Minneapolis Explores Giving Tenants Right of First Refusal

In the midst of a pandemic, the Minneapolis City Council has seen fit to continue studying a proposal that if passed, would require landlords who want to sell the right of first refusal to buy the property.

Modeled after Washington D.C.’s Tenants Opportunity to Purchase Act (TOPA), the local proposal, called Opportunity to Purchase (OTP), would require landlords of any sized property (including single-family homes and condominiums) to give right of first refusal on purchasing the property to tenants.

Tenants who wish to buy would be able to connect with a local nonprofit housing organization to finance the purchase. The city would help with completing loan applications and legal paperwork.

The intention behind the proposal is to help the city preserve affordable housing and provide minority residents a path to homeownership.

While all of this sounds good, there have been challenges with the D.C. measure, which was enacted more than 30 years ago. Stories abound of tenants being unable or disinterested in purchasing the property, yetrefusing to waive their right to purchase. Those same residents then turn around and assign those rights to the highest bidder and pocket that fee. This has, in effect, forced many rental property owners to sell to whomever the tenant assigned those rights to.

Worse yet, the District’s ordinance doesn’t clearly define what a tenant is. TOPA payouts often happen long after the end of a lease and tenants no longer live there.

In many cases, the demand for payouts has become so bad that title companies will no longer let a landlord close on the sale of the property without signed TOPA waivers from every tenant who’s lived in the building for the last year or more.

In 2018, Washington D.C. amended this measure in 2018, eliminating the TOPA requirement for single-family homes and those with Accessory Dwelling Units (ADUs). However, it still applies to duplexes, triplexes, fourplexes and on up.

While TOPA’s objective; creating wealth for struggling communities through home ownership is a fantastic goal, it is important to note in the 30 years since D.C. enacted the TOPA requirement, just 5 percent of all renters have purchased the properties they live in.

It is hard to imagine the city of Minneapolis would fare any better.