In the District of Columbia (DC), the main sources of law come from statutes (DC Code), regulations (DC Municipal Regulations), common law principles and case law.

The DC Code is the primary source of law, covering a range of topics from property and lien rights to brokerage relationships and to taxes. The Municipal Regulations supplement the DC Code, as do administrative notices issued by various agencies.

Administrative agencies also supplement the rules and regulations, particularly in areas like professional licensing and conduct. The DC Department of Licensing and Consumer Protection, for example, sets standards for real estate professionals and upholds the Municipal Regulations that affect real estate in DC.

DC, like other areas, has experienced a downturn. Several trends are unique to this market.

Many buildings in DC are federally owned (mainly via the Government Services Administration (GSA)) or house government tenants under leases. Since early 2025, the Department of Government Efficiency (DOGE) and the federal government have prioritised disposing of government-owned buildings and terminating or reducing the size or term of GSA leases. Many tenants, including the GSA, are reducing space and not renewing leases. DOGE’s actions also affect government contractors and other commercial office users, and their demand for space. While these trends continue to depress values, they may create redevelopment opportunities, especially in areas with many government buildings, such as, for example, between the Wharf and the National Mall in Southwest DC.

Over the past year, the Mayor and DC Council have advanced legislation to incentivise real estate development and investment. DC now leads the nation in office-to-residential conversions, and the local government’s “Office to Anything” programme encourages repurposing office space for new commercial, entertainment, retail or non-residential uses. DC has also proposed its first major Tenant Opportunity to Purchase Act (TOPA) reform in decades, excluding market-rate multi-family buildings from tenants’ right of first refusal to purchase. Significant development is expected around Capital One Arena in Chinatown/Gallery Place, with nearly USD800 million invested, and a potential new stadium for the Washington Commanders at the former RFK stadium could bring further opportunities in other parts of DC.

DC faces the national trend of rising inflation, which has increased construction and development costs. High interest rates have kept large property valuations subdued. However, anticipated interest rate decreases in 2025 may lower acquisition and development costs in DC.

DC’s Mayor has proposed the Rebalancing Expectations for Neighbors, Tenants, and Landlords (RENTAL) Act to reform rental housing regulations by streamlining the rental process, strengthening tenant protections, and addressing affordability and stability. The Act aims to modernise laws to better fit today’s housing market and the needs of both tenants and landlords, while also addressing landlord challenges like rent collection and rising costs.

TOPA is a longstanding DC law giving tenants the right of first refusal when a landlord sells property, allowing tenants to buy or assign their rights before a sale, often causing higher costs and delays in multi-family transactions. The RENTAL Act proposes major changes to TOPA, including streamlining the process and exempting most market-rate multi-family properties built in the last 25 years, shifting TOPA’s focus to non-market rate rentals.

If passed, the Act would likely make TOPA more predictable and manageable. As of 1 July 2025, the RENTAL Act remains proposed, but the DC Council is expected to adopt some form of TOPA reform and other provisions. The full impact will depend on the final version.

Categories of property rights include:

• fee interests (fee simple and life estate);
• leasehold interests and other concurrent ownership interests; (eg, tenancy in common or joint tenancy);
• non-possessory interests (eg, easements and licences); and
• security interests (primarily deeds of trust).

Real property is categorised for taxation purposes, with various tax rates applying to commercial, residential or vacant property. Government, charitable or education properties may be exempt.

Title is usually transferred by special warranty deed, which must be recorded within 30 days of execution. “Deed” broadly refers to any document transferring or assigning a real estate interest, except leases or ground rents under 30 years (including extensions).

For commercial properties like offices, hotels or retail, no unique transfer requirements apply. Whether certain items – such as fixtures – are included in the sale depends on factors like attachment and the parties’ intent. The DC Bulk Sales Act requires buyers of existing businesses (eg, hotels) to notify the Office of Tax and Revenue before closing, or they may become liable for the seller’s unpaid taxes.

As to soil characteristics, real estate sale contracts must include the following.

• The soil characteristics of the property as described by the Soil Conservation Service in the 1976 Soil Survey of DC and shown on the Soil Maps of DC in that publication.
• A note that buyers can contact a soil testing lab, the DC Department of Environmental Services, or the Soil Conservation Service for more information.

Sellers must also inform buyers in writing, before signing the sale contract, about the existence or removal of any underground storage tanks. For commercial property, sellers must disclose any prior use suggesting tanks may exist. These disclosures are based on the seller’s knowledge.

Transfer is typically effected by a (special warranty) deed or similar document that legally conveys ownership, by a grantor to a grantee. The deed must be in writing, signed by the current owner, and include a legal description of the property. The grantor’s signature must be acknowledged and notarised. DC uses a race-notice recording system, meaning the first party to record a deed has priority, provided they had no knowledge of prior claims.

See 2.2 Laws Applicable to Transfer of Title regarding recording requirements and transfer taxes.

Title insurance is commonly used to protect buyers and lenders from potential issues with the property’s title. These insurance policies are typically obtained at closing.

Buyers are encouraged to perform thorough real estate due diligence to uncover issues like environmental contamination, legal restrictions or structural problems.

Typically, buyers obtain environmental site assessments (such as a Phase I), a zoning report and a property condition report. A buyer’s attorney usually handles title and survey due diligence, reviewing any encumbrances or encroachments. Due diligence also includes reviewing leases, service contracts, warranties, certificates of occupancy and tenant estoppels.

Most purchase and sale agreements provide a “due diligence period” for buyers to complete these investigations.

Agreements typically include standard representations and warranties, including:

• organisation and qualification of the seller entity, and confirmation of authority to enter into transaction;
• pending or threatened litigation;
• whether the seller has employees;
• certain matters pertaining to the rent roll or leases, including whether leases have been provided and whether there are any outstanding defaults;
• status of property contracts;
• known environmental issues;
• the existence of any outstanding purchase rights with respect to the property; and
• compliance with the USA PATRIOT Act, Office of Foreign Assets Control (OFAC) rules, or any other applicable laws or regulations.

Buyers rely on sellers’ representations to ensure the information provided is accurate, complete and current. Buyers expect these representations to cover all aspects of the property and ownership structure, especially matters not easily discovered during due diligence.

Buyers also make limited representations, such as confirming their authority to purchase and compliance with the PATRIOT Act and OFAC rules.

A seller’s liability for breaches of representations and warranties discovered after closing usually survives for a negotiated period, often six to 12 months. This allows buyers time to identify issues that may not be obvious at closing. Since most commercial property sellers are special purpose entities with no assets beyond the property, buyers often require security for these obligations – such as a post-closing holdback in escrow, a guaranty from a creditworthy parent, or a covenant to retain funds or maintain net worth. Sellers typically negotiate a liability cap, often 1–3% of the purchase price, though this varies by deal size and complexity.

To manage post-closing risk, some transactions incorporate representation and warranty insurance (RWI), shifting the risk of a seller’s breach to an insurer. RWI protects buyers, can facilitate smooth closings and is useful in complex transactions where holdbacks or escrows may be insufficient. It often supplements or replaces traditional liability caps, giving buyers more security and limiting sellers’ post-closing exposure.

While DC does not have specific rules targeting foreign buyers, federal statutes and regulations may apply, particularly those enforced by the Committee on Foreign Investment in the United States (CFIUS). Real estate investments near sensitive sites like airports, military facilities, government buildings or buildings subject to lease by a government agency or contractor (common in DC) may trigger national security reviews. National security issues are challenging to mitigate if a target property involves certain government agencies or the exchange of classified documentation.

The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) significantly expanded the authority of CFIUS to include certain real estate transactions.

The Foreign Investment in Real Property Tax Act (FIRPTA) may also subject foreign investors to certain federal income tax liability, and foreign sellers may be required to hold back sale proceeds pending confirmation from the IRS that only reduced withholding is required.

Buyers are generally not liable for soil pollution or environmental contamination of a property if the buyer did not cause it. Under DC law, a person who qualifies as a “non-responsible person” is not liable for existing contamination at the property, provided they meet certain criteria, including having no prior or current ownership interest in the property at the time of applying to participate in any Voluntary Cleanup Program and having not caused or contributed to the contamination. This status continues upon acquiring the property, and buyers are not liable for pre-existing contamination unless they cause new contamination or exacerbate existing contamination.

Further, buyers may avoid liability for pre-existing contamination if they qualify as an “innocent landowner” – meaning they did not contribute to the contamination and took reasonable steps to assess and prevent environmental risks. Conducting customary environmental due diligence is a key part of establishing this protection.

Buyers typically engage a third-party zoning consultant to conduct a zoning analysis. This includes obtaining a zoning letter from the Department of Buildings (DOB), which confirms the official zoning classification. The consultant then prepares a zoning report outlining permitted uses, applicable restrictions, and whether existing structures and uses comply with current zoning regulations.

See 4. Planning and Zoning for further detail.

DC may acquire private property for public use through condemnation when a voluntary sale cannot be reached. This process allows the Mayor to initiate proceedings to acquire land for public purposes.

Once DC determines that a taking is necessary, DC files a condemnation complaint with the DC Superior Court to begin the legal process of condemnation and the ascertainment of value. The Mayor then files a “Declaration of Taking”, which formally states that the property is being acquired for public use. Upon filing this declaration and depositing estimated compensation with the court, title to the property vests in DC in fee simple, and the land is deemed condemned. The court then oversees the determination of just compensation.

Real estate transactions, including deed transfers and assignments of ground lease interests, are subject to both transfer tax and recordation tax, unless a statutory exemption applies. These are typically based on the consideration paid for the property. If the consideration is deemed nominal (less than 30% of the fair market value), taxes are calculated based on the property’s fair market value. The Recorder of Deeds will not accept a deed unless all applicable taxes are paid.

Transfer and recordation tax rates are as follows.

Residential Property

For properties with consideration under USD400,000:

• transfer tax – 1.1%;
• recordation tax – 1.1%; and
• combined total – 2.2%.

For properties with consideration of USD400,000 or more:

• transfer tax – 1.45%;
• recordation tax – 1.45%; and
• combined total – 2.9%.

First-Time homebuyer exemption:

• Eligible buyers may qualify for a reduced recordation tax of 0.725%, while the transfer tax remains unchanged.

Commercial and Mixed-Use Property

Relevant taxes are:

• transfer tax: 1.45%;
• recordation tax: 1.45%; and
• combined total: 2.9%

The buyer and seller typically split the taxes equally, and both are jointly and severally liable.

Special rules apply in many situations, especially in connection with ground leases. Interested parties are advised to consult an experienced lawyer prior to calculating potential transfer and recordation taxes associated with a transaction.

DC also has an “economic interest” transfer tax of 2.9% for upper-tier controlling interest transfers. Complex rules apply to these transfers, and an “Economic Interest Deed” (ROD 6) may need to be filed.

A Form FP-7C Real Property Recordation and Transfer Tax Form, setting forth a calculation of transfer and recordation taxes, must typically be filed with any deed submitted for recordation. A ROD 5 Transfer of Economic Interest Tax Return applies in the case of an economic interest transfer.

Please see 2.6 Important Areas of Law for Investors.

Common financing methods for commercial real estate acquisitions are as follows.

• Senior mortgage loans – a financial institution provides a loan secured by a first lien on real property.
• Preferred equity – private investors, real estate funds or institutional investors provide capital in exchange for an ownership stake and share of profits from the operation of the real estate asset.
• Mezzanine financing – a hybrid of debt and equity financing, typically used to fill the gap between senior mortgage loan and equity investment. Mezzanine loans are typically secured by membership interests in a mezzanine entity that holds equity interests in the underlying mortgage borrower. Mezzanine lenders take a subordinate position to senior lenders, but have priority over equity holders.

The choice of financing depends on the size and complexity of the transaction, the creditworthiness of the borrower and prevailing market conditions. Acquisitions of large real estate portfolios or companies holding real estate often require more sophisticated structures. These can include syndicated loans, bridge loans, corporate-level financing, Real Estate Investment Trust (REIT) structures, joint ventures, preferred equity or the issuance of bonds.

A commercial real estate investor that borrows funds to acquire or develop real estate typically grants a mortgage or deed of trust over the property as security for the loan (with deed of trust being most common in DC). Additional security can include assignments of leases and rents, security interests in personal property associated with the real estate and guarantees from affiliates or principals in the ownership structure of the property owner.

There is no blanket restriction in DC that prevents a borrower from granting a security interest over real estate to a foreign lender. If a foreign lender intends to conduct ongoing business or foreclose and take title to property, it may be required to register as a foreign entity authorised to do business in DC. Additionally, foreign lenders may need to appoint a local agent for service of process and may need local counsel to represent them in DC foreclosure proceedings.

Borrowers in DC can make payments to foreign lenders without special governmental approval. However, transactions involving certain countries or individuals subject to US sanctions may be restricted. All parties must ensure that the foreign lender is not on any prohibited lists administered by the OFAC, and that all Anti-Money Laundering regulations and PATRIOT Act disclosures are made.

Borrowers must comply with IRS reporting and withholding obligations when making payments to foreign lenders. Payments of interest to foreign lenders may be subject to US federal withholding tax, typically at a rate of 30%, unless reduced or eliminated by an applicable tax treaty or exemption. Borrowers are generally responsible for withholding and remitting the withholding tax and filing appropriate IRS forms.

Granting security over real estate, most commonly by executing and recording a deed of trust, typically triggers the imposition of a recordation tax, registration fees and notaries’ fees.

Recordation tax is assessed whenever a security instrument is recorded with the DC Recorder of Deeds. The basis of the tax is the amount secured by the instrument, and if that amount is less than USD400,000, a 1.1% recordation tax is due. If the above is over USD400,000, a 1.45% recordation tax is due. Custom is for the borrower to pay the recordation tax.

Nominal registration or filing fees are charged by the DC Recorder of Deeds. Security documents must typically be notarised before they can be recorded.

See 8.2 Mitigation of Tax Liability.

DC does not have statutory “financial assistance” rules. However, entities must comply with corporate governance requirements, ensure the transaction provides a corporate benefit and avoid fraudulent conveyances. Additionally, an entity must ensure it has the proper corporate authority to grant a valid security interest in its real estate assets. This typically involves complying with the entity’s governing documents (articles of incorporation, by-laws, or operating agreements), and obtaining necessary approvals from directors, members or managers). Lenders often require evidence of authorisation as a condition to closing a loan.

When a borrower is in default, the lender must: (i) ensure that the security instrument was properly executed and recorded; (ii) provide the borrower with notice of default and an opportunity to cure such default within a specified time period (in accordance with the loan documents and DC statutes); (iii) at its election, engage in a non-judicial foreclosure process under the deed of trust which allows the lender to sell the property at a public auction after providing the required notices (in some cases a judicial foreclosure process is followed, which involves filing a lawsuit and obtaining a court order to sell the property); and (iv) comply with all statutory requirements related to the foreclosure process, including publication of the notice of sale, timing of the sale and procedures for conducting the auction.

Lenders must ensure that the deed of trust is recorded as soon as possible after execution to establish priority over any unrecorded or subsequent liens or encumbrances. 

Non-judicial foreclosures can be completed in as little as 30–45 days. Judicial foreclosures can take six months to over a year. Delays can occur for either foreclosure process if the borrower contests the foreclosure, seeks injunctive relief, or files for bankruptcy, which imposes an automatic stay on foreclosure proceedings.

COVID-19 pandemic-specific restrictions on a lender’s ability to foreclose on real estate have generally expired or been lifted. Lenders may now proceed with foreclosure and enforcement actions in accordance with pre-pandemic statutory and contractual procedures. Consequently, many lenders have resumed foreclosure proceedings where borrowers are in default and workout negotiations have failed.

Lenders often choose to forebear or negotiate loan modifications or extensions in cases where foreclosure may not be economically advantageous or could negatively impact the lender’s reputation, especially with long-standing borrower relationships or properties with uncertain market value. There is also an active market in DC for the sale of non-performing notes. This allows lenders who hold defaulted or underperforming loans to manage their risk and recover value. Buyers of the non-performing notes often specialise in distressed assets and assume the administrative burden for any workout or required foreclosure.

Secured debt can become subordinated to newly created debt either by agreement between the parties or by operation of law.

Subordination by Agreement

When parties enter into a subordination agreement, the existing secured lender (the “Senior Lender”) agrees that its security interest or repayment rights will be subordinate to those of a new lender (the “Junior Lender”). This arrangement is often used to enable new financing, especially when the borrower needs additional funds and the new lender requires a higher priority security interest. Intercreditor agreements are detailed contracts between lenders that define each lender’s rights and priorities regarding the assets. Often, existing loan terms require the Senior Lender’s consent before the borrower can take on new debt from a Junior Lender. In distressed situations, lenders may restructure claim priorities to support a workout or restructuring plan.

Subordination by Operation of Law

In limited circumstances, subordination can occur by operation of law. Certain statutory liens, such as tax liens or mechanic’s liens, can take priority over pre-existing secured debt, depending on the nature and timing of the liens.

Generally, lenders are protected by the “secured creditor exemption” when they merely hold a security interest and do not participate in the management of the property. However, if a lender becomes actively involved in the management of the property or forecloses and takes title, it may be considered an owner under applicable DC and federal law and can be held liable for contamination of the property, if the lender’s actions result in additional contamination or the lender engages in gross negligence or wilful misconduct. Lenders are protected for acting in good faith to protect their interests in contaminated properties, as long as they comply with the outlined requirements and do not exacerbate contamination.

If a borrower becomes insolvent and files for bankruptcy, the US Bankruptcy Code allows the trustee to set aside certain transfers or security interests that are deemed preferential, fraudulent or unperfected. A preferential transfer is one where a security interest was granted to a lender within 90 days before bankruptcy (or one year for insiders), and the lender received more than it would have in liquidation. A fraudulent transfer occurs if the security interest was granted to hinder, delay, or defraud creditors, or if the borrower, while insolvent, received less than reasonably equivalent value in return.

An unperfected transfer happens when a lender fails to properly perfect its security interest, such as by not recording a mortgage or not filing a UCC-1 financing statement in the correct jurisdiction.

When a bankruptcy is filed, an automatic stay prevents lenders from enforcing security interests or foreclosing on collateral without court approval. Courts may also recharacterise transactions or subordinate a lender’s claim if the transaction or the lender’s acts are inequitable.

Mezzanine loans, which are secured by a pledge of equity interests in the property-owning entity rather than a direct interest in the real estate, are generally not subject to recordation or transfer taxes in DC because the collateral for a mezzanine loan is not a real property interest, but rather a security interest in the ownership interests of the entity that owns the real estate. Therefore, there is no requirement to record the security interest for a mezzanine loan in the land records and no recordation or transfer tax is triggered.

There are currently no pending or proposed rules in DC that would impose new or additional recording or similar taxes on mezzanine loans. Legislative trends in other jurisdictions have included proposals to impose taxes or require the recording of mezzanine loans, but those measures have not been enacted in DC.

Transfer and recordation taxes may apply in connection with a senior or mezzanine lender’s exercise of remedies under a loan, including for a foreclosure or deed-in-lieu of foreclosure, or for a mezzanine foreclosure.

Please also see 2.10 Taxes Applicable to a Transaction and 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security regarding transfer and recordation taxes.

Zoning and land use regulations are based on a jurisdiction’s police power to protect public health, safety and welfare. State governments usually delegate this authority to local governments through enabling statutes, allowing municipalities to create and enforce zoning rules consistent with their comprehensive plans.

In DC, Congress grants zoning authority. The DC Zoning Commission, under this authority, adopted the 2016 Zoning Regulations and Zoning Maps.

While some regional co-ordination may address specific land use issues, zoning regulations are generally created and enforced by municipalities, leading to significant differences between jurisdictions.

In DC, the design, appearance and construction of new or renovated buildings are governed by detailed development standards that differ by zoning district and development type.

The zoning code regulates key physical and visual aspects, such as building height, massing, setbacks, lot occupancy, façade articulation and roof structures. The DOB, with the Office of Planning, typically enforces these rules.

Some areas require extra design oversight. Projects in Design Review Zones, Historic Districts or Neighborhood Conservation Overlays undergo enhanced review, which may include requirements for compatibility with surrounding architecture and context.

The design review process ensures new construction supports the urban fabric and DC planning goals. Public notice and hearings are usually required for projects in design review or seeking special exceptions, allowing for community input in decisions.

Development in DC is primarily regulated by DC’s local government, with planning boards serving an advisory role. The zoning code provides the legal basis for evaluating development proposals and reflecting community land use goals.

The Zoning Commission and Board of Zoning Adjustment (BZA) are the main bodies overseeing land use. The Zoning Commission adopts and amends zoning regulations and maps, while the BZA handles appeals, variances and special exceptions.

The Office of Planning offers policy guidance and analysis, and the DOB enforces zoning compliance through permits and inspections. These agencies work together to ensure development aligns with the Comprehensive Plan and zoning code, which sets procedures and standards for review to reflect community goals and legal requirements.

To start a new development or major renovation in DC, applicants usually go through a formal entitlement process for zoning approval. This may include obtaining zoning determinations from the DOB, applying to the BZA for special exceptions or variances, or seeking design review or Planned Unit Development (PUD) approval from the Zoning Commission. The process often requires compliance with the State Environmental Quality Review Act (SEQRA) and the DC Environmental Policy Act to assess environmental impacts.

Public input is collected through notice and hearing procedures, and community feedback can strongly affect decisions. The Zoning Commission reviews rezoning and PUD applications, often with input from the Office of Planning and affected Advisory Neighborhood Commissions (ANCs). The entitlement process aims to balance development flexibility, neighbourhood compatibility and public benefits.

Zoning appeals may be filed with the BZA by any person aggrieved by a decision, such as a zoning determination by the DOB.

The BZA conducts a public hearing and issues a decision based on the record and applicable zoning standards. If a party is dissatisfied with the BZA’s ruling, they may seek judicial review by filing an appeal with the DC Court of Appeals.

Certain development projects in DC may require formal agreements with government entities to support approval or implementation, though this is not always mandatory.

These agreements include Community Benefits Agreements negotiated during the PUD process, Memoranda of Understanding with ANCs or city agencies, and Reimbursement Agreements for third-party consultant or infrastructure costs.

Incentive zoning, such as Inclusionary Zoning, may also apply, granting development bonuses in exchange for affordable housing or other public benefits.

All agreements must comply with zoning and administrative laws and are generally reviewed as part of the entitlement process. Fees must be reasonable, necessary and not imposed solely for the reviewing board’s convenience.

Zoning restrictions are enforced through regulations like height limits, density, setbacks, parking and lot coverage, as well as conditions attached to zoning approvals. These are reviewed during planning and permitting, and monitored by municipal code enforcement or building departments.

Violations can be found through inspections or citizen complaints. The DC DOB oversees compliance via plan reviews, inspections and complaint investigations.

Violations may lead to Notices of Infraction, fines, or stop-work orders. Non-compliance enforcement actions can be appealed to the Office of Administrative Hearings or the BZA, depending on the dispute.

Investors can hold real estate in various entities, such as limited liability companies (LLCs), partnerships and corporations, including REITs. LLCs are the most common choice.

LLCs

LLCs offer flexibility and can be managed by members or appointed managers. An operating agreement sets management procedures, profit distribution and member rights. Members are generally protected from personal liability for entity debts. Unless electing corporate tax treatment, LLCs are pass-through entities for federal tax purposes, so profits and losses go directly to members’ tax returns, avoiding double taxation. However, DC imposes an unincorporated business franchise tax on LLCs. LLCs must also pay annual registration fees and ongoing accounting and compliance costs.

Partnerships

Limited partnerships (LPs) have general partners (management authority, unlimited liability) and limited partners (limited liability, no management authority). A partnership agreement sets management, profit sharing and partner rights. Income and losses pass through to partners, avoiding entity-level tax. LPs are subject to the unincorporated business franchise tax, annual registration fees, and possible accounting and compliance costs. General partnerships are less common for real estate investment due to partners’ unlimited liability for entity debts.

Corporations

Corporations are separate from shareholders and provide limited liability. They are governed by articles of incorporation and by-laws detailing governance, share structure, and rights of directors and shareholders. Managed by a board and officers, shareholders have limited direct involvement. C-corporations face double taxation: corporate income at the entity level and dividends at the shareholder level. S-corporations offer pass-through taxation but have restrictions on shareholders and only one class of stock. In DC, S-corporations are treated as C-corporations for state tax, so they get federal tax benefits but still pay the DC corporate franchise tax. Corporations must pay annual franchise taxes and filing fees.

Public and Private REITS

REITs are commonly used to invest in income-producing real estate, from single properties to large portfolios in DC. They pool capital from multiple investors, enabling diversification and access to larger assets. Public REITs are traded on major stock exchanges, open to both individual and institutional investors, and subject to strict regulatory and reporting rules for transparency. Private REITs, usually for institutional or high net worth investors, are less regulated but offer access to specialised real estate. Both types are generally available to foreign investors – though these investors may face US tax withholding on distributions and gains, and must meet US tax reporting and regulatory requirements.

Advantages of REIT Structures

REITs offer key benefits for DC real estate investors. Public REITs provide liquidity, as shares can be easily bought and sold, unlike direct real estate investments. REITs also offer diversification, reducing the risk of investing in a single property. By law, REITs must distribute at least 90% of taxable income as dividends, appealing to those seeking regular income. REITs avoid double taxation if they meet certain requirements, including income distribution. They also allow foreign investors to access US real estate markets, including DC.

Statutory Requirements for REIT Qualification

To qualify as a REIT under US law, an entity must:

• be organised as a corporation, trust or association taxable as a domestic corporation;
• have at least 100 shareholders after the first year, with no more than 50% of shares held by five or fewer individuals in the last half of the year;
• derive at least 75% of gross income from real estate sources, and at least 95% from these plus dividends, interest, and gains;
• invest at least 75% of total assets in real estate, cash or US Treasuries;
• distribute at least 90% of taxable income (excluding net capital gains) to shareholders annually as dividends;
• be managed by a board of directors or trustees and have transferable shares; and
• comply with IRS filing and reporting requirements (and potentially additional DC tax rules).

There is no minimum capital requirement to set up an entity to invest in real estate in DC; however, the entity governance documents may specify minimum capital. REITs are typically formed with substantial capital to ensure compliance with regulatory requirements and to attract investors.

Since 1 January 2020, DC has required all entities formed or registered to do business in DC to provide beneficial ownership information. A beneficial owner is anyone who: (i) owns more than 10% (directly or indirectly) of the entity, (ii) controls the entity’s financial or operational decisions, or (iii) can direct its day-to-day operations.

Beneficial owners must report their names and both business and home addresses to DC’s Corporations Division when the entity is formed or registered, whenever the BRA-25 Biennial Report is filed (due April 1 every two years), and any time the information changes.

Under the Corporate Transparency Act (CTA), most LLCs, partnerships and corporations formed or registered in DC must also report beneficial ownership information to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), unless exempt (such as large operating companies or certain regulated entities). According to the law, the report must include each beneficial owner’s and company applicant’s name, date of birth, address and a unique identifying number. US entity beneficial owners are exempt from this reporting, but the CTA still applies to foreign companies.

See 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity for a discussion of the key governance documents for each entity.

All entities are required to file a report every two years with a USD300 filing fee. Third-party registered agents typically cost USD100–USD300 annually.

LLCs

• Basic bookkeeping and tax preparation ranges from USD1,000–USD3,000 annually.
• More complex LLCs with multiple members, properties or significant activity can incur higher costs, potentially USD3,000–USD7,500+ annually.
• Total typical annual cost range is USD1,250–USD7,950+.

Partnerships

• Basic annual accounting and tax compliance ranges from USD1,500–USD4,000 annually.
• More complex partnerships can incur higher costs, potentially USD4,000–USD10,000 annually.
• Total typical annual cost range is USD1,750–USD7,500+.

Corporations

• Basic bookkeeping and annual accounting and tax compliance typically ranges from USD2,000–USD5,000 annually.
• Publicly traded REITS or large private corporations can incur higher costs, potentially USD10,000–USD50,000+ annually.
• Total typical annual cost range is USD2,400–USD50,600+.

The most common way to occupy real estate without owning it is by leasing, which gives the tenant a legal right to possess the property for a set period. Leases usually grant exclusive use, may be assigned with landlord approval and generally cannot be ended early unless the tenant defaults or certain conditions apply.

Less formal options include licences and occupancy agreements, which permit use of the property without creating a legal interest. These are more flexible but provide fewer rights, and are often used for short-term or limited access.

An estate at will is an informal tenancy that either party can end at any time, typically used when there is no written lease.

Commercial leases differ based on property type and financial arrangements. The main types are gross leases, net leases and ground leases, each dividing costs and responsibilities differently.

Gross leases, common in multi-tenant office buildings, require tenants to pay a fixed base rent (which may increase annually) plus extra rent for a share of operating expenses like taxes, insurance, maintenance and utilities. These extra costs are usually based on increases over a base year or the tenant’s share of the building’s square footage.

Net leases place more responsibility on the tenant. In a triple-net lease, for example, the tenant pays base rent and directly covers all property expenses, including taxes, insurance and maintenance. This is typical for single-tenant retail or industrial properties.

Ground leases involve leasing land, often for long terms such as 99 years, so the tenant can develop and operate improvements. The tenant handles construction and maintenance, while the landowner keeps a reversionary interest. At lease end, the land and improvements usually revert to the landlord.

For residential units under the Rent Stabilization Program, rent increases are regulated in timing and amount. Landlords must notify the DC Rental Accommodations Division (RAD) of any rent adjustment, and increases are usually tied to the Consumer Price Index (CPI). Voluntary agreements, approved by at least 70% of tenants and the DC Rent Administrator, can adjust rents or fund improvements. Leases for units exempt from rent control must include written notice to tenants that rent increases are not regulated.

Residential lease terms are generally negotiable if they comply with the law. Landlords must disclose whether a unit is rent-controlled or exempt, and leases must be clear enough to be enforceable, even if some terms are open.

DC does not regulate commercial rents. Lease terms and rent amounts for commercial properties are freely negotiated.

DC commercial leases generally follow standard patterns in term length, maintenance duties and rent schedules, though details vary by lease type.

Lease Term Length

Space leases for office, retail or industrial properties usually last between five and 20 years, often with renewal options and scheduled rent increases. Ground leases are much longer, often up to 99 years, and are used when tenants lease land to develop and operate improvements.

Maintenance and Repair Obligations

In space leases, tenants handle all maintenance and repairs within their premises, while landlords maintain the building’s structure, roof, common areas and major systems. If tenants neglect repairs, landlords can step in after notice and bill the tenant. In ground leases, tenants are responsible for all maintenance and repairs, including the land and any improvements.

Rent Payment Frequency

Space lease rent is usually paid monthly. Ground lease payments may be monthly, quarterly, or annually. Rent often includes a base amount and, in some cases, additional charges for operating expenses, especially in net leases.

Commercial leases often include rent escalation clauses, allowing rent to increase over time according to negotiated terms. These clauses help landlords keep up with inflation and rising property costs.

Base rent usually increases at set intervals – annually, every three years, or every five years – by a fixed percentage or tied to an index like the CPI. In long-term leases, CPI-based increases may be recalculated periodically and often have caps to limit large jumps.

Tenants typically pay a share of increases in operating expenses, such as taxes, insurance and maintenance. These are estimated and billed monthly, with an annual reconciliation based on actual costs.

Retail tenants may pay percentage rent, calculated as a percentage of gross sales above a set threshold. These payments are usually estimated and reconciled annually after actual sales are reported.

DC law allows rent increases during a lease if the lease specifically provides for them. If the lease sets a fixed rent with no escalation clause, no increases are allowed during the term. DC courts consistently uphold clear escalation provisions.

Rent increases for rent-controlled units follow specific rules based on the reason for the adjustment, aiming to balance tenant and housing provider interests while complying with local law.

Under commercial leases, lease terms govern.

Commercial rent is not subject to a VAT or similar sales tax.

Commercial tenants in DC often pay more than just base rent. Depending on the lease, they may also cover utilities, water, trash, property taxes, common area maintenance, and business-related licenses or permits. Reasonable, documented management fees are permitted if they are not simply disguised rent increases.

Tenants usually provide a security deposit at or before lease commencement. They may also pay for permits and construction or remodelling. In gross leases, landlords typically deliver the space in a specified condition and may offer a tenant improvement allowance to help with fit-out costs; any expenses beyond this allowance are the tenant’s responsibility. Alternatively, the landlord may provide a turnkey or build-to-suit space that is substantially complete.

Landlords are usually responsible for maintaining and repairing common areas like hallways, lobbies, elevators, parking lots, garages and landscaping. Leases specify which services are provided, including seasonal work such as snow removal. Although landlords manage these services, the costs are typically passed to tenants as Common Area Maintenance (CAM) charges, with each tenant paying a pro rata share.

In ground leases, however, tenants are generally responsible for all maintenance and repair costs, including those for areas that would otherwise be common in multi-tenant properties.

Leases and statutes govern utility and telecommunications payments in DC commercial properties. Landlords or property managers must ensure tenants are billed accurately and legally.

Tenants are usually charged for utilities through direct metering or submetering. By law, landlords can only charge tenants the actual utility cost, plus limited administrative fees if the lease allows. Submetering is permitted if the lease authorises it, and billing must follow the utility provider’s cycle unless otherwise agreed. If a landlord fails to pay utility bills, tenants can obtain service in their own names and deduct those payments from rent.

HVAC costs depend on the building. Many properties have central HVAC systems, with costs included in base rent and escalations. Tenants may be charged for after-hours HVAC use. In some cases, tenants have individual HVAC systems and are billed directly. Tenants with supplemental cooling (eg, for server rooms) are responsible for those costs.

Leases define utility responsibilities, specifying which utilities tenants pay directly and how shared costs are divided. Transparency, proper documentation and compliance with DC regulations are essential.

Leases establish the party responsible for paying real estate taxes on commercial rental property. While landlords, as property owners, are generally responsible for paying these taxes, it is common for commercial leases to require tenants to cover increases in real estate taxes over a base year. This arrangement helps landlords maintain a predictable return on investment by shifting the burden of tax increases to tenants.

If a tenant is contractually liable for real estate taxes, any tax abatements or benefits may be passed through to the tenant, even though the landlord remains the primary taxpayer.

The lease terms dictate insurance obligations. Landlords usually maintain property insurance for the building, while tenants are often required to carry liability insurance and insure their own property or business operations. In condominiums, governing documents like declarations typically outline who must carry insurance and pay deductibles, with some costs passed to unit owners.

Property insurance generally covers risks such as fire, floods, earthquakes, terrorism, mechanical failures, business interruptions, pollution, debris removal and weather-related damage. Policies may also cover losses from lightning, storms and water damage from sprinklers or plumbing, provided coverage meets public policy standards.

During the COVID-19 pandemic, many tenants sought business interruption coverage for losses from mandatory closures. DC courts have consistently held that these policies require actual physical damage to property to trigger coverage. Claims based only on closures or the virus’s presence were usually denied, as they did not involve direct physical loss or damage.

Landlords can set lease restrictions on how tenants use the property, such as specifying residential or commercial use and banning certain activities. These limits are generally enforceable if they comply with zoning and other laws. However, landlords cannot unreasonably interfere with a tenant’s lawful use, as tenants are entitled to quiet enjoyment. A lease is void if it is for an illegal purpose, like violating zoning laws.

Tenants are generally permitted to make alterations or improvements, subject in each case to the negotiated terms of the lease.

The DC Rental Housing Act and related regulations apply to residential leases. These obligations include regulations on security deposits, notice requirements and eviction procedures. The law is favourable to tenants. COVID-19 regulations have expired.

A commercial tenant’s insolvency is governed by both the lease and federal bankruptcy law. Most leases let landlords terminate if the tenant becomes insolvent or files for bankruptcy, but federal law generally makes these clauses unenforceable after bankruptcy is filed.

Filing for bankruptcy triggers an automatic stay, stopping all eviction or collection actions. The lease, considered an executory contract, cannot be terminated or enforced without court approval. The bankruptcy trustee (or debtor-in-possession) must decide within about 120 days (subject to extension) whether to assume (continue) or reject (terminate) the lease. If assumed, the tenant must cure defaults and keep performing under the lease; if rejected, the lease ends.

Landlords can ask the court to lift the automatic stay to regain possession. If the lease is rejected, landlords can seek damages, but recovery is limited by bankruptcy rules. Under DC law, tenants may be entitled to restitution for payments exceeding the landlord’s damages, with possible offsets.

A commercial tenant has no automatic right to stay after the lease expires or is terminated. If the lease is for a set term and the tenant remains without the landlord’s consent, the landlord can immediately reclaim possession – no notice to quit is needed.

Under DC Code § 42-3210, the landlord may file an ejectment action in DC Superior Court to recover possession. If the tenant holds over without permission, the landlord can seek double rent for the unlawful period, and may also pursue unpaid rent or damages.

Self-help evictions are not allowed. Landlords cannot change locks, cut utilities, or block access. All evictions must go through the court.

Leasehold interests are transferable, but leases govern and landlords often require written consent for any assignment or sublease.

Landlords may condition approval on the proposed assignee or subtenant meeting reasonable financial or operational qualifications. Some leases allow the landlord to terminate the lease or recapture the space if the tenant seeks to assign or sublet. Continued acceptance of rent by the landlord after an unauthorised transfer may be interpreted as a waiver of the restriction.

Even if a lease is assigned or sublet, the original tenant typically remains liable under the lease unless the landlord explicitly releases them from future obligations.

Landlords may terminate a lease if the tenant defaults, such as by not paying rent or breaching key terms. For month-to-month or similar tenancies, landlords can end the lease with 30 days’ written notice. For leases with a fixed end date, no notice is needed; the landlord can reclaim the property immediately when the lease ends. If a tenant does not vacate after the lease ends or is terminated, the landlord must go to court to regain possession. Self-help methods like changing locks or cutting utilities are not allowed.

Tenants can also terminate a lease in certain situations. They may end a month-to-month tenancy with 30 days’ notice, or terminate if the landlord fails to meet essential obligations or if the premises become uninhabitable due to events like fire or major damage. Some leases may allow early termination for reasons such as redevelopment or sale. Both parties must follow notice requirements and use the legal system to resolve disputes or enforce right.

Commercial leases over one year in DC must be executed as a deed – signed and sealed by the landlord or authorised agent – to be valid. For leases of 30 years or more (including renewal options), the lease or a memorandum must be recorded with the DC Recorder of Deeds.

Recording triggers recordation and transfer taxes. See 2.10 Taxes Applicable to a Transaction.

Leases under 30 years do not have to be recorded, but recording can offer legal protection.

A tenant can be evicted before a lease ends for defaulting, but strict legal requirements apply. Eviction is only allowed for specific reasons: non-payment of rent, violating lease terms or illegal activity. For violations other than non-payment, landlords must give a formal “Notice to Cure or Vacate”, allowing the tenant a chance to fix the issue before eviction proceedings start.

The eviction process has multiple steps and can take months. Landlords must give proper written notice and follow all procedures. For nonpayment, tenants can usually stop eviction by paying overdue rent, interest, and court costs before the process is complete. If the case goes to court, timing depends on court schedules and whether the tenant contests the eviction.

There are no active COVID-19 eviction moratoriums in DC, but landlords must still follow certain pandemic-era procedures.

A lease can also end due to legal events like eminent domain or foreclosure, in addition to tenant default (see 6.21 Forced Eviction). In eminent domain cases, after a declaration of taking is filed, the court may set deadlines and terms for tenants (including commercial tenants) to give up possession. DC uses the “aggregate of interest” rule, valuing each party’s interest separately and combining them to determine the property’s total value. Leases often specify how any condemnation award is divided between landlord and tenant.

A lease may also end if the property is foreclosed. Whether the lease survives depends on its priority, set by recording order or a subordination agreement signed by the tenant. Many commercial leases include a Subordination, Non-Disturbance and Attornment Agreement, which protects the tenant’s right to stay even if the landlord’s interest is foreclosed.

When a commercial tenant breaches and ends a lease early – such as by abandoning the premises – the landlord has several remedies, but also faces limitations.

Landlords generally have three options:

• accept the abandonment and terminate the lease, ending the tenant’s future rent obligation, but still recover damages specified in the lease;
• re-enter and relet the premises without accepting abandonment, holding the tenant liable for any rent shortfall. The landlord must make reasonable efforts to mitigate damages by trying to relet the space; or
• leave the premises vacant and hold the tenant liable for the full rent due under the lease. This is less common because landlords must try to mitigate losses.

Besides unpaid rent, landlords may seek liquidated damages if the lease allows, but these must be reasonable and reflect actual or expected harm – not act as a penalty. Landlords can also recover costs for reletting, repairs or other losses if allowed by the lease and law.

Security deposits protect against tenant defaults or damage. Landlords must return the deposit (plus interest) unless used for unpaid rent or damages, and must provide an itemised list of deductions. Failure to do so can result in penalties, including treble damages for bad faith. While most deposits are cash, other forms like letters of credit may be used if agreed in the lease.

Construction projects use various contract types, each distributing financial risk differently between owner and contractor.

In a fixed price (lump sum) contract, the contractor completes the project for a set amount and bears the risk of cost overruns. In a cost-plus contract, the owner reimburses actual costs plus a fee, so the owner assumes the risk of increased expenses. A guaranteed maximum price (GMP) contract reimburses costs and fees up to a capped amount; any excess costs are the contractor’s responsibility.

A unit price contract bases payment on the number of completed work units at set rates. This is useful when work quantities are uncertain, such as in infrastructure projects. The total cost depends on the actual work performed.

Only licensed design professionals – Professional Engineers and Registered Architects – can prepare project designs.

The traditional delivery method is design-bid-build: an architect or engineer leads design, then a contractor is chosen through competitive bidding for construction. Subcontractors are typically hired by the general contractor for specialised work.

Alternative methods are also common. In design-build, one entity handles both design and construction under a single contract, streamlining communication, reducing costs, and speeding up schedules by overlapping phases. This integrated approach appeals to owners seeking faster delivery.

The construction manager at risk (CMAR) model is also widely used. A construction manager provides input during design, then becomes the general contractor for construction, holding all subcontractor agreements. The CMAR guarantees project completion within a set maximum price, sharing financial risk with the owner and offering cost certainty.

Mechanisms to manage construction risk include indemnification clauses, warranties, limitations of liability, waivers, insurance provisions and retainage, each serving a specific risk-management role.

• Indemnification clauses shift risk of loss from one party to another.
• Insurance provisions provide financial protection for risks not fully covered by indemnity. Owners and contractors are often named as additional insureds on each other’s general liability policies.
• “Retainage” means withholding part of payment until certain milestones are met. DC does not set a statutory cap on retainage for private projects.

Project schedules are typically set by the construction manager or architect and included in the contract documents. Contractors and subcontractors are required to follow these timelines. To address delays, contracts often have liquidated damages clauses, allowing the owner to recover a set amount for each day the project goes past the agreed completion date. Alternatively, owners may seek actual damages for delays.

Some contracts also include incentive provisions to encourage early completion or cost savings. Though less common than penalties, these incentives offer financial rewards for exceeding contract expectations and help align contractor and owner interests.

Owners often require contractors to provide performance bonds. This is standard in public construction projects and increasingly common in private developments. A performance bond guarantees the contractor will meet all contract obligations; if the contractor defaults, the surety must either finish the work or compensate the owner for losses.

Contractors and design professionals can file mechanic’s liens to secure payment for labour, services or materials. These liens encumber the property’s title, potentially delaying or blocking its sale or refinancing until resolved.

A Notice of Mechanic’s Lien must be filed with the DC Recorder of Deeds within 90 days of project completion or termination, whichever comes first. This deadline benefits subcontractors, but sub-subcontractors and remote suppliers only have lien rights if they contracted directly with the owner or general contractor.

To enforce a lien, the claimant must file a lawsuit within 180 days of recording the lien and record notice of the lawsuit with the Recorder of Deeds within ten days.

DC law allows a “Defense of Payment”: if the owner has fully paid the general contractor, subcontractor liens may be invalid unless notice was given before payment. Subcontractor liens usually have priority over general contractor liens, and mechanic’s liens take priority over construction loan advances made after the Notice of Mechanic’s Lien is filed.

To remove a lien, owners can pay the lien amount or file a written undertaking, such as a bond.

Before a building can be occupied, the owner must obtain a certificate of occupancy. This certifies that the building has passed inspection, complies with all relevant codes and regulations – including Zoning Regulations, DC Construction Codes, and the Green Building Act – and is approved for its intended use. The certificate remains valid indefinitely, but a new or updated certificate is generally required if the building’s use or ownership changes.

There is no VAT. Sales tax is not imposed on the sale or purchase of real estate. Sales tax may be imposed on the transfer of personal property.

There are limited exemptions to transfer and recordation taxes. One technique to mitigate recordation tax is to record a “purchase money deed of trust” simultaneously with the deed transferring the applicable real property. The exemption applies to the secured debt used to finance the purchase price, up to the amount of the purchase price. 

Municipal taxes are not charged on payments to occupy a business premises or on rent.

DC does not impose income tax on foreign investors engaging in a trade or business in DC through an “unincorporated business” such as a partnership. Further, partnerships operating in DC cannot withhold taxes on the distributive share of such non-resident partners who are exempt from tax.

The main tax benefits of owning DC real estate are depreciation deductions, expense deductions and potential capital gains advantages.

Owners of investment or business property can lower taxable income by depreciating the property’s value.

Owners can deduct ordinary and necessary expenses for managing, maintaining and operating the property, such as management fees, repairs, utilities, insurance, and property taxes. Mortgage interest on loans for acquiring, improving or refinancing real estate is deductible for both DC and federal taxes. Legal, accounting and other professional fees related to the property are generally deductible as business expenses.

When real estate is sold, any gain may be subject to capital gains tax. Long-term capital gains (for property held over one year) are taxed at favourable federal rates, but as ordinary income. Both DC and federal law allow deferral of capital gains tax if proceeds are reinvested in similar property through a “like-kind” exchange under Section 1031 of the IRC.