Virginia Real Estate, Land Use & Construction Law : Virginia Construction Lawyers & Attorneys : Bean Kinney & Korman Law Firm : VA Real Estate, Land Use & Zoning

Think twice before you accept a check tendering only partial payment!  In a recent case, Helton v. Phillip A. Glick Plumbing, Inc., [pdf], the Virginia Supreme Court ruled for a homeowner who had repeatedly disputed his plumbing company’s charges and argued that his bill was excessive. The homeowner wrote his last check for  $1300 -- $1686.51 less than the final invoice -- and included the words “paid in full” in the memo line of the check.  He sent the check with a letter raising yet again the issue of overbilling and wasted time and materials, and said that he would make no more payments.  The plumbing company cashed the check, crossing out “paid in full” and writing “No” and “balance due $1686.51.”

Looking at Virginia Code Section 8.3A-311 [pdf], an amendment to the Uniform Commercial Code adopted in 1992, the Court reviewed the following elements that a debtor must prove to establish accord and satisfaction by use of an instrument: (1) the debtor tendered an instrument in good faith as full satisfaction of the claim; (2) the amount of the claim was unliquidated or subject to a bona fide dispute; and (3) the claimant obtained payment of the instrument.  Under that code section, the claim is discharged if the debtor shows the instrument, or an accompanying written communication, contained a conspicuous statement showing that the instrument was tendered as full satisfaction of the claim.

The Court had no problem concluding that the homeowner tendered the check intending the bill to be satisfied in full, that the final invoice was subject to a bona fide dispute, and that the plumbing company cashed the check. The Court ruled that the claim was discharged because the homeowner clearly marked “paid in full” on the check and sent a letter with the check outlining the repeated complaints of overbilling.  The language added by plumbing company before cashing the check only verified the company’s knowledge of the dispute and that the homeowner gave a “conspicuous statement” that he tendered the check as full satisfaction of the claim.
 

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I had a great time last Thursday at another one of Rutherfoord’s Trends in Building Green seminars. We got to hear from Tommy Russo from Akridge, Eric Oliver from EMO Energy Solutions, Bobby Christian from Tangible, and Tom Mawson, the Executive Director for the U.S. Green Building Council’s National Capital Region Chapter. 

I made a presentation outlining our region’s local jurisdictional green building trends, policies and incentives for private commercial development from a zoning, planning and land-use perspective. Here’s the slide show from the presentation. There was quite a bit more explanation beyond what is outlined in the slides, including bonding and other security requirements for incentives and a number of new initiatives a number of localities are currently pursuing. If anyone has any questions about what any of these localities (Arlington County, City of Alexandria, Fairfax County, Loudoun County, Prince William County, Montgomery County, Prince George's County and Washington, D.C.) are doing, please feel free to post a question and I can respond in more detail.

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The current state of the economy makes clear that cash-flow is king in the construction industry. As our last post discussing the failed Granby Tower project in Norfolk demonstrates, even very high profile projects can suffer disastrous failures if the players have not addressed financing issues appropriately. For both general contractors and subcontractors, the first key to protecting yourself is to know the applicable rules of the game regarding mechanic’s liens and payment bonds.

• Know the timing requirements – failing to comply can and often will be fatal to your claim
• Know the precise contents of required bond and lien notices – again, failure is not an option
• Do not assume that all states are the same – with regards to both liens and bonds, you must know the applicable rules for each state in which you are doing work, and states differ substantially on form, content, and timing of required notices
• For bonds, obtain copies of the bonds before you start work as a subcontractor – on private jobs, the bond terms will control and your notices need to comply with the bond or again your claim may fail
• Do the research before the last second - you do not want to find out no day 91 that your lien notice was required on day 90; it is best to know the requirements before the job starts
• Associated corollary - if possible, spare your lawyer the heart attack and get them involved early, before the last second!

Perhaps from a perspective of self-preservation, but also in the interests of potential claimants, I will choose to end by amplifying on the last point a bit.  Lien claims, for example, are highly complex, extremely technical, and quite challenging.  A modest flaw may prove fatal to the claim.  Knowing this, it is in your best interest as a lien claimant to give yourself the best chance for success by not waiting until the last minute to evaluate, document and pursue lien claims.  Placing a last minute rush on an issue increases the difficulty of obtaining required information, reviewing applicable materials, and accurately preparing, filing and transmitting required notices and documents.

Given the current prevalence of cash-flow, collections, bonds and lien issues, we will be spending some more time in future posts discussing some of the regional variances amongst Virginia, Maryland and the District on lien and bond claims. We will also highlight a number of specific potential issues with liens and discuss some recent cases surrounding the same.

Image by Purpleslog

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As noted earlier today, we had the opportunity to post on the Construction Law Musings blog today as a guest blogger.  The post discusses litigation involving the failed Granby Tower project in Norfolk, Virginia - Norfolk inhabitants will likely know this project as the excavated hole in the ground downtown filling with water for the last couple years.

Here is a partial excerpt of the post:

A recent Virginia case once again demonstrates that contract terms matter. An unusual financing term allowed the owner of a project a complete escape from any liability on a project despite significant work being performed. The opinion from the Circuit Court of Norfolk involved five separate cases consolidated together, four claims by subcontractors and one by the general contractor Turner. All five cases hinged on an unusual financing clause in Turner’s contract with the owner.  The provision stated:

This Agreement and any liability … of the Owner (other than liability …. for Preconstruction Services) shall be subject to and expressly conditioned upon the closing by the Owner, and the initial funding by its lender, of the construction loan (on terms satisfactory to Owner) and Owner shall have no obligation or liability to [Turner] for any costs for the Construction Phase under this Agreement unless such construction loan closing is completed.

The court found that despite significant efforts, the owner was not able to procure such financing. Substantial construction work started, including excavation for the project, without actual financing in place. Multiple subcontractors filed liens and filed suit to enforce the liens, as did Turner. The court found that the contract clause completed absolved the owner from liability. The court further ruled that the subcontractors could not recover. Virginia statutes provide that a subcontractor cannot lien a job for amounts in excess of what the owner owes to the general contractor. While often described as “the owner only pays once”, the court held that the owner’s total defense to Turner’s claims similarly buried the subcontractors’ lien claims.

Please visit the link above to see the entire post!

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One of the more intriguing and rewarding aspects of our recent entry into the legal blogging and social media arena has been the rapid development of conversations and connections with interesting people.  Two of these friendships have led to cross-posts on a pair of our friend's blogs.

We have been friendly with Chris Hill at Construction Law Musings for some time before the launch of our blog.  Not only has Chris been a tremendous source of information, support, and helpful advice during our first fledgling steps, but we have enjoyed an extended dialogue on various topics, blog posts, and twitter.  Chris invited us to guest post at Construction Law Musings and you can see that post today, Yes, Virginia, Contract Terms Do Matter: Financing Term Offers Owner an Escape Hatch.

The "Six Degrees of Separation" style of internet interrelationships has led from Chris to dialogue with the Build2Sustain group.  The Build2Sustain blog in particular is home to some intriguing and important discussions regarding the development process.  Those discussions, on both the blog and twitter, have in turn led to us getting to know Yahya Henry.  Yahya has extensive development and real estate experience and brings not only a passion for sustainability, but a solid understanding of the business end of the equation. 

Amongst many interests and pursuits, Yayha is currently Director of Business Development for The Aribra Group, LLC.  The Aribra Group is an online commuity promoting sustainable development.  Yayha invited us to join the conversation at The Aribra Group and recently reprinted one of our LEED related posts, LEEDing to Unintended Consequences - The Ghost of LEED Future.

We appreciate the chance to reach out and extend our dialogue and look forward to such discussions in the future.  For those interested in more rapid dialogue, you can follow us all on Twitter: Timothy R. Hughes can be found @vaconstruction, Chris Hill can be found @constructionlaw, and Yayha Henry can be found @yahyahenry.

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As discussed previously, USGBC has imposed extended reporting requirements as part of its minimum program requirements for LEED. It appears the extended reporting already adopted may only be an initial step. We may see extended reporting requirements backed up by decertification; we may see on-going recertification as a basic part of LEED program structure.  I admit this is speculative, but we may be seeing a shift from LEED using energy modeling towards an actual performance model.

Given the overall goal of improved building performance implicit in LEED, these changes and speculated upon shifts may make sense technically. These changes, however, raise some significant questions regarding risk and responsibility. The ultimate impact on risk, and thus embedded costs, of these changes may vary dramatically from state to state because of each state's underlying legal framework.  Placing these changes into the complex network of construction contracts, contractual allocations of risk, and shared responsibilities raises some interesting observations and questions:

• States whose limitations period runs based on "injury", such as Virginia, may experience extended limitations triggers where building performance is alleged to be the failure; such results could be different for the various players depending on their roles
• In damage trigger states, courts may find that "injuries" were suffered far earlier than owners even suffered performance problems, so results in these states are difficult to predict and there could be big winners and losers
• States with discovery based limitations accrual, such as Maryland and the District of Columbia locally, will present cases with ever longer, potentially plausible, arguments regarding why the owner "reasonably did not know" of a problem for years after occupancy of the project
• The timing issues presented by extended performance questions mean that contractual agreements on statute of limitations and when they start to run should be focal points of contract negotiations; negotiations regarding extended warranties will be pivotal as well
• The growing use of LEED certification in various local zoning approvals means decertification may carry unintended consequences. If a project is decertified, is there a possibility that its occupancy permit is threatened?
• The potential for decertification, or a failure to participate in recertification if that becomes standard, may place commercial landlords at potential for extended risk of breaches of lease agreements depending on the LEED requirements imposed
• Lease agreements in turn need to be carefully worded so that all parties are on the same page as to exactly what is the yardstick and time frame for complying with LEED related terms

These are just a few of the wrinkles that come the mind when one places an overlay of extended performance obligations into the context of LEED.  We will keep a close watch on these developments moving forward.  We believe that continued movement on the extended performance axis by USGBC will have some serious economic impact on the financial aspects of LEED projects, who "wins" and who "loses" based on these changes, and where bottlenecks may develop on the economic risk side of the equation in reaction to extended performance obligations.

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The recent New York Times piece criticizing LEED (discussed previously) has reignited discussion of the potential for decertification after initial issuance of LEED certification. Some previously pointed to the USGBC addition of extended energy reporting for five years after occupancy as a "Minimum Performance Requirement" and the threat of decertification as an enforcement mechanism.  More recently, commentators have predicted recertification programs.  Rich Cartlidge even called for a wedding between LEED for New Construction and LEED for Existing Buildings.

The USGBC changes must be viewed against the backdrop of the development of international, state and local building codes and even Congressional legislation.  Codified efficiency standards would clearly and immediately raise the minimum energy bar across the board and reduce or eliminate some of the arguments raised by the Times article.  Reducing compliance to clear codes may also reduce in part the increasingly complex interface between local authorities interpreting prescriptive codes and the interpretive voluntary third party organization subject to little if any legal challenge or appeal (commented on previously by Chris Hill).   LEED as a voluntary tool has succeeded in driving the dialogue and advancing knowledge of green building.  LEED as a remotely delegated code interpretative structure with limited avenues of legal challenge is far more complicated.

With regards to code based approaches to energy efficiency, at least one local energy code has been passed and partially tested ... and stopped dead in its tracks (at least temporarily). The City of Albuquerque passed its own building code with energy efficiency standards. In granting a preliminary injunction blocking application of the code, a federal district court judge made the preliminary finding that it was more likely than not the challenger would prevail based on an argument that Congress had spoken on energy efficiency and that the federal statutes preempted state or local action.

The City of Albuquerque case reached the preliminary finding of federal preemption despite the fact that when Congress passed its energy efficiency measures, it included an express limited caveat that excluded building codes from preemption. The case is still pending, so the ultimate result is up in the air. The case does, however, offer a roadmap to those seeking to challenge statewide and local building code efforts to impose energy efficiency standards.

Given these complexities, it may be simpler for proponents of increased efficiency to do so at the federal level. The Waxman-Markley bill (described as the cap and trade bill by some, by others as The Illiad) includes significant increases in required energy efficiency requirements. While these standards have received extensive attention and commentary from green building bloggers, the press and public discussion of these aspects of the bill have been almost strangely silent.

The interplay of these issues raise a number of questions, particularly if proponents are successful at incorporating energy efficiency standards into federal or state statutes:

• If LEED in fact incorporates recertification and/or on-going performance requirements, will it reach the tipping point where owners and end-users push back on fees and process?
• What is LEED's role in the future if green requirements are increasingly codified? Does LEED always impose higher requirements? Does it stick to a holistic approach and avoid "energy myopia" as coined by Shari Shapiro?
• If/when statutory framework for sustainable development emerges in earnest, will the position of pre-eminence of LEED erode? Is the USGBC's ultimate mission of "working to make green building available to everyone within a generation" furthered more by advancing legal codification or increasing the reach and depth of its current market penetration?

These are the Ghosts of LEED Present.  Next time we will discuss in greater detail the thicket of legal risk and defense issues posed by extended reporting requirements, decertification and recertification, including statutes of limitations and shared/murky issues of risk and responsibility.
 

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It is common to have arbitration clauses in contracts, and courts will honor these clauses in all but very rare instances. In fact, Virginia courts have repeatedly stated a clear public policy in favor of arbitration and upholding arbitration agreements.  Additionally, Virginia Code Section 8.01-581.02 (A) [pdf] mandates a court to compel arbitration when a party to an arbitration agreement petitions the court and the opposing party refuses to arbitrate.

Nonetheless, a party can waive its right to invoke an arbitration clause when it initiates litigation and later uses the arbitration clause to thwart the litigation process. This is exactly what happened recently in the Circuit Court for the City of Hopewell in the consolidated cases of Shoosmith Bros., Inc. v. Hopewell Nursing Home, LLC, et al., Case No. CL06-299 and Kenbridge Constr. Co., Inc. v. Hopewell Health Investors, LLC, Case No. CL09-108 [pdf].

In Shoosmith Brothers, Judge Campbell noted that Virginia has not squarely addressed the issue of waiver of arbitration, but relied on the concept of “default” in the Federal Arbitration Act and cases from the United States Court of Appeals for the Fourth Circuit to articulate a test for waiver.  The question became whether Kenbridge Construction Company “so substantially utilize[d] the litigation machinery that to subsequently permit arbitration would prejudice” Shoosmith Brothers, Inc.  Judge Campbell had no problem finding waiver where Kenbridge had been participating for two and a half years in litigation involving two different cases with many different parties, and arbitration with only Kenbridge would have left the other parties in “judicial limbo.”

The lesson to take from this is “Finish what you started.” Arbitration can save parties a great deal of time, money and frustration.  You should be sure at the outset that arbitration is the dispute resolution forum you want before you include arbitration clauses in your agreements, and understand you may be stuck with your choices.
 

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The Virginia Department of Transportation and the Virginia Soil and Water Conservation Board are each respectively in the process of examining and issuing regulations impacting the development and construction industry.  The proposed VDOT regulations cover access management and relate to minor arterials, collectors, and local streets.  The public comment period began September 15, 2009 and is set to end on October 14, 2009.

The Soil and Water Board's stormwater regulations include significant amendments to stormwater management and were designed to address water quality and quantity and local stormwater management criteria.  Public comment ended on August 21, 2009 resulting in 408 comments.   The very significant level of commentary reflects a high degree of citizen and business interest and involvement.  The comments range from general but impassioned calls to defend the environment to quite a bit of substantive critical comments from design professionals, builders, and ordinary citizens regarding the regulations and their potential resulting economic impact.    

In a conversation with me today, Barrett Hardiman, Vice President/Director of Regulatory Affairs for the Home Builders Association of Virginia, encapsulates much of the flavor of the home building industry's reaction to the proposed new stormwater regulations:

"We want a regulation that is best for both the environment and the economy.  What they are proposing does not do much for the environment and does serious damage to an already fragile economy and home building industry.  It does not benefit the [Chesapeake] Bay and will likely cost Virginia billions to squeeze the last bit of phosphorus out of new development."

While the public comment period has officially ended, the Soil and Water Conservation Board has scheduled a special public hearing for further discussion of the suggested changes.  That meeting will be held on Thursday, September 17 at 9:30 am. The meeting will be held at the MCV Campus Molecular Medicine Research Center, 1220 E. Broad Street, 1st Floor Multipurpose Room, Richmond, VA 23219. 

Given the uncertain current status of the proposed regulations and their potential dramatic impact on the development process, proponents and opponents would both be well advised to represent their positions at these continuing meetings.

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The legal blogosphere has been active the last two weeks with discussion of the recent article in the New York Times critical of LEED. The article in essence uses the example project of the Federal Building in Youngstown, Ohio as a sample for LEED projects that fail to be "green". The Times in particular attacks the actual energy performance of a specific project as an example of why the LEED certified project is not in fact green. Reaction has been varied, from Shari Shapiro pointing out these discussions have been in the mix for some time  to an impassioned, relatively emotional, reaction from Rob Watson, a board member of USGBC and significant national player in the green movement.  Chris Cheatham has pointed out for discussion the interplay between green building success on the one hand and risk associated with projects receiving funding under the American Recovery and Reinvestment Act.  Before we move on to the bigger picture, the article deserves the specific focus on the example project, called by the Times the "Federal Building", but more properly known as the Nathaniel R. Jones Federal Building and US Courthouse (Youngstown, OH).  

After first glance, the Times article raises more questions than it purports to answer. The article states, "[T]he building is hardly a model of energy efficiency. According to an environmental assessment last year, it did not score high enough to qualify for the Energy Star Label[.]"  A review of the GSA study on its website reveals a few interesting facts that the Times left out of the article:

• The GSA study was of 14 first wave green GSA buildings ; 8 were LEED certified, 2 were LEED registered, one used Green Building Challenge, and three were designed with an emphasis on energy efficiency
• The Federal Building project did not seek any credits for energy efficiency under EA Credit 1. Similarly, the project did not seek points for additional commissioning, measurement and verification, or green power 
• While the Federal Building project did not receive the 75 score required to qualify for Energy Star, it did in fact reach a 58 despite the fact the building did not even try for the energy efficiency credits. Every other GSA project contained in the study qualified for Energy Star

So how did a project that is alleged by the Times to have a "major gas guzzler" of a cooling system reach LEED certification in 2002? A review of the GSA's webpage describing the project, and further discussion at BuildingGreen.com, reveals that the site is a downtown redevelopment of a previously paved site. The project included restoration and planting with native and adapted vegetation and reduction of impervious area by a whopping 58%. The project reduced ozone depletion by use of HFC refrigerants and the fire suppression system includes no halons. Over 72% of project waste was recycled and the project used structural steel with 90% post-consumer recycled content. Over 62% of the project's building materials were manufactured locally.

The New York Times' focus on the Federal Building project does bring a couple of key themes into focus.  First, "green" is not the same to everyone.  Indeed, Build2Sustain has had a fascinating discussion on-going on its blog and also on its various members blogs and twitter accounts comparing use of "green" and use of "sustainable" terminology. The use of loose labels where everyone does not agree on a shared meaning can create misunderstandings. Green does not necessarily mean energy efficient as there are plenty of areas allowing points under LEED that can in fact inhibit energy efficiency.

Second, the project used as the centerpiece of the article was completed in September 2002. LEED has come a long way since then and trying to extrapolate structures that were designed roughly ten years ago and apply that to current conditions may be suspect.

Finally, the USGBC has in fact already taken steps to address these issues. The new LEED 2009 standards incorporate a shift in greater emphasis towards energy efficiency in particular. Further, USGBC is taking steps to require on-going reporting and has indeed discussed using decertification as a means to require on-going compliance. (Please visit Matt Devries' blog for an excellent recap of the commentary that erupted when the decertification discussion first broke several months ago). 

In summation, it appears like the NYT dug and found an example of an old project to raise objections that the USGBC has already been addressing with LEED ... in short, they are perhaps trying to resurrect the Ghost of LEED Past.  In a few days, we will visit with the Ghosts of LEED Present and Future and try to extrapolate where LEED may be heading and what that means in terms of future risk management, contract exposure, and potential economic pitfalls associated with these trends.

Image (Courthouse): by OZinOH

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A quick “congrats” to Jim Pritchett who has been named Executive Director of Alexandria’s relatively new Housing Development Corporation. The Alexandria Housing Development Corporation (AHDC) is a non-profit developer and owner of affordable housing, primarily focused on projects located in the City of Alexandria, Virginia. 

The creation of AHDC was pursuant to a request from then-Councilman William Euille and Councilwoman Joyce Woodson to Alexandria city staff for a plan of action to address the City's affordable housing needs.  In April of 2003, Mildrilyn Davis, Director of the Office of Housing, and Phil Sunderland, City Manager, responded with a memorandum detailing the establishment of a new non-profit housing corporation. This plan anticipated city involvement in the creation and initial establishment of the corporation, but without direct oversight of its activities.  In January of 2004, the City Council named five incorporators to form the corporation and oversee its initial setup and AHDC was incorporated in May of that same year. 

AHDC is preparing to celebrate the Grand Opening of The Station at Potomac Yard on October 17th.  This unique project is a mixed use development that includes 64 units of affordable and workforce housing, Alexandria's newest fire station, and some retail space that is available on the first floor. 

Good luck to Jim and the rest of the AHDC team.

For more information about this project and AHDC here’s the link to their website.

Thanks to Larry Adams, the project's architect from LeMay Erickson, for allowing us to post the above rendering.  Here's a link to the architect's website:  LeMay Erickson Willcox Architects

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For those of you that don’t already know, Arlington County has filed a complaint against the U.S. Department of Transportation, the Secretary of the United States Department of Transportation, the Federal Highway Administration, the Federal Highway Administrator, the Virginia Department of Transportation, and the Secretary of the Virginia Department of Transportation. Apparently, the purpose of this complaint is to stall and possibly derail the HOV/HOT highway project in Northern Virginia which would add additional travel lanes along the I-95/I-395 corridor from Spotsylvania to the Pentagon. For decades, Arlington County has been tirelessly waging a war against suburban sprawl and the impacts of funneling more and more automobile traffic from outlying suburban counties through Arlington County.

 Among many other things, the complaint alleges that Federal Highway Administrator, the Secretary of VDOT, and the Secretary of the US DOT, personally and deliberately, unjustifiably defined the project so narrowly that it would be excluded from the comprehensive review and public scrutiny requirements of NEPA and the Clean Air Act. The complaint alleges that there is no defensible way that the Northern Section of the project could obtain a “Categorical Exclusion” allowing it to bypass the Environmental Impact Statement or Environmental Assessment processes which would require an in depth review and analysis of the environmental impact of the project.

The complaint also alleges that the defendants failed to adequately analyze the impact on Arlington’s communities that the significant increase in traffic volumes the project would generate. Arlington is particularly concerned about what Arlington considers some of its traditional and historic neighborhoods that are in proximity to the project.

Unexpectedly, however, the complaint also alleges that Secretary LaHood, Secretary Homer and Administrator Mendez deliberately, in their individual capacities, promoted this project to “…enable a financially-able, privileged class of suburban and rural, primarily Caucasian residents…” to the “…disparate impact of the Project on minority and low-income communities…” in Arlington. Ouch. Sounds like the gloves are off.

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After an astounding nearly two-years of litigation, Virginia’s Fourth Circuit found for a private property owner and the City of Norfolk in August following a challenge by a private citizen of the City’s ability to modify height restrictions in the City’s Ghent historic districts. Apparently, in the Ghent historic districts in Norfolk, maximum building heights may be altered through a legislative act by the City Council through a special exception process which culminates in the enactment of a “Certificate of Appropriateness”. In anticipation of the Christ and Saint Luke’s Episcopal Church being awarded such a certificate to increase the height of a proposed building addition from 35 feet to 53 feet, a private citizen filed a complaint challenging the process via its enabling legislation and on constitutional grounds. 

The crux of the complaint was based on two basic premises: (i) the City did not have the appropriate authority to legislatively approve the increase in building height because such an act would amount to an “illegal variance” (i.e. such a special exception requires at least some kind of judicial or quasi-judicial review by the Board of Zoning Appeals), and (ii) the Certificate of Appropriate process followed by the City failed to provide her adequate equal protection and due process protections.

The interesting twist in this case from a land use/zoning perspective is the Court expounds on the extent of the City’s legislative authority to modify Zoning Ordinances through the Commonwealth’s historic preservation statute § 15.2-2306. According to Judge Thomas, through § 15.2-2306, the General Assembly has empowered localities to enact historic preservation ordinances, the ordinances “may” provide for a separate review board to administer the ordinance, and an ordinance “shall” specify which parties would have the right to appeal a determination.  Simply put, the City’s Zoning Ordinance provided for all of these things (i.e. that the City’s Planning Commission would be this review board, that only a party applying for a Certificate of Appropriateness would have the right to appeal if denied, etc.)  Therefore, the enabling legislation, § 15.2-2306, clearly allows an avenue for legislative special exceptions separate than the enabling legislation which contemplates quasi-judicial review by a Board of Zoning Appeals for variances.

Here's a PDF of the Judge Thomas’ unsigned letter opinion. 
 

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As the economy has languished, many property sellers and landlords have experienced extensions of property listings. In many cases, these extensions have actually exceeded the terms of the listing agreements with their brokers. This situation can raise some complex questions of exactly what listing terms remain in place and what commission, if any, the real estate broker can recover.

A recent case in the United States for the Eastern District of Virginia, Grubb & Ellis v.  Potomac Medical Building, LLC, gives some guidance on these questions. The case ended in a bench trial and resulting forty page memorandum opinion, so the case is certainly long on facts and detail. There are a few important take-away points, especially when one takes into account the context of litigation in the "Rocket Docket":

• The original listing agreement permitted only written extensions - while there were continued dealings between the parties, the court found there was no extension of the original listing in large part because there was no written extension
  
• The broker’s continuing efforts to lease the property did not create a new listing agreement
• While the initial broker brought the eventual tenant to the table, that tenant was not willing to close on the landlord's terms so the broker was not the "procuring cause"

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A federal judge in Maryland has ruled that Executive Order mandating compliance with the “e-verify” program for confirmation of immigration status as part of the Federal Acquisition Regulations is constitutional and enforceable. The case decision, issued on August 26, 2009, granted summary judgment to the federal government and leaves intact an administration decision to implement the final rule effective September 8, 2009.

 The issue may not end here. On August 31, 2009, various parties filed a notice of appeal of the decision. Further, the appellants have filed an emergency motion for stay to delay application of the court’s ruling during the pendency of the appeal and accompanying memorandum. We still have no ruling on this motion, so for a few more days it is still perhaps unclear whether e-verify will officially start on September 8 or perhaps be punted back until resolution of the appeal of this case. 

Updated on 9/5/2009: The court officially denied the emergency motion for stay on September 4, 2009 so it appears that e-verify will indeed kick off on Tuesday.  Our employment and labor colleague here at Bean Kinney, Phil Keating, has written a more detailed discussion memorandum of the issues relating to e-verify.
 

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The economy has affected the budgets of not just individuals and companies, but also state and local governments. In these hard economic times, governments are facing serious shortfalls of revenue, made worse by the plunging value of real estate, shriveling sources of funding and growing budget deficits.  In response, states and municipalities have become much more proactive about checking and enforcing compliance with all taxes, including business taxes.

You are likely aware of business license requirements, but  you may not realize that you could be required to obtain a nonresident construction license if you work in other states, such as Maryland. Additionally, you could be subject to further business tax obligations above and beyond your business license fee, such as sales or gross receipts taxes and use taxes.

One of the most notable examples of business taxes can be found in Virginia, where counties, cities and towns are authorized to levy “BPOL” (Business, Professional and Occupational License) taxes. BPOL taxes are geared towards a company’s gross receipts, making these taxes controversial and often the subject of political attack. Most local governments in Virginia, including those in Northern Virginia, have opted to impose BPOL taxes. 

Generally, BPOL taxes are levied where the company has its “definite place of business.” Special provisions apply to contractors, including one provision that allows a locality outside the contractor’s “definite place of business” to impose BPOL taxes if the contractor does more than $25,000 of business in a year in that locality. Because there is no centralized administration for BPOL taxes, you must work with each locality to ensure compliance.

In an effort to encourage businesses and individuals who are behind on or non-compliant with payments, some jurisdictions will extend a form of amnesty. Starting September 1, 2009 and extending until October 30, 2009, Maryland is extending Tax Amnesty to business taxpayers. You can find more information and an application on the Comptroller of Maryland’s website.

The District of Columbia has an ongoing “Voluntary Disclosure Program” through its Office of Tax and Revenue (“OTR”). With this Program, the District may agree to a three- to five-year look-back period and may waive civil penalties if the tax and interest are paid in full. You can find information and a form Voluntary Disclosure Agreement on OTR’s website.

Because state and local governments are currently hungry for tax revenue and actively enforcing compliance with local taxes, it is vital to ensure that you are in full compliance with your licensing and business tax obligations.

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A Fairfax County judge has ruled that a commercial real estate tax used to help fund the rail extension to Dulles Airport is constitutional. According to the Washington Business Journal, Fairfax Circuit Court Judge Stanley Klein approved of the structure in the context of a bond validation suit initiated by Fairfax County and related entities. Fairfax created the Dulles Corridor Phase I Special Improvement Tax District as a funding mechanism to repay bonds issued to fund Fairfax County's contribution to the rail extension project.

Virginia has seen significant challenges to its attempts to create stable funding mechanisms for transportation over the last several years. The most notable challenge was a successful appeal to the Supreme Court of Virginia to significant portions of the overall transportation funding legislation adopted by Virginia's General Assembly in 2007. In the case of Marshall v. Northern Virginia Transportation Authority, the Supreme Court of Virginia held that the General Assembly violated Virginia's Constitution by attempting to delegate its taxation powers to unelected multi-district transportation authorities in Northern Virginia and Hampton Roads.
 

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