Know Your Rights with the Right of First Refusal

• June 18, 2018
• Landlord Law

“Daunting,” “baffling,” and “headache-inducing” are just a few of the words used to describe the Tenant Opportunity to Purchase Act (TOPA) (also called Tenant’s Right of First Refusal), which covers the buying or selling of a single-family residential rental property in the City of Baltimore. Our clients can be concerned because they knew that the procedures required of landlords and tenants by TOPA can be daunting, especially considering that failure to follow the code can result in criminal charges (and invalidate sales). If a landlord decides to sell or transfer a property, TOPA gives tenants the right of first refusal at buying the home they live in. For landlords, any sale of a single-family residential rental property depends on compliance with procedures set out in TOPA.

Tenant’s Right of First Refusal Procedures

The steps a landlord and tenant must follow are laid out by the Tenant Opportunity to Purchase Act (TOPA) as outlined in the Subtitle 6 of Article 13 of the Baltimore City Code. The process usually begins when a landlord sends their tenant a written offer of sale stating the sale price as well as the terms and conditions of the sale that have been agreed to between the landlord and a third party. To accept the landlord’s offer, the tenant must respond within 30 days of the date the landlord mailed the offer. Sometimes a landlord will enter into a sales contract before mailing a sales offer to the tenant or during the 30-day notice period. Under these circumstances, the landlord must mail a notice of the contract to the tenant. Then the tenant has 30 days to notify the landlord of their intent to purchase the property for at least as much as the amount stated in the contract. But there are other, very specific procedures mandated by TOPA. For example, all correspondence must be sent via first class mail, postage prepaid, with a receipt of the mailing from the post office. The owner must also send copies of all tenant sale offers to Baltimore’s Department of Housing and Community Development. If the tenant plans to use a government program to assist in financing or insuring the purchase, this must be indicated at the time the sales offer is accepted. If the landlord winds up selling the property to a third party for less than what was initially offered to the tenant, the landlord must give the tenant a second chance to purchase the property at the new, more favorable price. TOPA also contains rules about settlement deposits and settlement dates. For example, if the tenant intends to use a government program to help with the purchase, the required deposit may not be greater than that required by that government program. If the tenant does not use such a program, then the deposit may not be more than 7% of the sale price. Settlement dates may not be less than 60 days (and if government assistance is involved, 90 days) after the date of the contract. Also, the sales contract must release the tenant if they cannot secure adequate financing by the settlement date. There are certain exceptions to the TOPA requirements, such as transfers to relatives, transfers from estates and open market sales where the property is listed with a third party licensed real estate agent and certain requirements are met.

Let Lusk Law Help

Lusk Law, LLC, represents sellers and purchasers in transactions, including handling TOPA compliance, as well handling litigation arising out of the purchase and sale of real property. Contact our office at (443) 535-9715 if you need legal advice about TOPA/Tenant’s Right of First Refusal.