Opinion ID: 1957556
Heading Depth: 1
Heading Rank: 5

Heading: Interpretation of TOPA and the Agreement

Text: We turn now to the Tenants' Association's argument that [u]nder TOPA, a `master lease' is included in the definition of `sell,' [so] that tenants must be afforded notice and opportunity to purchase upon execution of a master lease. The term master lease appears in D.C.Code § 42-3404.02(c), but is not defined. In relevant part § 42-3404.02(c) provides: [T]he term sell or sale includes ... a master lease which meets some, but not all, of the factors described in subsection (b) of this section or which is similar in effect. The Tenants' Association further contends that the Agreement between GWU, and the Partnership and its General Partner, is similar in effect to Factor 1 [`Relinquishes possession of the property'] in that it conveys the right to use and occupy [units at the Columbia Plaza Apartment complex] in exchange for consideration and Factor 5 [`Extends an option to purchase an ownership interest in property ....'] in that it extends an option to purchase an ownership interest in the [Columbia Plaza Apartment complex], which may be exercised at any time after execution of the [A]greement. In West End Tenants Ass'n, supra, we determined that § 42-3404.02(b) was designed to reach the Master Lease Agreement at issue in that case, and that subsection (b) define[d] a sale to include the very provisions included in the lease entered into between GWU and [the owners of the West End Apartments]. Id. 640 A.2d at 736 n. 36. [6] We concluded that the 1989 amendment to TOPA redefine[d] the term `sale' in a manner that plainly mirrored the terms of the Master Lease involved in this [ West End Tenants Ass'n ] case. [7] Id. at 731. Under the Master Lease in that case, unlike the Agreement in this case, GWU gained control over equipment and supplies at the West End Apartments, as well as the right to challenge real estate assessments levied against the property. Id. at 724. In addition, under that Master Lease, but not the Agreement in this case, GWU was obligated to pay the real property taxes, perform all maintenance work and repairs, obtain all non-transferable permits, and to purchase liability insurance. Id. The legislative history accompanying the 1995 addition of subsection (c) to § 402 of TOPA assists in an understanding of the legislature's intent. The section by section analysis of the proposed subsection (c) contained in the Committee Report referenced the 1989 amendment which added subsection (b) and stated: There was extensive discussion at the hearing on the Tenant Opportunity to Purchase Clarification Amendment Act of 1989 (D.C. Law 8-49) concerning transactions which are encompassed within the term sale. It was generally agreed that all changes in fundamental control of ownership were intended to be covered, but the legislative history was not clear on this point. There was a particular lack of clarity caused by the introduction of a provision in Bill 5-162, The Rental Housing Conversion and Sale Act of 1980 Amendments and Extension Act of 1983. That provision would have explicitly covered sale of majority interest in corporations and partnerships, but was removed in response to the Mayor's position that such sales were not occurring and that they could not be monitored because they did not have to be recorded. Today, it is clear that such sales do occur. Committee Report, at 10. From this passage the legislature envisioned the critical concept, in assessing whether an owner had relinquishe[d] possession of the property, to be change in fundamental control of ownership. Indeed, Richard C. Eisen, who was counsel for the tenants association in West End Tenants Ass'n, supra, gave testimony during the Council's consideration of proposed subsection (c), which not only referenced the West End case, but also focused on the concept change in fundamental control of ownership. Mr. Eisen even suggested that instead of defining this concept to embrace transfer of 51% of the partnership interests, perhaps it should be defined to mean transfer of 75% or more of ownership interests, instead of a simple majority. [8] In the case before us the Agreement does not fall within D.C.Code § 42-3404.02(b)(1)  relinquishes possession of the property. The Partnership has not relinquished its possession of the Columbia Plaza Apartment complex to GWU. There has been no change in fundamental control of ownership. GWU acquired substantially less than a 51% interest in the Partnership. It acquired that interest as a limited partner, rather than as a general partner in charge of managing the Partnership. While GWU has the right to designate its students and faculty for a vacancy, it does not have the kind of control or obligations evidenced in West End Tenants Ass'n, supra, with respect to equipment, supplies, permits, payment of taxes, maintenance and repairs, and liability insurance. Nor does it have any responsibility for managing or operating the apartment complex, or executing a lease directly with a GWU student or faculty member, or for security at the premises, or landlord and tenant actions and evictions. As the trial court determined, although GWU may instruct the Partnership to evict a student if the student violates the [C]ode of [Student] [C]onduct... or ceases to be a student in good standing, nothing in the Agreement precludes the Partnership from taking eviction actions against a GWU student or faculty member in the event of lease violations. Our review of the Agreement leads us to conclude that the Partnership did not relinquish possession of the [Columbia Plaza Apartment complex]. D.C.Code § 42-3404.02(b)(1). As the trial judge aptly put it: [T]he words `relinquish possession' do not mean the limited control given to GWU in the present case, and relinquish possession of the property means giving up more control than GWU has done in this [A]greement. Nor does the Agreement fall under D.C.Code § 42-3404.02(b)(5): Extends an option to purchase an ownership interest in the property, which may be exercised at any time after execution of the agreement but shall be exercised before the expiration of the agreement. D.C.Code § 42-3404.02(b)(5). Article 15(B) of the Agreement obligates the owner of any limited partner interest in one group of limited partners, the Tauber Group, who desires to sell a limited partner interest to make a written offer to sell that interest first to GWU. The words option to purchase do not appear in Article 15(B). Instead, GWU is granted a right of first offer. Furthermore, Article 15(B) excludes certain Tauber Group limited partnership interests from the reach of the right of first offer, such as those earmarked for transfer to family members or to charitable organizations as a donation through a will. In addition, Article 15(B) states that after the sale of partnership interests under the Agreement, the Tauber Group owned 28% of all of the partnership interests in the Partnership. Thus, the Agreement mentions no option to purchase and it is quite clear that Article 15(B) covered only 28% of the Partnership interests, and all of those interests were not included in the provision requiring the transmittal to GWU of a written offer to sell the specified limited partnership interests. Moreover, in West End Tenants Ass'n, supra, we indicated that all that GWU could have had under the Master Lease in that case was a right of election which would permit it to exercise a privilege, and only when that privilege has been exercised by acceptance [would] it become a contract to sell.... Id. at 728 (quoting 8A GEORGE W. THOMPSON, COMMENTARIES ON THE MODERN LAW OF REAL PROPERTY § 4443, at 257 (1963 Repl.) (internal quotation marks omitted)). The right which GWU acquired in Article 15(B) is not a sale within the meaning of TOPA. That right not only involves less than 30% of the total ownership interests of the Columbia Plaza Apartment complex, but also given the exclusions of interests that are subject to GWU's right of first offer in Article 15, a written offer may never be extended to GWU by the Tauber Group. As the motions court recognized, [i]f a [Tauber Group limited partner] never decides to transfer an interest except to a family member or a charity, GWU will never have an option to buy it. As the trial court declared in relying on THOMPSON, supra, [a]n option to purchase ... gives the optionee a privilege of buying property within a specified time on terms and conditions expressed in the option. That is not the case here. Under these circumstances, the Agreement does not satisfy the requirements of D.C.Code § 42-3404.02(b)(5). Since the Agreement satisfies neither Factor 1 nor Factor 5 of the statutory definition of a sale, we agree with the trial court that it does not constitute a sale within the meaning of D.C.Code § 42-3404.02(b). And, because statutory Factors 1 and 5 are not satisfied, the Agreement is not a master lease within the meaning of § 42-3404.02(c) because there is no showing that the Agreement meets some, but not all of the factors described in subsection (b) [of § 42-3404.02]. Appellant's argument that the words or which is similar in effect which appear in § 42-3404(c) demonstrate that the Agreement is a sale under TOPA is unpersuasive. Consistent with statutory interpretation principles, we examine the plain meaning of the statute and interpret the words according to their ordinary meaning. Boyle, supra, 820 A.2d at 568 (citation omitted). We also read these words in light of the Act and TOPA as a whole. Id. (citations omitted). And we construe the words in a manner that is not at variance with the policy of the legislation as a whole. West End Tenants Ass'n, supra, 640 A.2d at 726 n. 14. Applying these principles, it is obvious that the words or which is similar in effect are designed to reach a document which is akin to a master lease and which meets some but not all of the factors codified in § 42-3404(b). In light of the statutory factors on which the appellant relies and the nature of the Master Lease in West End Tenants Ass'n, supra, and given our analysis as reflected above, we are satisfied that the Agreement in this case is not similar in effect to that of a master lease, as that term is understood in § 42-3404(c). In short, the Agreement is not a sale within the meaning of TOPA, and appellees had no obligation to give the tenants an opportunity to purchase the Columbia Plaza Apartment complex. Accordingly, for the foregoing reasons, we affirm the judgment of the motions court. So ordered.