(a) Notice of offer. If the owner receives and accepts a bona fide offer from a third party to purchase the rental property, then the owner shall promptly provide written notice of such offer (“Notice of Sale”), to the Department and to the tenant association, or if no tenant association exists, to each tenant in the rental property. Any such third-party purchase agreement shall be contingent upon the right of first refusal set forth in this chapter. The Notice of Sale must include an executed duplicate original of the third-party purchase agreement, and the disclosures set forth in Section 5-11-050(b), unless the owner has previously made such disclosures and the disclosures remain accurate and complete.
(b) Time for tenants to form organization. In order to exercise its right of first refusal to purchase a rental property:
(1) the tenants of a rental property consisting of five or more dwelling units shall have a period of 90 calendar days from receipt of the Notice of Sale to
(A) form a tenant association,
(B) inform the owner and the Department of its existence, and
(C) provide to the owner and the Department the names, addresses, and telephone numbers of at least two of the officers or representatives of such association.
(2) the tenants of a rental property consisting of four or three dwelling units shall have a period of 30 calendar days from receipt of the Notice of Sale to form a tenant association and inform the owner and the Department of its existence.
(3) at least one tenant of a rental property consisting of one or two dwelling units shall have 15 calendar days to inform the owner of its intent to exercise its right of first refusal.
(c) Negotiation. Any negotiations between the owner, or the owner’s agents, and a tenant association or, in the case of a rental property consisting of one or two dwelling units, one or both tenants, shall require a continuing duty of good faith negotiations on the part of the owner.
(d) Exercise right of first refusal.
(1) A tenant association or, in the case of a rental property consisting of one or two dwelling units, at least one tenant, shall exercise its right of first refusal by delivering written notice to the owner prior to the expiration of the period required in subsection (b) that the tenant association or tenant(s), as applicable, elects to purchase the rental property pursuant to this chapter.
(2) Any such subsection (d)(1) notice shall be accompanied by any earnest money required under the terms of the third-party purchase agreement, subject to the cap set forth in Section 5-11-070.
(3) The contract formed by exercise of the right of first refusal shall be on the same terms and conditions as those set forth in the third-party purchase agreement, as modified by the terms of this chapter.
(4) Notwithstanding this general requirement or any term of the third-party purchase agreement, any such acceptance shall be presumed to be contingent upon the tenant association’s, or tenant’s, ability to conduct due diligence and secure financing before the deadline in subsection (c) for completing the sale.
(5) Nothing in this section shall be construed to require any owner to extend any form of owner financing to tenants or a tenant association.
(c) Time for closing.
(1) If a tenant association, or tenant(s) under subsection (b)(3), exercises its right of first refusal in accordance with subsection (b), then the tenant association or tenant(s) shall have a period of either:
(A) 120 calendar days from the date of such notice in rental properties consisting of five or more dwelling units, or
(B) 60 calendar days in rental properties consisting of four or fewer dwelling units,
to conduct due diligence and secure financing, unless the owner and the tenant association, or tenant(s), have expressly agreed otherwise in writing.
(2) The owner must give the tenant association or tenant(s) any information about the rental property that the tenant association or tenant(s) reasonably requests, such as architectural and engineering plans and specifications, if available, and access to the rental property to inspect the same and conduct reasonable tests at reasonable times after reasonable notice.
(3) At the end of this 120-day period, 60-day period, or any other period which has been agreed upon in writing, as applicable, the owner shall sell the rental property to the tenant association or tenant(s) upon those terms. If the applicable closing period ends on a Saturday, Sunday, or other legal holiday in the City, then the closing shall occur on the first business day thereafter. If the rental property is conveyed to the tenant association or tenant(s) under this right of first refusal, any prepaid rent shall be apportioned as of the closing date and applied on account of the purchase price.
(d) Tenant association’s rejection of offer. If the tenant association or tenant(s) fails to exercise its right of first refusal on or before the deadline set forth in subsection (b), or terminate the contract pursuant to its terms, or defaults (unless there is a mutual default), then such right will be deemed waived and the owner may sell the rental property to the third-party purchaser identified in the third-party purchase agreement on the terms specified therein. If the sale to such third-party purchaser fails for any reason to close, or if there is any material change in the terms of sale from those set forth in the third-party purchase agreement, then the tenant association’s, or tenant’s, right of first refusal under this chapter shall be reinstated. Any sale of the rental property by the owner to a different party or on any materially different terms shall be null and void.
(e) Third-party rights. The right of a third-party to purchase a rental property is subject to the right of first refusal conferred by this chapter. Upon exercise of the right of first refusal, the third-party purchase agreement between the owner and the third-party purchaser shall automatically terminate, and neither the owner nor the tenant association or tenant(s), as applicable, nor the rental building shall be bound or in anyway affected by any such agreement and such third-party purchaser shall not have any interest in the contract between the owner and the tenant association or tenant(s) formed by exercise of the right of first refusal. Without limiting the generality of the foregoing, the owner and the tenant association or tenant(s) may freely modify the terms and conditions on which the sale from the owner to the tenant association or tenant(s) may be made. For example, the time periods for exercising the right of first refusal under subsection (b) and for closing under subsection (c) are minimum periods, and the owner may grant the tenants a reasonable extension of such period, without liability under a third-party agreement. Third-party purchasers are presumed to act with full knowledge of tenant rights and public policy under this chapter.
(f) Continuing right. The right of first refusal is a continuing right and shall apply as often as the owner shall sell the rental property. The right of first refusal applies to all owners of the rental property including, but not limited to, any owner that acquired its interest in a sale to which the right of first refusal applied but was not exercised.
(Added Coun. J. 9-18-24, p. 16736, § 3)