November Multifamily Alert - TOPA, Rent Control, and Transfer Tax Updates

Happy Thanksgiving to our clients and friends. A lot has transpired since our October Alert (linked here), so we are providing this update on TOPA, rent control, and transfer and recordation taxes.

TOPA Reform. On September 17, 2025, the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act passed on its second reading by the DC Council. It was expected that the RENTAL Act would then go on to the Mayor for approval or veto. However, after the RENTAL Act passed, the title industry expressed concerns relating to the wording of the bill’s TOPA exemption for small buildings with two to four units, as well as single-family accommodations. To address these concerns, and other issues, the DC Council scheduled a third reading, where it passed with amendments. The RENTAL Act was then signed by Mayor Bowser on November 13 and transmitted to Congress on November 17. Congress has 30 congressional days (i.e., in-session) to review this. If Congress does nothing, the law becomes effective. Below are a few highlights of the TOPA-related provisions of the RENTAL Act.

15-Year Blanket Exemption for New Buildings. This is the most important and impactful provision of the RENTAL Act. Once the law becomes effective, any sale of or transfer of interests in a new housing accommodation, completed within the 15 years prior to the date of sale, is not a “sale” for Offer of Sale purposes. Consequently, tenant associations will not have a right to purchase exempt properties. One requirement for this exemption is for landlords to notify prospective tenants in their leases that the property is exempt. Also, landlords of exempt properties must provide written notice to all tenants regarding the applicability of the exemption. Note that when an exempt property is sold, a Notice of Transfer must be sent to all tenants.

Notice of Transfer. In addition to a Notice of Transfer being required for new buildings eligible for the 15-year exemption, a Notice of Transfer is required for transfers that are otherwise excluded from the Offer of Sale requirement. Under existing law, a Notice of Transfer requires an accurate description of the transfer containing all material facts, including whether the transfer will result in any changes in management, current rents, or any applicable affordability requirements for the housing accommodation. Under the RENTAL Act, the requirement to provide a description containing all material facts has been replaced with the requirement to provide an “accurate description.”

Revised Definition of Sale. Certain transfers of ownership interests in business entities may be able to avoid the Offer of Sale requirement; however, a Notice of Transfer will still be required. Under the RENTAL Act, the transfer of ownership interests in an entity that owns a rental property is a “sale” if the property is the entity’s principal asset and the transfer results in a change in control of a majority of ownership interests. This is a more objective test than the previous test for a “sale,” which included any transfer “which in effect results in the transfer of the housing accommodation”. The RENTAL Act defines “principal asset” as the value of the property relative to the entity’s other holdings, and “majority of ownership interests” as those tied to the entity’s capital, profits, and losses.

New Offer of Sale Requirements. For properties that are not exempt or excluded from the Offer of Sale requirements, Offers of Sale must now include (1) a notice that tenants are entitled to no-cost technical assistance and training regarding their TOPA rights, and (2) a list of all tenant support providers (see below) certified by the Mayor at the time of the offer.

Tenant Support Providers. The RENTAL Act establishes tenant support providers, which will be certified through a process established by the Mayor through the DC Department of Housing and Community Development (DHCD) and based on a provider’s ability to counsel tenants on TOPA matters. Certification is valid for four years and DHCD will maintain a list of providers.

Cooling-Off Period. Within five business days after the Mayor receives a valid Offer of Sale, the Mayor must provide copies of the offer to all tenant support providers and Qualified Purchasers (see below). For tenant associations in buildings with five or more units, they may not assign their purchase rights to a third party before receiving a valid offer or during the first 45 days after receipt of the offer, unless they have previously submitted registration materials to DHCD. These registration materials include information regarding the organization’s officers, legal counsel, articles of incorporation, bylaws, and documentation that it represents a majority of occupied units. The organization must also provide proof that its members have received training on their rights from an approved tenant support provider, including date, time, number of units represented, and confirmation that a quorum was met.

Qualified Purchasers. The legislation creates a certification process for “Qualified Purchasers”—developers or organizations approved by the District—to acquire TOPA properties. For the first four years after the law becomes effective, any entity previously designated as a Pre-Approved Developer under 14 DCMR § 2499 will automatically be granted certification as a Qualified Purchaser. Certification will remain valid for four years. DHCD is tasked with establishing criteria for selecting Qualified Purchasers.

Assignment of Rights and Consideration. Tenants may assign their rights for any consideration at any point after the cooling-off period. If a third party receives tenant rights, they may only reassign those rights to a private or nonprofit entity. No consideration is permitted for secondary assignments.

Requirement for Written Certifications and Notices. DHCD is required to provide, within five days of request, written certifications of any notices received pursuant to TOPA and copies of such notices. And in cases where DHCD has not received any notices, certifications of nonreceipt.

Interference Prohibition. Anyone contacting tenants or tenant associations about an offer or negotiation must disclose the names and addresses of all individuals or entities with ownership or governance interests in the contacting entity and any financial interest they have in the property. Owners, purchasers, or agents with a financial or other interest in the housing accommodation may not interfere with tenants’ rights under TOPA.

Rent Control. Rent control continues to make the news, both locally and nationally.

Proposal to Exempt Post-2002 Properties in Montgomery County, Maryland. The Montgomery County Planning Department recommended a change in the “rent stabilization” law, because of its chilling effect on housing development. As noted in this Montgomery Planning Residential Development Pipeline Analysis, rent control was identified as a major obstacle by survey respondents. This report notes that currently, projects that have been built in the last 23 years are exempt from rent control, but this is a rolling exemption. Converting to a specific date (instead of a rolling date) for the new construction exemption would add more certainty and confidence for investors. The Planning Staff suggested exempting all projects built after 2002. At this time, it is uncertain if the County Council will act on this recommendation prior to the 2026 election. As noted in prior Alerts, the 2026 election may have a significant impact on the business and real estate environment in the county. The support and engagement of the business community will be critically important.

Proposed DC Rent Control Referendum. The District of Columbia Building Industry Association (DCBIA) advised its members of a new ballot initiative filed by More Affordable DC. This initiative seeks to freeze rents citywide for two years and automatically freezes rents in any future 12-month period if inflation exceeds 6%. A copy of the initiative proposal can be read here. Before this initiative is placed on the ballot, the Office of the Attorney General must assess its legality, the Office of the Chief Financial Officer must assess its fiscal impact, and the Board of Elections’ General Counsel must ensure that it complies with requirements for initiatives.

The Board of Elections would then hold a public hearing and subsequently issue a determination on whether the initiative is a “proper subject.” If approved, at least 24,835 valid signatures must be collected, including 5% of voters in at least five wards. If the petition is verified by the Board of Elections, it will appear on the next primary, general, or city-wide special election ballot, so long as that ballot is at least 90 days away. A public hearing is scheduled for December 3, 2025.

Rent Control as a Constitutional Taking. The Wall Street Journal recently reported that New York landlords filed a lawsuit challenging rent control in New York City. The lawsuit argues that when rents are regulated so that a property can only be rented at a loss, it qualifies as a taking under the Fifth Amendment. They also argue that because New York’s rent restrictions primarily apply to buildings constructed before 1974, the rent stabilization is arbitrary and violates equal protection and due process rights.

The Supreme Court declined to hear several prior rent control appeals, but in a 2024 case in which the Court denied certiorari, Justice Thomas noted that “in an appropriate future case, we should grant certiorari to address this important question.”

LA Rent Control. The Wall Street Journal also reported on new rent control legislation in Los Angeles. The city restricted rent increases in about three quarters of the city’s multifamily housing units to the consumer-price index (CPI) with an annual ceiling of 8%. The City Council voted to lower the cap to 90% of CPI with a maximum increase of 4%. Landlords will also no longer be allowed to raise rents to cover an increase in utility charges. How to Shrink Housing Supply.

DC Transfer and Recordation Tax Legislation. The Committee on Business and Economic Development held a hearing on The Transfer and Recordation Tax Appeals Amendment Act of 2025 on Wednesday, November 19, 2025. This bill would amend the District’s deed transfer and recordation tax laws to allow transferors and transferees to appeal the fair market value used for calculation of the transfer and recordation taxes.

DCBIA testified in support of the bill and suggested two key amendments: First, that the language clarify that the sale price of distressed properties determined in an arms-length transaction is deemed their fair market value. Second, that transfers between entities that retain majority ownership should not be subject to transfer and recordation taxes. The Office of Tax and Revenue (OTR) put forth its own amendment as well. OTR’s testimony on the amendment can be found here.

Navigating Transfer and Recordation Taxes in the DMV. Transfer and recordation taxes associated with transfers or financings of property in Maryland, DC, and Virginia, can be costly and confusing. In some cases, careful advance planning and deal structuring can be an effective means to avoid or mitigate these taxes. Although this analysis below was published two years ago, it remains relevant today. Navigating Transfer and Recordation Taxes.

Should you have any questions about the matters above, please reach out to our Condo Multifamily Team at CondoMultifamilyTeam@ballardspahr.com.

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.