area or on the entry doors of the rental facility except for single-family rental facilities.
D. An offer of sale must allow the tenant(s), registered tenant association or the City to purchase only the rental facility even if the third-party contract to purchase the rental facility includes other real or personal property.
E. Change in the Sales Price or Contract Entered into After Offering.
1. If there is a subsequent third-party contract after the initial offer of sale that results in a material change, or if the terms of a third-party contract to purchase the rental facility materially change between the time an offer of sale is made and the settlement, then the owner shall give each tenant(s), tenant association, and the City a new offer of sale.
2. The tenant(s), registered tenant association and the City shall have all rights provided under this chapter except that the period to express an interest in purchasing the rental facility on the revised terms of sale shall not exceed seven calendar days from the date of receipt of the new offer of sale; provided, that the initial time period to express interest has expired.
3. For rental facilities with seven or more rental units, a tenant association’s prior registration shall continue in effect.
4. A material change shall include, but is not limited to, a change in the purchaser or a reduction in the sales price of 10% or more.
5. An owner shall not be required to give a new offer of sale if there is an increase in the sales price. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-803)
6.32.050 Contract negotiation.
A. The tenant(s), tenant association and the City shall bargain in good faith for the sale of the rental facility.
B. The owner may not require the tenant(s), tenant association or the City to prove financial ability to perform, as a prerequisite to entering into a contract. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-804)
6.32.060 Earnest money deposits.
To execute a contract, the owner may require the tenant(s), tenant association or the City to pay an earnest money deposit of up to 1% of the contract sales price for a single-family rental facility and for rental facilities with two to six rental units. For rental facilities with seven or more rental units, an owner may require an earnest money deposit of up to 1/2% of the contract sales price. The earnest money deposit shall be refundable within 30 calendar days in the event of failure of the tenant(s), tenant association or the City to perform under the contract despite good-faith efforts. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-805)
6.32.070 Exercise or assignment of rights.
The tenant(s), tenant association or the City may exercise rights under this chapter in conjunction with a third party or by assigning or selling those rights to any party, whether private or governmental. The exercise, assignment or sale of rights of purchase may occur at any time in the process provided in this chapter and may be for any consideration which the tenant, tenant association or City finds acceptable. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-806)
6.32.080 Waiver of rights.
An owner shall not request, and a tenant(s), tenant association or the City may not grant, a waiver of the right to receive an offer of sale or any other right under this chapter except in exchange for consideration which the tenant, tenant association or City, in their sole discretion, finds acceptable. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-807)
6.32.090 Single-family rental facilities.
The following provisions apply to single-family rental facilities:
A. Upon receipt of a written offer of sale from the owner, the tenant shall have seven calendar days to deliver a written statement of interest to the owner and to the City Manager. Following that time period, if the tenant has not submitted a statement of interest, the City shall have seven additional calendar days to personally deliver or send by first-class mail a written statement of interest to the owner. The statement of interest must be a clear expression of interest on the part of the tenant or the City to exercise the right to purchase the rental facility as specified in this chapter.
B. The tenant or the City may accept the offer of sale by submitting a written contract within 14 calendar days after the date of the written statement of interest. The contract must include substantially the same terms and conditions contained in the owner’s third-party contract of sale, if any, including any contract term that provides for a reasonable real estate commission.
C. Any contract of sale shall provide a reasonable period between the execution of the contract of sale and settlement for the tenant to secure financing. This period shall be not less than 30 calendar days. If the tenant is obtaining financing through a government or other loan program for low or moderate income persons or for first-time homebuyers and the government agency or lender estimates in writing that a decision with respect to financing will be made within 60 calendar days after the date of the contract, then the owner shall afford an extension of time consistent with that written estimate.
D. If six months elapse from the date an owner has given notice of an offer of sale to a tenant and the City under this chapter and the owner has not gone to settlement on the sale of the rental facility, the owner shall comply anew with the provisions of this chapter before selling the property. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-808)
6.32.100 Rental facilities with two to six rental units.
The following provisions apply to rental facilities with two to six rental units:
A. The tenants may respond to an owner’s offer of sale first jointly, then individually. Upon receipt of a written offer of sale from the owner, a group of tenants acting jointly shall have 14 days to provide the owner and the City Manager with a written statement of interest. The written statement of interest shall be personally delivered or sent by first class mail. Following that time period, if the tenants acting jointly have failed to submit a written statement of interest, then any individual tenant of the rental facility shall have seven additional calendar days to personally deliver or to send by first class mail a written statement of interest to the owner and the City Manager. Following that time period, if no individual tenant has submitted a statement of interest, the City shall have seven additional calendar days to personally deliver or to send by first class mail a written statement of interest to the owner. Each statement of interest must be a clear expression of interest on the part of the submitter to exercise the right to purchase the rental facility as specified in this chapter.
B. Contract Negotiation Period.
1. A tenant group, tenant, or the City may accept the offer of sale by submitting a contract within 30 calendar days after the date the written statement of interest is delivered. The contract must include substantially the same terms and conditions contained in the owner’s third-party contract of sale, if any, including any contract term that provides for a reasonable real estate commission. If more than one individual tenant submits a written statement of interest, the owner shall negotiate with each tenant separately or jointly if the tenants agree to negotiate jointly.
2. If, at the end of the 30-calendar-day contract negotiation period and any extensions thereof, the tenant group has not jointly contracted with the owner for purchase of the rental facility, the owner shall provide an additional 30-calendar-day period, during which any one of the individual tenants of the rental facility may contract with the owner for the purchase of the rental facility. If, at the end of the additional 30-calendar-day contract negotiation period and any extensions thereof, no individual tenant has contracted for the purchase of the rental facility, the owner shall provide an additional 30-calendar-day period, during which the City may contract with the owner for the purchase of the rental facility.
3. If the owner is required to negotiate with more than one tenant group or tenant pursuant to this section, the owner may decide which contract to accept without liability to any other tenant group or tenant.
C. Any contract of sale shall provide a reasonable period between the execution of the contract of sale and settlement for the buyer to secure financing or financial assistance. This time period shall be at least 90 calendar days.
D. If eight months elapse from the date an owner has given notice of an offer of sale to tenants or the City under this section and the owner has not gone to settlement on the sale of the rental facility, the owner shall comply anew with the provisions of this chapter before selling the property. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-809)
6.32.110 Rental facilities with seven or more rental units.
The following provisions apply to rental facilities with seven or more rental units:
A. The tenants may respond to an owner’s offer of sale only through a registered tenant association that represents at least one-third of the occupied rental units in the rental facility.
B. Upon receipt of an owner’s offer of sale, the tenant association and the City shall have 45 calendar days to:
1. Mail or personally deliver to the owner and the City Manager a written statement of interest. The statement of interest must be an expression of interest on the part of the tenant association or the City to exercise the right to purchase the rental facility as specified in this chapter.
2. The tenant association shall mail or personally deliver to the owner and to the City Manager a registration statement listing the names, addresses and telephone numbers of all member tenants, officers, legal counsel and other confirmation that the tenant association represents at least one-third of the occupied rental units at the time of registration.
C. A registered tenant association or the City may accept the offer of sale by submitting a contract within 120 calendar days after the date the tenant association or the City delivered the written statement of interest to the owner. The contract must include substantially the same terms and conditions contained in the owner’s third-party contract of sale, if any, including any contract term that provides for a reasonable real estate commission.
D. Any contract of sale shall provide a reasonable period, considering current market conditions, between the execution of the contract of sale and settlement for the tenant association or the City to secure financing. This time period shall be at least 120 calendar days. If a lending institution or agency estimates in writing that a decision with respect to financing will be made within 240 calendar days after the date of the contract, the owner shall afford an extension of time consistent with that written estimate.
E. Conversion to Limited Equity Housing Cooperative.
1. If the tenant association, by its articles of incorporation, bylaws or resolution adopted by the board of directors, or by other agreement which provides that the purpose of the tenant association is to convert the rental facility to a limited equity housing cooperative, then the owner shall afford the tenant association not less than 180 calendar days after the date of the contract in order to secure financing for the purchase of the rental facility.
2. If the purpose of the tenant association is to convert the rental facility to a limited equity housing cooperative pursuant to subsection (E)(1) of this section, the owner shall assist the tenant association in converting the rental facility to a limited equity housing cooperative by executing a contract of sale with the tenant association. Toward this end, at any time after execution of a contract of sale and at the written request of the tenant association, the owner shall execute and deliver any and all notices required under the Maryland Cooperative Housing Corporation Act, under Chapter 11C, Cooperative Housing, of the Montgomery County Code and under any other applicable or successor provisions of State and County law to all tenants at the rental facility and to all applicable government agencies. Such notices and any related documentation or offers of sale shall be prepared solely by the tenant association, and all reasonable costs associated with the publication and distribution of such notices shall be the sole responsibility of the tenant association. The tenant association shall indemnify and hold harmless the owner from the liability for any loss or damage suffered as a direct result of the giving of such notices.
F. If one year elapses from the date an owner has given notice of an offer of sale under this chapter and the owner has not gone to settlement on the sale of the rental facility, the owner shall comply anew with the provisions of this chapter before selling the property. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-810)
6.32.120 Obligations upon foreclosure.
A lender’s trustees or the lender’s attorney who are foreclosing on a rental facility shall give notice of the time, place, and terms of sale to the tenants in the rental facility by mailing such notice to the tenants by first-class mail or by posting the notice in a prominent place in the common area or on the entry doors of the rental facility. Notice also shall be provided to the City Manager and to any registered tenant association by mailing or personally delivering the notice to the president of such tenant association and to the City Manager. This notice shall be given within the time frame currently applicable under State law or court rules for giving notice of the time, place, and terms of sale to the record owner of the property. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-812. Formerly 6.32.130)
6.32.140 Enforcement of tenant opportunity to purchase rights.
A. An owner, tenant or tenant association may seek enforcement of any right or provision under this chapter through a civil action filed with a court of competent jurisdiction and, upon prevailing, shall be entitled to an award of reasonable attorney’s fees and costs.
B. In addition to the above, the City may take all appropriate action, including but not limited to the actions specified in subsections (A) and (C) of this section, to enforce the provisions of this chapter.
C. In addition to any other remedy or enforcement measure, a tenant, tenant association or third party or public agency working with the tenant or tenant association may seek and any court of competent jurisdiction may: (1) issue restraining orders and/or temporary or permanent injunctions if the plaintiff is found likely to succeed on the merits of a complaint against an owner for violation of the provisions of this chapter; and/or (2) declare any transfer in which an owner has not complied with all requirements of this chapter void and the transfer documents set aside. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-813)
6.32.150 Statutory construction.
The purpose of this chapter is to provide an opportunity for tenants to become owners of the rental facility in which the tenants reside or to allow tenants to exercise or assign their rights for their benefit, as provided in this chapter. If a court finds ambiguity and there is any reasonable interpretation of this chapter that favors the rights of the tenant or tenant organization, then the court should resolve such ambiguity toward the end of strengthening the legal rights of the tenant or tenant organization to the maximum extent permissible under law. (Ord. 2013-25 § 1, 2013/Ord. 2003-7 § 1 (part), 2003: prior code § 6-814)