Ruling on Case That Changed Tenant Rules is Bittersweet
On April 14, the D.C. Superior Court handed down a decision in a case that has taken seven years to resolve. Tenant associations at two buildings came out on top—but four of them went through all those layers of appeal for nothing.
Here's the backstory: In early 2004, Harold and Maxine Bernstein decided to sell 11 apartment buildings in D.C. to Carmel Partners for $88 million. In order to avoid the hassle of the Tenant Opportunity to Purchase Act—which stipulates that tenant associations must be given the match the price at which the building is offered for sale—the Bernsteins engineered a complicated transaction transferring 99.99 percent of the consolidated properties to Carmel, and 0.01 percent to another entity created for the purpose of the deal. With the help of Richard Luchs, the most creative and aggressive landlord's attorney in the city, the Department of Consumer and Regulatory Affairs signed off on the non-sale. (City Paper's Ryan Grim chronicled the whole sordid process back in 2006).
Tenants at six of the apartment buildings, clustered in Mt. Pleasant and Columbia Heights, sued over the transparently manipulative transaction. Each of the lower courts that heard the cases granted the Bernsteins summary judgment, agreeing with the DCRA that the transfer didn't qualify as a "sale." The tenants appealed. In his novel defense, Luchs used comma placement in the rent control legislation to argue that TOPA only kicked in if the building had been sold with the intention of demolishing it or turning it into housing for sale—and that even if it wasn't, that the legislation itself was an unconstitutional redistribution of wealth from the landlord to the tenants.
The five-judge panel bought none of that, applying commonsense logic to the question of whether the transaction constituted a sale subject to TOPA (of course it did) and whether the whole law was constitutional (of course it is, as much as a graduated income tax, Medicare, or unemployment compensation). That was enough to reverse the lower courts' decisions on two of the cases—the Lanier and the Barclay apartments. But on four of the cases, the court reluctantly ruled that the tenant associations lacked standing to sue, having not demonstrated that they had more than 50 percent of the building's residents as members.
Since the case initially came to light, Councilmember Jim Graham—an avowed foe of Luchs and his firm, Greenstein, DeLorme, and Luchs—helped pass an amendment to the rent control law that will prevent landlords from skirting TOPA by using a straw minority purchaser (which he crowed about again last week). And legislation last year allowed all registered tenant associations standing to sue without requiring a majority of the building's occupants to be members.
But a failing in the legislation becomes apparent in this case: Smallish tenant associations still don't have a claim under TOPA. So even if they're able to sue, they probably won't win, which means that appellants at the Argonne, Richman Towers, Sarbin Towers, and Marconi Park are out of luck—which highlights the importance of having strong tenant associations in the first place. Tenants at the Lanier and the Barclay, by contrast, will probably get the chance to purchase their buildings, at long last—or at least, those tenants who stuck it out.