Opinion ID: 1560190
Heading Depth: 3
Heading Rank: 1

Heading: Forfeiture of the Deposit

Text: Linen challenges the order requiring that his deposit be forfeited to Lanford on the ground that the trial judge failed to make the finding of bad faith that he argues is required by TOPA. This challenge has merit. When a tenant seeks to take advantage of his right to purchase a rental accommodation from the owner, the owner cannot require him to pay a deposit in excess of five percent of the contract sale price to enter into a contract. D.C.Code § 42-3404.05(b). This subsection further provides that [t]he deposit is refundable in the event of a good faith failure of the tenant to perform under the contract. Id. For a tenant, just as for an owner, intentional failure . . . to comply with the provisions of this subchapter is prima facie evidence of bargaining without good faith. D.C.Code § 42-3404.05(a)(3). In contrast to these provisions, the contract the parties entered affords the landlord a far more favorable position regarding forfeiture. Paragraph 25 of the regional sales contract states that [i]f the Purchaser fails to complete Settlement, at the option of the Seller, the Deposit may be forfeited as liquidated damages and not as a penalty, in which event the Purchaser will be relieved from further liability to the Seller. Thus, under the regional sales contract, the landlord can elect to retain the deposit if the tenant fails to perform, even if there is no finding that the tenant has not bargained in good faith. The trial court, in its order granting post-judgment relief, ruled that the deposit should be forfeit to Defendant as a matter of law. However, it is unclear whether the court based its ruling on application of TOPA or of the regional sales contract. Lanford, in his memorandum in support of post-judgment relief, argued that Linen should forfeit the deposit pursuant to Paragraph 25 of the regional sales contract. The landlord made the same contract-based argument in a supplement to his motion for post-judgment relief. In contrast, the tenant, in his opposition to the landlord's motion for post-judgment relief, contended that TOPA supersedes the provisions of the regional sales contract and that the court was required to make a finding of bad faith on the tenant's part before it could order the deposit forfeited. Linen reiterated this TOPA-based argument in his opposition to the supplement filed by Lanford. It is not clear whether the trial court considered TOPA in granting the landlord's motion for post-judgment relief. In any event, the court did not make the required explicit finding of bad faith. As noted above, a tenant must receive consideration from the owner that the tenant alone finds acceptable for there to be a waiver of a right conferred on him by TOPA. D.C.Code § 42-3404.07. Under TOPA, an owner cannot require a tenant to pay a deposit greater than five percent of the contract sales price, and the deposit is refundable when there is a good faith failure of the tenant to perform under the contract. D.C.Code § 42-3404.05(b). There is nothing in the record to indicate that Linen received consideration to waive the rights provided for by § 42-3404.05 and Lanford does not make this argument on appeal. Thus, under TOPA, Lanford was entitled to retain the deposit only if Linen failed to perform in good faith under the contract. We reverse the trial court's order requiring that Linen forfeit the deposit and remand for the trial court to consider, in accordance with D.C.Code § 42-3404.05(b), whether Linen failed to perform in good faith under the contract.