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West End Tenants Ass'n v. George Washington University

April 21, 1994

WEST END TENANTS ASSOCIATION, ET AL, INTERVENOR-APPELLANTS
v.
GEORGE WASHINGTON UNIVERSITY, ET AL, APPELLEES. DISTRICT OF COLUMBIA, APPELLANT V. GEORGE WASHINGTON UNIVERSITY, ET AL, APPELLEES



Appeals from the Superior Court of the District of Columbia; (Hon. George Herbert Goodrich, Trial Judge)

Before Steadman* and Sullivan, Associate Judges, and Belson, Senior Judge.

The opinion of the court was delivered by: Belson

BELSON, Senior Judge: Appellants, District of Columbia (the "District") and intervenor, the West End Tenants Association ("Tenants"), *fn1 appeal from summary judgment entered in favor of the George Washington University ("GWU") and the owners of the West End Building (the "Owners").

The District and Tenants sought declaratory and injunctive relief against GWU and the Owners of the West End, an 86-unit apartment building located at 2124 I Street, N.W. (the "West End") and GWU, pursuant to the Rental Housing Conversion and Sale Act of 1980 (the "Sale Act"), *fn2 as amended by the Tenant Opportunity to Purchase Clarification Amendment Emergency Act Of 1989, *fn3 (the "Clarification Act") and pursuant to the George Washington University Higher Education Facilities Revenue Bond Act of 1981 (the "Bond Act"). *fn4 In particular, they sought a declaration that Tenants had been deprived of their rights under the Sale Act as a result of a lease agreement between GWU and the Owners, dated August 1, 1988, (the "Master Lease"), and also sought an injunction requiring that those rights be effectuated. They further sought a declaration that the Master Lease violated the Bond Act agreement and an injunction barring its enforcement. Finally, they asked that the court order "the owners to give the tenants their opportunity to purchase and/or their right of first refusal with respect to the purchase" of the accommodation.

In granting appellees' motion for summary judgment, the trial court ruled that the retroactive application of the Clarification Act would be unconstitutional because, inter alia, it would violate the Contract Clause of the Constitution. *fn5 The trial court was unpersuaded that GWU violated the Bond Act. It rejected the argument that the Master Lease was equivalent to a "sale" under the Sale Act of 1980, and ruled that when the Owners and GWU entered into the Master Lease agreement in 1988, they were not required to afford the Tenants notice and an opportunity to purchase. We affirm.

I.

We set forth in some detail the facts that bear upon the issues (1) whether the trial court erred in ruling that the Master Lease did not effect a "sale" for the purpose of triggering certain statutory rights of Tenants under the Sale Act, and (2) whether the Clarification Act had the effect of clarifying or redefining the terms of the Sale Act in such fashion as to make a "sale" of the lease transaction entered into by GWU and the Owners.

1. The Bond Act

GWU made certain promises regarding tenants' rights in order to secure passage of the Bond Act. On July 27, 1981, in response to efforts by GWU, the Bond Act was referred to the Committee on Finance and Revenue of the Council of the District of Columbia. The Bond Act "authorized the District of Columbia to issue up to $30 million in revenue bonds for the purpose of providing funds [to GWU] for the construction of an 'academic cluster' and the improvement of several existing buildings to provide greater fire safety and access" for persons with disabilities. COMMITTEE ON FINANCE AND REVIEW, REPORT ON BILL 4-303, THE GEORGE WASHINGTON UNIVERSITY HIGHER EDUCATION FACILITIES REVENUE BOND ACT OF 1981 (1981).

During the course of public hearings on the bill, residents of the Foggy Bottom area voiced concern that "passage of the act would make it possible for the University to acquire two multi-family rental housing buildings located within the campus plan area of the University." Of particular concern was the future of the West End Apartments at 2124 I Street, N.W., and the Schenley Apartments at 2121 H Street, N.W.

Responding to these concerns, GWU, on September 24, 1981, submitted a "Statement regarding the University's intentions concerning the West End and Schenley Apartments" to the Committee on Finance and Revenue. It provided, in pertinent part:

1. The University will not initiate negotiations with the owners of the West End Apartments or the Schenley Apartments for the purpose of purchasing either of these buildings.

2. In the event that the owners of the West End and Schenley Apartments offer the buildings for sale, the University will not offer or enter into a contract for the purchase of these buildings, except in conjunction with the tenants' exercise of their rights to purchase the property under prevailing laws of the District of Columbia.

3. If after compliance with points 1 and 2 above, the University acquires through purchase the West End and/or Schenley apartment buildings, the University will maintain the buildings as rental housing under the provisions of the prevailing laws of the District of Columbia.

The University would have the right to use any voluntarily vacated units for student tenancy.

This agreement will remain in effect for a period of ten years.

See id. at 23.

With these assurances, the Council passed the Revenue Bond Act. It became law on December 23, 1981, D.C. Law 4-58, 28 D.C. Reg. 4758 (1981). *fn6

2. 1988 Master Lease Agreement

A review of the events that led up to the signing of the Master Lease Agreement and of the provisions of that agreement will aid our consideration of whether the agreement violates the Sale Act or other applicable statutes.

In 1982, Thomas Bradford, Jr., one of the owners, spoke with then university Assistant Treasurer Maurice K. Heartfield, Jr. and inquired whether the university was interested in purchasing the West End. Mr. Bradford also expressed his interest in exploring the mutual advantages to both the Owners and GWU of a renovation and long-term lease. GWU responded by providing Mr. Bradford with a copy of the assurances it had given the Council in connection with the Bond Act. All negotiations then ceased for some five years, until May 4, 1987, when Mr. Bradford again inquired as to whether the university was interested in the premises. The negotiations which followed led to several proposals culminating in the transmittal to Mr. Bradford on May 12, 1989, of an initial draft of the Master Lease.

At about this time, the university's counsel, Vincent C. Burke, III, had a telephone conversation with Mr. Byron Hallstead of the District of Columbia Consumer and Regulatory Affairs Conversion and Sale Office regarding the lease agreement. *fn7 Without revealing the parties involved, Mr. Burke presented Mr. Hallstead with a hypothetical situation based on the facts of the Master Lease. Mr. Hallstead stated that such an agreement would not violate the Sale Act as the agreement (1) constituted a lease and not a sale, and (2) recognized the rights of the tenants to purchase before any purchase by the university.

Prior to signing the lease, GWU Vice-President and Treasurer Charles E. Diehl called Councilmember John Wilson to inquire if Mr. Wilson believed that such a lease was in accordance with the University's Bond Act assurances. Mr. Wilson, according to Mr. Diehl, responded orally that, given the Master Lease's explicit recognition of the tenants' right to purchase, it was his Opinion that it did not violate the Bond Act assurances. *fn8

On August 1, 1988, the university entered into a lease agreement (the "Master Lease") with the owners of the West End Apartments for a period of ten years at a rate of $25,000 monthly, or $300,000 each year. The university was granted the "exclusive right to purchase" the apartment building at the end of the ten-year period (on July 31, 1998) for $6 million, minus a $100,000 credit per rental year, for a net amount of $5 million. This option was made "expressly subject and subordinate to the tenants' rights pursuant to the District of Columbia Rental Housing Conversion and Sale Act . . . ." It recognized that GWU must "comply with the District of Columbia Rental Housing Conversion and Sale Act and any successor or similar act in existence at the time a contract of sale is entered into, and provide the notices required by the Act relating to said sale and to the exercise of tenants' statutory rights of purchase under said Act." *fn9

The Master Lease, in addition to giving GWU control over all equipment on the premises, supplies, and transferable permits, as well as the right to challenge any real estate assessments, obligated the university to pay all real property taxes and utilities, to perform all maintenance and repairs, and to obtain all non-transferable permits and purchase liability insurance. The owners, besides holding record title, reserved the right to prevent the university from making any alterations, improvements, or additions to the apartment, to re-enter ...


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