The Six-Unit Building, the Cash Buyer, and the Tenant Association
Priya lists a six-unit apartment building at 3312 Sherman Ave NW for $1.85 million. The seller is a small LLC that wants a 21-day cash closing. Five units are occupied; four are under lease. The tenants have formed a tenant association and registered it with the District. A cash buyer submits a full-price offer, 21-day close, $50,000 deposit, no contingencies. The seller tells Priya: "Don't notify the tenants until we're ratified - I don't want them slowing this down. It's cash, they can't match it anyway." The buyer's attorney drafted the purchase contract with a time-is-of-the-essence clause and a seller representation that "no tenant holds any right of first refusal or purchase option affecting this sale."
1. Must Priya notify the tenants before ratification? Analyze the tenants' rights and the seller's instruction.
Read the worked answer
Yes - the instruction is not one Priya can follow.
DC's tenant opportunity to purchase law gives tenants of rental housing a statutory chance to purchase before the owner sells to a third party. The process is not a courtesy; it runs on its own clock, generally: the owner delivers written notice of intent to sell to the tenants (and files with the District), the tenant organization has a period (commonly 30 days, extendable) to negotiate and deliver a contract, and if a third-party offer materializes, the tenants get a further window to match that offer. A registered tenant association can assign its rights.
Two common misunderstandings the seller has:
- "It's cash, so they can't match." The tenants' right is to match the offer's terms; financing is theirs to arrange, and a cash competitor does not extinguish the right.
- "Wait until ratified." The notice obligation arises before sale, not after contract. Ratifying first and notifying later exposes the sale to challenge.
Exemptions are narrow - typically small owner-occupied buildings and certain single-family situations where the owner is a natural person with few units. An LLC-owned six-unit building with five occupied units does not fit.
Priya's duty: tell the seller plainly that she will not participate in delaying notice, document the advice, and involve her managing broker. A licensee who assists concealment risks discipline and civil liability alongside the seller.
2. Is the contract's seller representation about tenant purchase rights accurate, and what should Priya do about it?
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It is very likely false as written, and that makes it the most dangerous sentence in the contract.
A representation that "no tenant holds any right of first refusal or purchase option" is not limited to recorded instruments. Statutory tenant purchase rights exist whether or not anything appears in the land records. Signing that representation while planning to notify tenants later is internally contradictory: the seller is warranting the tenants have no right while knowing they do.
Consequences if it stands:
- The buyer may claim breach and pursue the deposit, damages, or rescission.
- If the sale closes without notice, tenants may have a private right of action and the transfer may be subject to being set aside or otherwise challenged - a title and resale problem for the buyer.
- Priya, who knows the facts, cannot let a client sign a representation she knows to be inaccurate and then stay silent.
What to do: request a written amendment before ratification - strike or qualify the representation to disclose the tenant association, pending notice, and the statutory process; add a seller covenant to deliver notice and a closing condition tied to expiration or waiver of tenant rights; and get the buyer's acknowledgment in writing. Advise the seller that the representation as drafted is a liability, not a shortcut, and confirm the advice in an email.
3. The seller wants 21 days. Advise on a compliant path and on Priya's own risk if the seller refuses.
Read the worked answer
The 21-day close may be achievable, but only by running the tenant process in parallel rather than trying to skip it.
Practical sequence:
- Deliver the statutory notice to the tenants and file with the District immediately, before or simultaneously with ratification.
- Amend the contract to make closing contingent on expiration or written waiver of tenant rights, and to make time-of-the-essence apply only to obligations the seller controls.
- Disclose the tenant situation to the buyer's side in writing so the buyer prices the risk knowingly.
- Calendar every deadline the notice creates and confirm receipt; a defective or unserved notice restarts the problem.
- If the tenants assign rights or negotiate, the seller can still sell - but on a real timeline.
Priya's own risk: she is a licensed person with actual knowledge. Participating in nondisclosure exposes her to Commission discipline, a civil claim by the buyer or tenants, and damage to the transaction she is trying to save. If the seller insists on closing before notice, Priya should escalate to her broker and, if the seller still refuses, consider whether she can continue as the seller's agent at all. Her license is not something the seller can instruct her to spend.