Holmes, Jr. v. DC Department of Housing & Community Development and 1516 & 1520 Holobrook Street NE Tenants Association, Inc. ( 2020 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
Nos. 17-AA-662 and 18-AA-585
TALLEY R. HOLMES, JR., PETITIONER,
v.
DISTRICT OF COLUMBIA
DEPARTMENT OF HOUSING & COMMUNITY DEVELOPMENT, RESPONDENT,
and
1516 AND 1520 HOLBROOK STREET NE TENANTS ASSOCIATION, INC.,
INTERVENOR.
On Petition for Review of an Order of the
District of Columbia Department of Housing and Community Development
(RP-2017-27)
and an Order of the District of Columbia Office of Administrative Hearings
(DHCD-24-17-DR)
(Argued May 8, 2019 Decided July 9, 2020)
William Payne for petitioner.
Sonya L. Lebsack, Assistant Attorney General, with whom Karl A. Racine,
Attorney General for the District of Columbia, Loren L. AliKhan, Solicitor
General, Caroline S. Van Zile, Deputy Solicitor General, and Stacy Anderson,
Acting Deputy Solicitor General at the time the brief was filed, were on the brief,
for respondent.
2
June L. Marshall, with whom Philip T. Evans and Cynthia A. Gierhart were
on the brief, for intervenor.
Before EASTERLY and MCLEESE, Associate Judges, and NEBEKER, Senior
Judge.
EASTERLY, Associate Judge: In these consolidated appeals, petitioner Talley
R. Holmes, Jr. asks us to vacate and reverse two administrative orders: (1) an
order by the District of Columbia’s Department of Housing and Community
Development’s Rental Conversion and Sale Division (DHCD) registering a tenant
association in a building owned by Mr. Holmes and (2) an order by the Office of
Administrative Hearings (OAH) making permanent a DHCD directive that Mr.
Holmes cease and desist his attempt to evict any tenants until he complies with the
Tenant Opportunity to Purchase Act (TOPA), D.C. Code §§ 42-3404.01 to .13
(2012 Repl. & 2019 Supp.). We conclude that Mr. Holmes has failed to establish
that he has standing to pursue his challenge to the first order. Regarding the
second order, we reject Mr. Holmes’s argument that his TOPA offer of sale,
prompted by a third-party offer to buy the housing accommodation, relieved him of
the obligation to issue a separate TOPA offer of sale when he later decided instead
to discontinue his use of the property as a housing accommodation.
I. Facts
A. The 2014 Contract for Sale and 2015 TOPA Notices
In September 2014, Mr. Holmes contracted with the C.A. Harrison
Companies, LLC (“C.A. Harrison”) to sell a sixteen-unit apartment building he
owned at 1516–1520 Holbrook Street N.E., promising to deliver the units with
marketable title. While the sale was pending, C.A. Harrison hired a company to
contact the tenants then living in the building (nine units were occupied at that
time) and to negotiate buyout agreements with them. Six tenants accepted the
buyouts and vacated their units, and one tenant voluntarily moved out before the
buyouts began. C.A. Harrison prepared to go to settlement by the end of July
2015, only to discover that Mr. Holmes was unable to deliver the units with
marketable title because he had not first given the tenants an opportunity to
purchase the property by providing them an offer of sale notifying them of the
third-party contract as required by TOPA, specifically D.C. Code § 42-3404.02(a).1
1
C.A. Harrison sued Mr. Holmes for breach of contract, as well as for
negligent misrepresentation based on its allegation that Mr. Holmes had previously
represented to C.A. Harrison that he had provided the TOPA offer of sale and “the
tenants had declined to exercise their TOPA rights.” C.A. Harrison Cos., LLC v.
Holmes, No. 2016-CA-3685-R(RP) (D.C. Super. Ct. May 19, 2016). Mr. Holmes
did not dispute that factual allegation.
4
Mr. Holmes eventually issued the requisite TOPA offer of sale in September 2015
to all the tenants of the nine units occupied at the time he signed the third-party
contract with C.A. Harrison in September 2014.
B. The Registration of the Tenant Association with DHCD
In response to the 2015 TOPA offer of sale, the tenants who had remained in
the building attempted to form a tenant association. 2 The association timely
applied to register with DHCD, as required by D.C. Code § 42-3404.11(1), but
DHCD erroneously rejected the association’s registration. Relying on the list of
addressees to whom Mr. Holmes had belatedly provided TOPA offers of sale,
DHCD determined that the association did not meet the requirements of D.C. Code
§ 42-3404.11(1), which provides that, at the time of registration, an association
must comprise “a majority of the occupied rental units.”
The association timely filed a petition for reconsideration with DHCD in
December 2015, explaining that it currently represented a majority of the occupied
2
This group called themselves 1516 & 1520 Holbrook Street NE Tenants
Association, Inc. A different set of tenants, which included some who had moved
off-site, also attempted to form a competing organization, but their efforts, which
have no bearing on this case, were unsuccessful.
5
units at Mr. Holmes’s building. DHCD ultimately granted the motion and
registered the association in June 2017. At no time did Mr. Holmes assert any
interest in or attempt to participate in the DHCD registration proceedings.
C. Mr. Holmes’s Attempt to Evict the Tenants
and DHCD’s Cease and Desist Order
In December 2016, while the association’s petition for reconsideration was
pending with DHCD, Mr. Holmes attempted to evict the remaining tenants by
issuing notices to vacate the property. Mr. Holmes nowhere acknowledged in the
notices to vacate his 2014 contract to sell the property to C.A. Harrison or C.A.
Harrison’s lawsuit, see supra note 1, in which C.A. Harrison sought enforcement
of that contract as a remedy (or an award of money damages). Instead, Mr.
Holmes certified that he was providing notices to vacate pursuant to D.C. Code
§ 42-3505.01(i)(1) (authorizing a housing provider to “recover possession of a
rental unit for the immediate purpose of discontinuing the housing use and
occupancy of the rental unit” if requisite notice is provided)—not D.C. Code § 42-
3505.01(e) (authorizing a housing provider to “recover possession of a rental unit
where the housing provider has in good faith contracted in writing to sell the rental
unit or the housing accommodation” if requisite notice is provided). He further
certified in the notice that he “no longer desire[d] to sell the property,” and he
6
stated in his cover letter that the notice was “only for purposes of discontinuing
housing use.”
In response to Mr. Holmes’s attempt to evict his tenants, DHCD issued a
deficiency letter in January 2017 informing him that, among other issues with the
building and notices to vacate, he had run afoul of TOPA. DHCD explained to Mr.
Holmes that a property owner could not issue notices to vacate for the
discontinuance of housing use without first giving tenants an opportunity to
purchase the housing accommodation through a TOPA offer of sale, and that he
had to file that TOPA offer of sale with DHCD’s Rental Conversion and Sale
Division. DHCD further explained that, although it had received “a[] [TOPA]
offer of sale on September 23, 2016 [sic] relating to the sale of the property”
(apparently referring to Mr. Holmes’s 2015 offer of sale related to his 2014
contract to sell the building to C.A. Harrison), “to date,” it had not received a
requisite TOPA “offer of sale . . . relating to the discontinuance of housing use.”
In light of Mr. Holmes’s noncompliance with TOPA and other statutory and
regulatory obligations, the office informed him his notices to vacate were “void
and must be withdrawn.”
7
Because Mr. Holmes did not correct the deficiencies identified in DHCD’s
January letter, DHCD issued an order to Mr. Holmes in May 2017. The agency
both directed him not to rely on his invalid notices to evict his tenants and notified
him of its intent to seek a temporary cease and desist order to “prohibit[] [him]
from discontinuing housing use or selling the Housing Accommodation” until he
corrected the deficiencies and complied with TOPA. When Mr. Holmes still did
not take action to comply with TOPA, the agency issued a temporary cease and
desist order in June 2017.
Mr. Holmes responded to the temporary cease and desist order and requested
a hearing before OAH. He argued that he had complied with TOPA by serving his
tenants with the 2015 offer of sale with a third-party contract, and appeared to
attribute DHCD’s adverse decision to a misunderstanding that he was still trying to
sell the housing accommodation to a third-party.
OAH rejected his arguments. It found that DHCD was well aware of the
2015 TOPA offer of sale and explained that DHCD was correct to require a new
TOPA offer of sale because “the right to receive an offer of sale before
discontinuance of use is absolute, and separate and distinct from the requirement to
8
receive an offer of sale before selling a property to a third-party contractor.”3
Citing and quoting the statute, D.C. Code § 42-3404.02(a-2), OAH elaborated that
any TOPA offer of sale in relation to a third-party contract would require the
owner to offer to sell the housing accommodation to the tenants “at a price and on
terms ‘as favorable’ as its offer to a third party” and might not bear relation to the
property’s market value, whereas “[i]n the absence of a third party contract[,]” the
owner’s TOPA offer of sale “must be based on the present value of the property.”
Relying on this court’s decision in Morrison v. Branch Banking & Tr. Co., 25 A.3d
930 (D.C. 2011), OAH further explained that an owner of a housing
accommodation must give their tenants a new TOPA offer of sale each time they
have a third-party offer, even if the terms of the new third-party offer are for the
same asking price. Concluding that Mr. Holmes had issued the notices to vacate
for discontinuation of use as a housing accommodation without first providing the
tenants a TOPA offer of sale in relation to that distinct intention, OAH made
DHCD’s cease and desist order permanent and enjoined Mr. Holmes from selling
the property unless and until he complied with his TOPA obligations.
3
OAH also concluded that the 2015 TOPA offer of sale had expired under
D.C. Code § 42-3404.11(4). Because we conclude that OAH’s first rationale is
dispositive, see infra part II.B, we do not address that line of reasoning.
9
This consolidated appeal of both DHCD’s order registering the tenant
association and OAH’s order (making permanent DHCD’s temporary cease and
desist order) followed.
II. Analysis
A. Mr. Holmes’s Standing to Challenge His Tenants’ Registration
of Their Association
Mr. Holmes seeks to appeal DHCD’s order registering the tenant association
pursuant to D.C. Code § 42-3404.11 on the grounds that it took too long to resolve
the association’s motion for reconsideration and that the agency wrongly engaged
in ex parte communications with C.A. Harrison. The association, however,
challenges his standing to raise these claims. “Standing is a threshold
jurisdictional question which must be addressed prior to and independent of the
merits of a party’s claims.” D.C. Appleseed Ctr. for Law & Justice, Inc. v. District
of Columbia Dep’t of Ins., Sec., & Banking, 54 A.3d 1188, 1199 (D.C. 2012)
(internal quotation marks omitted); accord Grayson v. AT & T Corp., 15 A.3d 219,
229 (D.C. 2011) (en banc) (explaining that standing is assessed separate from the
merits of the plaintiff’s claim). Mr. Holmes “bears the burden to establish [his]
standing” to pursue this claim. UMC Dev., LLC v. District of Columbia, 120 A.3d
37, 43 (D.C. 2015).
10
In assessing standing, the central “question is whether the person whose
standing is challenged is a proper party to request an adjudication of a particular
issue.” Grayson, 15 A.3d at 229 (internal quotation marks omitted). At a
minimum, a litigant must adequately allege that they suffered “an injury in fact.”
D.C. Appleseed, 54 A.3d at 1200 (internal quotation marks omitted). Such “injury
must be an invasion of a legally protected interest which is (a) concrete and
particularized, and (b) actual or imminent, not conjectural or hypothetical.” Id.(internal quotation marks omitted). Additionally, the “litigant must show a
substantial probability that the requested relief would alleviate its asserted injury.”
Id. (internal quotation marks omitted).4
4
In support of his standing argument, Mr. Holmes relies in part on the
judicial review provision of the District of Columbia Administrative Procedures
Act (DCAPA). See D.C. Code § 2-510(a) (2016 Repl.) (authorizing “[a]ny person
suffering a legal wrong, or adversely affected or aggrieved, by an order or decision
of the Mayor or an agency in a contested case” to seek judicial review in this
court). We do not understand him to argue that the statute provides him broader
standing than our case law. Moreover, because we conclude that he cannot
establish standing under our case law as an injured individual, see infra, we need
not address the tenant association’s argument that the judicial review provision in
D.C. Code § 42-3405.09 (authorizing “any party” to an administrative proceeding
under the Rental Conversion and Sale Act to seek judicial review under the
DCAPA in this court) imposes a heightened standing requirement on Mr. Holmes.
11
Mr. Holmes, who never sought to participate in the DHCD proceedings
regarding the registration of the tenant association, 5 argues he suffered injury and
now has standing to challenge DHCD’s delayed registration decision—and the
information it considered in making that decision 6—because of his status both as
the owner of the tenants’ housing accommodation and as a party to a contract to
sell that property. Mr. Holmes relies on D.C. Appleseed where we concluded that
the plaintiff-appellant had suffered sufficient injury as a result of being
overcharged by its insurer, and thus had standing to challenge a determination by
the insurer’s regulator that surplus funds collected by the insurer were not illegally
excessive. 54 A.3d at 1202. He argues “[b]y analogy, it should follow that . . . a
housing accommodation owner clearly has an interest in holding [DHCD]
5
It is unclear whether he would have been authorized to do so. Mr. Holmes
did not address the question in his brief to this court, but the tenant association
argues that not only is the statute silent about a homeowner’s participation in the
registration process, see D.C. Code §§ 42-3404.11, -3405.04, but also it expressly
prohibits owners from “interfer[ing] with the right of a tenant or tenant organizer
to . . . [engage in] [a]ny . . . activity reasonably related to the establishment or
operation of a tenant organization.” D.C. Code § 42-3505.06(d)(8).
6
Mr. Holmes asserts that C.A. Harrison provided DHCD with information
that resulted in the agency’s ultimately granting the motion for reconsideration to
help C.A. Harrison defend against Mr. Holmes’s counterclaim in their separate
litigation. His assertion about CA Harrison’s motivations are not only speculative,
see D.C. Appleseed Ctr., 54 A.3d at 1200 (providing that injury in fact cannot be
based on speculation or conjecture), but also unsupported by the record, such as it
exists: C.A. Harrison initially provided information to DHCD regarding the tenant
association’s registration request in November 2015, seven months before it filed
suit against Mr. Holmes and well before Mr. Holmes filed his counterclaims.
12
accountable for fits of misfeasance or clear abuses of discretion in administering
the TOPA program when real estate properties valued in the millions of dollars are
at risk of sitting idle and being prevented from entering the market.” 7
We fail to see how the circumstances of this case—either the relative
positions of Mr. Holmes, the tenant association, or DHCD, or the allegations
themselves—are at all analogous to D.C. Appleseed. Moreover, to the extent Mr.
Holmes is arguing that he suffered financial harm because DHCD’s “fail[ure] to
act” from December 2015 to June 2017 on the tenant association’s November 2015
motion for reconsideration “forced [him] to defend a lawsuit [by C.A. Harrison] at
great expense,” and “deprived [him] [of] selling the Housing Accommodation,” he
complains of problems of his own making. Mr. Holmes was “forced” to defend a
lawsuit because of his own inaction before July 2015, not because of any event
related to DHCD’s delay in addressing the association’s reconsideration petition.8
7
Mr. Holmes also broadly argues that “a housing accommodation owner’s
status alone must be sufficient” to establish standing in any action relating to
TOPA. We disagree; owners must establish their own standing in any action under
statute or case law like any other person or party.
8
As noted above, see supra note 1, C.A. Harrison sued Mr. Holmes for
breach of contract and negligent misrepresentation. C.A. Harrison Cos., LLC v.
Holmes, No. 2016-CA-3685 (D.C. Super. Ct. May 19, 2016). Without regard to
the tenant association’s registration status or any event after July 2015, the trial
court granted partial summary judgment to C.A. Harrison, finding Mr. Holmes
(continued…)
13
Further, under his own theory, the DHCD’s “failure to act” after November 2015
resulted in the effective denial of the tenant association’s motion for
reconsideration as of January 2016 and thus did not impede him from selling the
property. And long before DHCD took any action countering his assumption that
the rejection was final, Mr. Holmes decided (as evidenced by his December 2016
letter) that he “no longer desire[d] to sell the property.” Accordingly, neither of
the injuries Mr. Holmes alleges can give him standing now on appeal to challenge
the proceedings resulting in the tenant association’s registration.
For these reasons, we conclude Mr. Holmes has failed to establish he has
standing to challenge DHCD’s registration decision on appeal to this court.
(…continued)
liable (1) for negligent misrepresentation because he falsely represented to C.A.
Harrison that he had complied with TOPA before the July 2015 closing date and
(2) for breach of contract because he had agreed in the contract to deliver
marketable title, which required prior compliance with TOPA, at closing. C.A.
Harrison Cos., LLC v. Holmes, No. 2016-CA-3685 (D.C. Super. Ct. Mar. 26,
2018). The court’s ruling regarding appropriate relief is still pending.
14
B. Mr. Holmes’s Appeal from the Cease and Desist Order
Mr. Holmes separately appeals from the 2017 cease and desist order made
permanent by OAH. This order rests on the conclusion by OAH (and DHCD
before it) that in issuing his tenants notices to vacate in December 2016, Mr.
Holmes violated TOPA because he had not first provided the tenants and filed with
DHCD the requisite TOPA offer of sale based on his intention to discontinue use
of the property as housing. See D.C. Code § 42-3404.02(a) (requiring a property
owner give tenants a bona fide offer of sale before discontinuing housing use);
D.C. Code § 42-3404.03 (requiring a property owner to notify tenants and the
DHCD’s Rental Conversion and Sale Division of the offer on the same day). Mr.
Holmes contends that he had no obligation to provide his tenants with a second
TOPA offer of sale before issuing the notices to vacate to discontinue use in 2017
because he had already given them a TOPA offer of sale in 2015 based on his
third-party contract with C.A. Harrison.
As a matter of first impression, we hold, consistent with the DHCD’s
interpretation of the statute, that Mr. Holmes’s first TOPA offer of sale based on
his third-party contract with C.A. Harrison could not also serve as a TOPA offer of
sale based on his intention to discontinue renting the property.
15
We review the provisions of TOPA de novo. The plain language of the
statute controls, Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751,
753 (D.C. 1983) (en banc), but where we encounter ambiguity, we defer to
reasonable interpretations of the statute made by the agency administering the
statute, here DHCD. Nunnally v. District of Columbia Metro. Police Dep’t, 80
A.3d 1004, 1010 (D.C. 2013). Any ambiguity we find in a provision of TOPA
must be resolved “toward the end of strengthening the legal rights of tenants or
tenant organizations to the maximum extent permissible under law.” Richman
Towers Tenants’ Ass’n v. Richman Towers LLC, 17 A.3d 590, 601 (D.C. 2011)
(quoting D.C. Code § 42-3405.11); see also 1618 Twenty-First St. Tenants’ Ass’n
v. Phillips Collection, 829 A.2d 201, 203 (D.C. 2003) (discussing D.C. Code § 42-
3404.02 and observing that TOPA’s “overarching purpose is to protect tenant
rights”).
In relevant part, TOPA requires that
[b]efore an owner of a housing accommodation may sell
the housing accommodation or issue a notice to vacate
for purposes of demolition or discontinuance of housing
use, the owner shall give the tenant an opportunity to
purchase the housing accommodation at a price and
terms that represent a bona fide offer of sale.
16
D.C. Code § 42-3404.02(a) (emphasis added). The statute’s separation of those
circumstances where an owner must provide a bona fide offer of sale with an “or”
indicates that one circumstance (selling the housing accommodation) may not
substitute for another (discontinuance of housing use) in the way Mr. Holmes
urges. “When the word or is used in a statute, it is presumed to be used in the
disjunctive sense, unless the legislative intent is clearly to the contrary.” Scott v.
United States, 672 A.2d 579, 581 (D.C. 1996) (internal quotation marks omitted);
accord Gay Union Corp. v. Wallace, 112 F.2d 192, 197 n.15 (D.C. Cir. 1940) (“In
statutory construction ‘or’ is to be given its normal disjunctive meaning unless
such a construction renders the provision in question repugnant to other provisions
of the statute.”).
Here the legislature’s intention to distinguish between the two scenarios—
sale or discontinuance of use—is reflected and reaffirmed in the statute as a whole.
Most importantly, the statute directs that, depending on the impetus for a TOPA
offer of sale, an owner must employ different pricing mechanisms and incorporate
different information. If prompted by a contract with a third party to sell a housing
accommodation of five or more units, the owner must inform the tenants of the
third-party offer, make a copy of the third-party offer available, D.C. Code § 42-
3404.03(3), and extend an offer to sell the property to the tenants at “a price and
17
other material terms that are at least as favorable as those accepted by” the
prospective third-party purchaser. D.C. Code § 42-3404.02(a-2)(1)(B)(i); see also
D.C. Code § 42-3404.05(a)(1).9 But if an owner wishes to discontinue use of the
property as a housing accommodation, “[t]he sales price contained in the offer of
sale shall be less than or equal to a price and other material terms comparable to
that at which a willing seller and a willing buyer would sell and purchase the
housing accommodation, or the appraised value of the housing accommodation as
determined by this subsection.” D.C. Code § 42-3404.02(a-1)(1); see also D.C.
Code § 42-3404.02(a-2)(1)(B)(ii). Additionally, the conditions upon which a
TOPA offer of sale potentially expires are different if the offer was prompted by
the owner’s desire to sell the housing accommodation (expiring after 360 days if
the accommodation has not been sold) or to discontinue the property’s use for
housing (expiring after 360 days if the owner has not issued notices to vacate). See
D.C. Code § 42-3404.11(4). More generally, TOPA offers of sale must be bona
fide, but what constitutes a bona fide offer is defined differently under the statute
depending on whether the owner wishes to sell the housing accommodation or
discontinue its use as such. D.C. Code § 42-3404.03(a-2)(1)(b). Lastly, we
9
The statute also affords a tenant or tenant association in this specific
scenario a time-limited right of first refusal that is contingent on receipt of a copy
of the third-party offer, D.C. Code § 42-3404.08, that the owner must disclose to
the tenant pursuant to D.C. Code § 42-3404.03.
18
consider the purposes of the Rental Housing Conversion and Sale statute of which
TOPA is a component. These purposes include “discourag[ing] the displacement
of tenants through conversion or sale”; “strengthening the bargaining position of
tenants” and “preserv[ing] rental housing which can be afforded by lower income
tenants in the District”; and “encourag[ing] formation of tenant associations.”
D.C. Code § 42-3401.02(1), (2), (6). All these aims lead us to conclude that the
legislature supported more notice for tenants, not less, and more opportunities for
tenants to seek to purchase their rental homes in response to TOPA offers of sale,
not fewer.
For these reasons, we hold that providing a TOPA offer of sale based on a
third-party contract does not also satisfy an owner’s obligation to provide their
tenants with a TOPA offer of sale if and when the owner decides instead to
discontinue use of the property as a housing accommodation. Thus, we affirm
OAH’s order concluding that Mr. Holmes violated his TOPA obligations and
making DHCD’s cease and desist order permanent.
So ordered.