Massachusetts TOPA Explained | Multifamily Property Owners

Massachusetts has a housing problem. We simply don’t have enough homes.

The Commonwealth estimates that Massachusetts needs at least 222,000 additional homes between 2025 and 2035 to meet demand and help address the state’s housing shortage.

At the same time, Massachusetts lawmakers are considering legislation commonly known as TOPA, or the Tenant Opportunity to Purchase Act. The proposal is designed to give tenants in certain multifamily properties an opportunity to purchase their building when the owner decides to sell.

The goal is understandable. Supporters believe TOPA could help preserve existing affordable housing and reduce displacement.

As a Massachusetts real estate broker who has been selling homes and multifamily properties for more than two decades, however, I think there is another side of the issue that deserves attention.

TOPA could make selling a multifamily property in Massachusetts slower, more complicated and less predictable. At a time when Massachusetts desperately needs additional housing and private investment, we should think carefully about adding more uncertainty to the ownership and sale of rental housing.

What Is TOPA in Massachusetts?

TOPA stands for Tenant Opportunity to Purchase Act.

The proposed Massachusetts TOPA legislation would allow participating cities and towns to establish a process giving tenants in certain multifamily properties an opportunity to purchase their building when the property owner decides to sell.

The proposal is a local option, meaning individual Massachusetts municipalities would decide whether to adopt it. The legislation also contains exemptions, meaning not every landlord or multifamily property would be covered.

The objective is primarily housing preservation rather than housing production. Supporters argue that allowing tenants or qualifying organizations to purchase apartment buildings could help preserve existing affordable housing and prevent displacement.

The question is whether the benefits outweigh the additional time, uncertainty and complexity TOPA could introduce into Massachusetts multifamily real estate transactions.

Key Takeaways for Massachusetts Property Owners

Massachusetts TOPA could affect how certain multifamily properties are sold in communities that choose to adopt it.

Property owners should understand several important points:

• TOPA would not automatically apply to every property in Massachusetts.

• Municipalities would have to choose to participate.

• Certain properties and property owners would be exempt.

• Covered transactions could require additional notices, waiting periods and procedures before a sale is completed.

• If tenants exercise their purchase rights, the proposed legislation provides closing periods that vary depending on the size of the property.

• TOPA is primarily intended to preserve existing housing rather than create additional housing units.

For Massachusetts landlords and multifamily property owners considering selling, these requirements could become an important part of determining how and when a property is brought to market.

Could TOPA Make It Take Longer to Sell a Multifamily Property in Massachusetts?

Potentially, yes.

Consider a typical Massachusetts multifamily sale.

An owner decides to sell a 20-unit apartment building. The property goes on the market and several investors spend time analyzing rents, operating expenses, financing, zoning, deferred maintenance and potential improvements.

After negotiations, the seller receives a strong offer from a qualified buyer who is prepared to close quickly.

In a conventional transaction, once the seller accepts the offer and the buyer completes the necessary due diligence, both parties generally have a reasonably clear path toward closing.

Under TOPA, a covered transaction could require additional steps.

Tenants may have statutory purchase rights. A tenant association may become involved. A nonprofit or other qualified organization could potentially participate. Notices and statutory deadlines would need to be followed.

Even when tenants ultimately decide not to purchase the property, these additional requirements could introduce more time and uncertainty into the sale.

How Long Could a TOPA Closing Take in Massachusetts?

Under the current House proposal, the closing period available to tenants who exercise their purchase rights depends on the size of the property.

For properties containing one to five units, the proposed closing period is 60 days.

For properties containing six to 20 units, it is 75 days.

For properties containing 21 or more units, the closing period can be as long as 120 days.

Those timelines matter because time has real value in a real estate transaction.

Buyers Don’t Like Uncertainty

This is one of the aspects of Massachusetts TOPA that deserves more discussion.

A serious multifamily buyer may spend considerable time and money evaluating a property before closing.

They may hire attorneys, lenders, inspectors, engineers and other professionals. They analyze leases, expenses, rents, building systems, zoning and financing. They may spend weeks negotiating the terms of a purchase.

If prospective buyers believe that their negotiated transaction could ultimately provide the framework for another party to purchase the property, some investors may reasonably question whether they want to spend the time and money pursuing the deal.

Some buyers will still participate.

Others may not.

And reducing the number of interested buyers is generally not beneficial to a property owner trying to establish the highest market value for a multifamily property.

Speed and Certainty Matter to Massachusetts Sellers

There also seems to be an assumption in some discussions about housing policy that sellers only care about price.

That’s simply not the case.

I’ve represented Massachusetts property owners for more than two decades, and certainty of closing can sometimes be nearly as important as the purchase price.

A multifamily owner might be selling as part of an estate or probate matter. Business partners may be dissolving a partnership. A mortgage could be approaching maturity. An owner may be purchasing another property or need the proceeds for another investment.

There are countless reasons why a Massachusetts property owner may need a sale to close within a predictable timeframe.

Interestingly, the Commonwealth Beacon article discussing the TOPA legislation provides an example of this.

A tenant-backed group attempting to purchase a Fenway building reportedly offered more money than another buyer, but the owner selected the lower offer because that buyer could close faster.

Anyone who works regularly in real estate understands why.

Speed and certainty have value.

A policy that significantly affects either one deserves careful consideration.

Could TOPA Affect Massachusetts Multifamily Property Values?

The effect of TOPA on Massachusetts multifamily property values is uncertain.

It would be premature to say that TOPA would automatically cause property values to decline.

However, buyers price risk.

If an investor believes purchasing or eventually selling a multifamily property will involve additional time, regulatory requirements or uncertainty, that risk may become part of the investor’s financial analysis.

Some buyers may require a greater return.

Others may offer less.

Some may decide to invest elsewhere.

That doesn’t mean those outcomes will necessarily occur. But incentives matter, particularly when Massachusetts is competing with other states for investment capital.

Does TOPA Create More Housing in Massachusetts?

Not directly.

TOPA is primarily a housing-preservation and anti-displacement policy rather than a housing-production policy.

That distinction is particularly important in Massachusetts because the Commonwealth faces a significant housing shortage.

Massachusetts estimates that at least 222,000 additional homes will be needed between 2025 and 2035.

Meeting that goal will require developers willing to build housing, lenders willing to finance projects, property owners willing to add units and investors willing to put capital into Massachusetts residential real estate.

Every additional cost, restriction and layer of uncertainty ultimately becomes part of those investment decisions.

If investors begin viewing Massachusetts multifamily real estate as increasingly complicated to own or sell, some capital could move elsewhere.

That doesn’t mean TOPA will automatically reduce housing production. Housing markets are much more complicated than any single law.

But Massachusetts should consider that possibility when evaluating new housing regulations.

What Could TOPA Mean for Cambridge and Somerville Multifamily Owners?

This issue could be particularly important in communities such as Cambridge and Somerville, where multifamily housing represents a significant portion of the residential real estate market.

If Cambridge, Somerville or another Greater Boston community ultimately adopts a TOPA program authorized by the state, owners of covered multifamily properties could face additional requirements when selling.

That makes understanding the rules before putting a property on the market especially important.

A property owner considering selling a Cambridge multifamily home, Somerville multifamily property or Greater Boston apartment building should understand whether the property would be covered, what notices would be required and how the statutory timelines could affect the marketing and closing strategy.

There Has to Be a Balance

I understand what supporters of the Massachusetts Tenant Opportunity to Purchase Act are trying to accomplish.

Longtime tenants understandably worry about displacement when their apartment building is sold. Communities also want tools to preserve naturally occurring affordable housing.

Those are legitimate concerns.

But protecting tenants and encouraging housing investment shouldn’t have to be opposing goals.

A more balanced approach could provide tenants with a clearly defined opportunity to purchase their building while still allowing Massachusetts property owners to sell within a commercially reasonable and predictable timeframe.

Massachusetts should also continue focusing aggressively on the fundamental problem behind our housing crisis:

We need more housing.

That means making it easier to build apartments, reducing unnecessary zoning barriers, speeding up permitting, encouraging transit-oriented development and creating incentives for property owners and developers to add housing units.

When housing supply increases, renters have more choices and landlords have more competition.

Ultimately, increasing supply addresses one of the fundamental causes of Massachusetts housing affordability.

Massachusetts TOPA Frequently Asked Questions

What does TOPA stand for?

TOPA stands for Tenant Opportunity to Purchase Act. It generally refers to laws that provide tenants with certain rights or opportunities to purchase their apartment building when the property owner decides to sell.

What is the Massachusetts Tenant Opportunity to Purchase Act?

The proposed Massachusetts TOPA legislation would allow participating municipalities to establish a process giving tenants in certain residential properties an opportunity to purchase their building when the owner decides to sell.

Would Massachusetts TOPA apply to every landlord?

No. The proposal is structured as a local option, meaning a Massachusetts city or town would have to adopt it. The proposed legislation also contains exemptions, so not every landlord or residential property would be covered.

Could TOPA delay the sale of a Massachusetts multifamily property?

It could. A covered transaction may require additional notices, tenant response periods and other statutory procedures. When tenants exercise their purchase rights, additional time may also be available to complete financing, due diligence and closing.

How long would tenants have to close under Massachusetts TOPA?

Under the current House proposal, closing periods vary according to property size. The proposed periods are 60 days for properties containing one to five units, 75 days for properties with six to 20 units, and 120 days for properties containing 21 or more units.

Could TOPA affect Massachusetts multifamily property values?

The ultimate effect on property values is uncertain. One concern is that additional transaction requirements and uncertainty could discourage some prospective buyers or cause investors to account for additional risk when valuing a property. Supporters argue that tenant purchase rights can help preserve existing affordable housing and reduce displacement.

Does TOPA create new housing in Massachusetts?

TOPA is primarily intended to preserve existing housing rather than directly create new housing units. Massachusetts separately estimates that the state needs at least 222,000 additional homes between 2025 and 2035.

Could TOPA affect multifamily property owners in Cambridge and Somerville?

Potentially. If Cambridge, Somerville or another Massachusetts municipality adopts a TOPA program authorized by the state, owners of covered multifamily properties could be required to follow additional procedures when selling their property.

The Bottom Line

The intention behind the Massachusetts Tenant Opportunity to Purchase Act is understandable. Preserving affordable housing and reducing displacement are worthwhile public policy goals.

But good intentions don’t guarantee good outcomes.

If a housing policy makes multifamily properties more complicated to sell, discourages buyers from bidding, increases transaction uncertainty or causes investors to view Massachusetts as a more difficult place to invest in rental housing, those consequences deserve serious consideration.

Massachusetts needs at least 222,000 additional homes by 2035.

As we consider new housing policies, I think we should keep asking a simple question:

Does this make it easier or harder to create, finance, own and invest in housing in Massachusetts?

For Massachusetts property owners considering selling a multifamily property in Cambridge, Somerville, Arlington or Greater Boston, understanding how changes in state and local housing laws could affect the value, timing and strategy of a sale is increasingly important.

About Ed Greable

Ed Greable is a Massachusetts real estate agent with more than two decades of experience and more than 500 real estate transactions. Ed Greable & Company specializes in residential and multifamily real estate throughout Cambridge, Somerville, Arlington and Greater Boston and is affiliated with Keller Williams Realty Boston Northwest.