3.2 DC Property Law Fundamentals
Key Takeaways
- DC is a race-notice jurisdiction: a subsequent purchaser must take without notice AND record first to prevail
- DC uses the deed of trust (trustor, beneficiary, trustee) — not a mortgage — and forecloses non-judicially via the power of sale
- DC deed transfer and recordation taxes are each ~1.1% under $400,000 and ~1.45% at $400,000+, on consideration or FMV (whichever is higher)
- TOPA gives tenants a right to purchase when a rental is sold; multi-unit rights are robust while single-family homes are largely exempt since 2018
- Security deposits are capped at one month's rent, held in an interest-bearing account, with interest paid to the tenant and the deposit returned within 45 days
DC Property Law Fundamentals
The District applies several property doctrines that differ from neighboring states, and the exam reliably tests the differences. Master the recording rule, the security instrument, and the foreclosure method first — they anchor most state-portion title and finance questions.
Recording System: Race-Notice
DC is a race-notice jurisdiction. To defeat a prior unrecorded interest, a subsequent purchaser must do both:
- Take without notice of the prior claim (no actual, constructive, or inquiry notice), and
- Record first among those who qualify.
| Concept | Meaning |
|---|---|
| Actual notice | The buyer literally knows of the prior claim |
| Constructive notice | Recording in the land records charges the world with knowledge |
| Inquiry notice | Visible possession by another should prompt investigation |
Key Point: Recording first is not enough under race-notice. A buyer who records first but knew of an earlier deed loses. Compare this with a pure "race" state (first to record wins regardless of notice) and a pure "notice" state (last bona-fide purchaser without notice wins even without recording).
Worked scenario: A seller deeds to Buyer A (who fails to record), then deeds the same lot to Buyer B. If B paid value, had no notice of A's deed, and records first, B prevails. If B knew about A's deed, B loses despite recording first.
Security Instrument: Deed of Trust
DC uses the deed of trust, not a mortgage, as the primary security instrument for real-estate loans. It involves three parties:
| Party | Role |
|---|---|
| Trustor | Borrower / property owner |
| Beneficiary | Lender |
| Trustee | Neutral third party who holds title (often bare legal title) for the lender |
Upon full repayment the trustee reconveys title to the borrower (a deed of reconveyance). Upon default, the power-of-sale clause lets the trustee sell the property without first going to court.
Foreclosure
Because the deed of trust contains a power of sale, DC foreclosures are usually non-judicial:
| Step | Description |
|---|---|
| Default | Borrower misses payments |
| Notice | Statutory notices to the borrower and recordation of a notice of default |
| Advertising | Public notice/advertisement of the trustee's sale |
| Auction | Trustee conducts a public sale to the highest bidder |
| Trustee's deed | Conveyed to the successful bidder |
Judicial foreclosure (a lawsuit) remains available but is slower and lets the lender pursue a deficiency judgment more readily.
Transfer and Recordation Taxes
DC imposes two separate conveyance taxes that frequently appear as math questions. Treat these as current DC rates (the Council can change them).
| Tax | Standard Rate | Customarily Paid By |
|---|---|---|
| Deed transfer tax | 1.1% if consideration is under $400,000; 1.45% if $400,000 or more | Seller |
| Deed recordation tax | 1.1% under $400,000; 1.45% at $400,000+ | Buyer |
Higher commercial/"economic interest" tiers apply to large nonresidential transfers, and both taxes are computed on consideration or fair market value, whichever is higher.
Worked example: On a $650,000 home, the transfer tax is 1.45% × $650,000 = $9,425 (seller) and the recordation tax is another 1.45% × $650,000 = $9,425 (buyer), for $18,850 in combined conveyance taxes before other settlement costs.
First-time buyer relief: Qualifying DC first-time homebuyers may receive a reduced recordation tax rate (commonly cited at about 0.725%) on eligible purchases — a frequent exam detail.
Landlord-Tenant Law
DC tenant protections are among the strongest in the nation, and they are heavily tested.
Rent Control (Rental Housing Act of 1985)
| Feature | Rule |
|---|---|
| Covered units | Buildings built / with a certificate of occupancy before 1976 |
| Owner threshold | Landlords owning more than 4 rental units |
| Exempt | Small landlords (4 or fewer units), federally subsidized units, and newer construction |
| Increases | Limited and regulated; tied to allowable adjustments |
TOPA — Tenant Opportunity to Purchase Act
TOPA gives tenants a right of first refusal / opportunity to purchase when an owner offers a rental property for sale. It is a signature DC trap:
- Multi-unit buildings: tenants (often through a tenant association) get robust rights to organize and match a third-party offer, with statutory negotiation timelines.
- Single-family rentals: 2018 amendments largely exempted single-family homes from full TOPA, substituting a simpler notice/limited-rights process.
Exam Trap: A licensee who markets and contracts to sell an occupied rental without giving the required TOPA offer exposes the seller to a voidable sale. Always check tenancy status before listing.
Security Deposits
| Rule | Detail |
|---|---|
| Maximum | One month's rent |
| Holding | DC interest-bearing account |
| Interest | Paid to the tenant |
| Return | Within 45 days of move-out, with itemized deductions |
Property Taxes
DC assesses real property at 100% of estimated market value, with rates set annually by the DC Council. Owner-occupants may claim the homestead deduction, and qualifying seniors/disabled owners may receive an assessment cap or 50% reduction.
Forms of Ownership and DC Specifics
DC has a distinctive housing stock, and the exam expects familiarity with the ownership forms that dominate the District.
| Form | DC Notes |
|---|---|
| Condominium | Owner holds fee title to a unit plus an undivided share of common elements; governed by the DC Condominium Act and a recorded declaration |
| Cooperative (co-op) | Resident owns shares in a corporation and holds a proprietary lease, not real property — common in older NW buildings |
| Tenancy by the entirety | Available to married couples and DC domestic partners; provides survivorship and creditor protection |
| Tenants in common / joint tenancy | Standard concurrent-ownership forms; joint tenancy carries the right of survivorship |
Exam Trap: A co-op share is personal property, financed by a share loan rather than a deed of trust, and its transfer triggers board approval rather than a standard deed recording.
DC also recognizes domestic partnerships for property and survivorship purposes, so tenancy-by-the-entirety questions can involve registered domestic partners, not only married spouses. Inclusionary Zoning (IZ) units carry resale price restrictions that a listing agent must disclose to buyers.
What type of recording system does DC use?
What is the primary security instrument used for real estate loans in DC?
An owner wants to sell an occupied rental apartment building. What DC law gives the tenants a right to match a purchase offer first?
On a $650,000 DC home sale, approximately how much is the deed transfer tax owed (customarily by the seller)?