D.C. Council Passes RENTAL Act, Including Significant Tenant Opportunity To Purchase Act Changes

Highlights

• The Washington, D.C., Council on Sept. 17, 2025, passed the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act of 2025 by a vote of 10-3.
• New multifamily buildings constructed within the last 15 years are exempt from the District of Columbia Tenant Opportunity to Purchase Act (TOPA); however, a Notice of Transfer is required.
• A 45-day "cooling-off period" during which tenants are prohibited from assigning their rights under TOPA has been included.
• The definitions of an "Owner" and "Tenant" have been expanded, and there are exemptions from TOPA for two- to four-unit housing accommodations, or "buildings," under certain circumstances.

The Washington, D.C., Council on Sept. 17, 2025, passed the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act of 2025, B26-0164, by a vote of 10-3. The RENTAL Act was introduced on March 3, 2025, by D.C. Council Chairman Phil Mendelson at the request of Mayor Muriel Bowser. The RENTAL Act aims to revitalize the District of Columbia housing ecosystem to help spur investment in multifamily housing production. Many aspects of Mayor Bowser's original bill were revised in the final version of the RENTAL Act that passed as a result of months of lobbying to the D.C. Council by both tenant advocates and the housing development community. Below is a high-level overview of some of the significant changes to the District of Columbia Tenant Opportunity to Purchase Act (TOPA) under the RENTAL Act.

Revised Definitions "Owner" and "Tenant"

Two foundational definitions within TOPA have been expanded by the RENTAL Act. First, an "Owner" is now defined as "any person, any one of a number of persons, or any entity in whom is vested all or any part of the beneficial ownership, dominion, or title of a housing accommodation; or the committee, conservator, or legal guardian of [an aforementioned person] who is non compos mentis, a minor child, or otherwise under a disability." Second, a "Tenant" is now defined as "any person or persons who, under the terms of a current or expired written lease or other rental agreement, are entitled to occupy the housing accommodation and are liable to the owner for the payment of rent." The definition goes on to state that nothing in the definition "shall be construed to limit the definition of 'tenant' for the purposes of any other law." This revision to the definition of a "tenant" aligns with what is already allowed under District of Columbia housing law in that a written lease is not required to establish tenancy. If a lease expires, tenants are allowed to continue their tenancy on a month-to-month basis on the same terms of an original written lease, except for legal rent increases.

New Exemptions from TOPA

The RENTAL Act expands the types of transactions that will not be considered a "sale" and, therefore, exempts an owner from providing an offer of sale to tenants.

The sale or other transfer of interest in a new multifamily building that completed construction and received a permanent certificate occupancy within 15 years before the date of the sale will no longer trigger the requirement that an owner must provide an offer of sale to tenants (New Construction Exemption) under TOPA, but a Notice of Transfer is required to be sent. The RENTAL Act also requires that before an inpidual enters into a lease for a rental unit in a building exempt from TOPA based on the New Construction Exemption, the owner must provide written notice to the inpidual that the building is not subject to TOPA. On the effective date of the RENTAL Act, owners of buildings that are exempt from TOPA based on the New Construction Exemption must provide notice to tenants within 90 days that their building qualifies for the exemption. An owner's failure to provide this notice does not affect the validity of the New Construction Exemption.

The RENTAL Act allows for the admission of one or more limited partners or investor members in an ownership entity of a property (Ownership Entity) who will make capital contributions and the exit of one or more limited partners or investor members who have made capital contributions. The limited partners or investor members, inpidually or combined if more than one, may have only a minority interest in the Ownership Entity. New investors are prohibited from acquiring any additional interest in the Ownership Entity within a 12-month period after their initial admission. Both a new investor member that is being admitted and an exiting investor member must receive or have received, respectively, tax benefits under the Low-Income Housing Tax Credit (LIHTC) statute or a comparable District program. Additionally, before and after a transfer, the Ownership Entity must continue to be controlled, directly or indirectly, by the same person or entity. Although this transfer will exempt an owner from providing an offer of sale to tenants, a Notice of Transfer is required to be sent for this exemption as well.

An existing exempt transfer under TOPA, transfers made by a decedent's estate – even if the transfer includes consideration by a decedent's estate – now includes transfers to an "heir," as defined under D.C. Official Code §20-101(c).

Housing accommodations with two to four units are also exempt from TOPA in instances where the building is not owned by a corporate business or an inpidual owner who owns multiple properties in the District of Columbia.

"Cooling-Off Period" and Assignment of Rights Under TOPA

A tenant organization in a housing accommodation with five or more units cannot assign its rights to purchase under TOPA to a third party during the first 45 days following receipt of a valid offer of sale from an owner (the Cooling-Off Period) unless the tenant organization has submitted its registration application materials to the Department of Housing and Community Development (DHCD) as outlined in the RENTAL Act. Those materials must also include a proof of certification that the tenant organization received training regarding its rights under TOPA that was conducted by an agency approved by DHCD or the Office of the Tenant Advocate. In two- to four-unit housing accommodations – which are not subject to the exemption described above – a tenant, either jointly or inpidually, may not assign their rights to purchase during the first 22 days following receipt of a valid offer of sale, unless the tenant has received training regarding their rights under TOPA. The RENTAL Act makes explicit that owners, third-party purchasers or any other agent with a financial interest in a property may not interfere with tenants' exercise of their rights under TOPA, including efforts to persuade tenants to waive or exercise their rights in a particular way without fully disclosing the party's interest in the TOPA transaction and failing to disclose that tenants must receive the training described above and have the right to consult with a tenant support provider.

The RENTAL Act also adds the restriction that a tenant cannot exercise or sell their rights under TOPA to a third party (TOPA Assignee) until after the Cooling-Off Period has expired. The Act expands the ability of a tenant to receive consideration in exchange for assigning their rights under TOPA to a TOPA Assignee, even if the tenant has vacated the building prior to receiving the consideration. Additionally, if a tenant assigns or sells their rights, the TOPA Assignee may only further assign the rights they received to a business entity in which they are an owner, managing member or officer who can legally bind the entity, and no consideration is allowed to be received for a secondary assignment.

Qualified Purchaser and Deed Transfer Tax Exemption

The term "Qualified Purchaser" has also been added under TOPA. Those interested in purchasing a building through TOPA must be certified on the following criteria:

1. capacity to acquire, own, manage and improve, or redevelop either independently or through an agent any building purchased under TOPA for its remaining useful life
2. entities that own other rental buildings in the District must have a history of responsible stewardship of rental buildings without histories of serious unabated housing code violations
3. must understand and comply with the requirements of the subchapter

The process of being certified as a Qualified Purchaser is also described in the RENTAL Act. Once received, a certification is valid for four years, and DHCD is required under the Act to maintain a public list of Qualified Purchasers on public website. A "Pre-Approved Developer" defined under the District Opportunity to Purchase Act (DOPA), D.C. Official Code § 42-3404.31 et seq. will automatically be granted certification as a Qualified Purchaser for a period of four years after the effective date of the RENTAL Act.

A tax incentive for Qualified Purchasers was included to be applied to the District of Columbia Deed Recordation Tax Act, D.C. Official Code §42-1102, in order to entice developers to become Qualified Purchasers. Deeds to property transferred to a Qualified Purchaser to whom a tenant, under TOPA or the District under DOPA, has assigned its purchase rights, will be exempt from District of Columbia recordation taxes. This section is subject to appropriations.

New Mandates for TOPA Agreements

The RENTAL Act requires that a contract or agreement, including development agreements negotiated between tenants and a developer, must be filed with DHCD within 30 days after being signed by all parties to be considered valid or enforceable. The RENTAL Act outlines the minimum information that any contract or agreement must include. DHCD is also tasked with creating a standard template for purchase agreements and rules for governing the minimum information to be included in purchase contracts within 180 days after the applicability date of the section. The use of the templates created is not mandatory for a TOPA transaction.

The RENTAL Act requires the D.C. mayor to establish a transparency portal within one year of the applicability date of the section that is publicly accessible and a searchable database of information, including but not limited to the address and ward number, unit count, information regarding income-restricted units and subsidies, and whether a purchaser was selected by a tenant organization.

Next Steps

Due to the various amendments included in the RENTAL Act on the day it passed the final vote, the amendments are currently being consolidated and integrated by the D.C. Council before it is transmitted to Mayor Bowser for approval. There is no statutory deadline by which the council is required to send the RENTAL Act to the mayor. Once the mayor approves the RENTAL Act, it will next go to Congress for a mandatory 30-day congressional review period and then must be published in the District of Columbia Register before it takes effect. An update will be provided by the author once that occurs.

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