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Tuesday
Dec082015

Rent, Sell, or Pay the Tax: What Should Mayor Bowser Do? 

Mayor Bowser is moving from her NE DC duplex to a house in NW but says she doesn't plan to sell her duplex. Many of my clients face similar situations when they need to leave DC for work or get married and buy a larger home and have to decide what to do with a DC property. What are her options?

1) Sell: Mayor Bowser has apparently decided not to sell her property at this time but selling is often a good option if you don't intend the return to the property. It can also be a way to make money for your new property without becoming a landlord. So why not just sell? There are tax consequences of selling that might be problematic, always check with an accountant. Perhaps the value isn't enough for you to sell right now and you want to bet on the property gaining value. Talk to to a real estate agent to evaluate if that's a realistic hope. If you might want to return to DC you might also decide to keep the property.

2) Rent: Do you want to be a landlord? DC is tough. Be prepared. I know what you're thinking. But you're a landlord-tenant attorney! Shouldn't you be recommending this option? Sorry, being a DC landlord is not for the faint of heart. You must get a rental license, rent control registration or exemption, pass an inspection, have a DC specific lease, have a plan for getting repairs done, screen applicants carefully, and know the risks. A DC tenant can hold you up in court for months without paying rent. Being a DC landlord is not passive income. It's risky. You can loose money. It can also be a great way to make a profit from your property while you are away, if you're willing to do it right.

3) Family: Sometimes a property can be occupied by other family while you are away. But be careful. Determining if a family member is a tenant or just a guest can be very complex and if there is damage to the property figuring out who pay is difficult. If the expenses become too high and you want to sell or you want to move back in and your family member doesn't want to move or you aren't sure if they are a tenant, consult an attorney before taking any action. Hint: did they pay you any rent, ever? They are a tenant.

4) Register the Property as Vacant and Pay the Tax: DC does not want vacant properties. If you plan to leave your property unoccupied you must register it and pay a vacancy property tax rate. If you think you can keep your homestead deduction instead, consider that your neighbors can call DC to turn you in, most people hate vacant properties on their block. If, like Mayor Bowser, you are moving elsewhere in DC you will also need that homestead deduction for your new place.

5) Renovate: One exception to that pesky vacancy tax is if your property is undergoing permitted renovation. If you only plan to be gone for a short period, like year, perhaps now is the time to do that HGTV style makeover you've always wanted to do. But managing a renovation from out of town can be complex so be certain you hire someone who will act as your project manager and oversee your interests while you are away.

It can be a hard to decide what to do with your old property when you are also trying to move. Contact me if you need help with crafting a lease, registering your property, or just considering the risks and rewards of renting.

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