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Construction Law | Zoning Law | Commercial Leases | Commercial Litigation
Construction Law
- Owner's Failure to Purchase Builders' Risk Insurance Bars Recovery From Contractor.
The Circuit Court of Fairfax County, Virginia has held that the failure of an owner to purchase and maintain builder's risk insurance as required by the contract between the parties bars the owners from recovering for damages to the work, even if the loss was caused by the general contractor's negligence.
Bishop of Catholic Diocese v. Building Management, Inc. (Law No. 2005-1097, 6/27/06) - Failure by General Contractor to File Certification of Mailing Invalidates Mechanic's Lien.
Virginia's mechanic's lien statute was amended, effective July 1, 2003, to require general contractors to file along with any mechanic's lien a certificate stating that a copy was mailed to the owner. The Virginia Supreme Court on January 13, 2006 held that a mechanic's lien filed by a general contractor is invalid unless the general contractor files the required certificate in the Circuit Court land records at the same time it files its mechanic's lien.
Britt Construction, Inc. v. Magazzine Clean, LLC, 271 Va. 58, 623 S.E.2d 886 (2006). - CGL Insurance Policy Construed to Cover Damaged Work Installed by Insured's Subcontractors.
The United States Court of Appeals for the Fourth Circuit has held that a standard commercial general liability policy covers damage to work installed by an insured's subcontractors. The Court held that the standard CGL policy exclusion for "damages to your work" does not eliminate coverage when the damaged work or work out of which the damage arises was installed by the insured subcontractors, as distinguished from the insured's own forces.
Limbach Company v. Zurich American Insurance Company, 396 F.3d 358 (2005). - General Contractor Held Not Liable for Subcontractor's Violation of VOSHA Standards.
The Virginia Court of Appeals on May 3, 2005, held that a general contractor is not liable for its subcontractor's violation of VOSHA safety standards which
created a risk of harm only to the subcontractor's employees. The VOSHA citation involved a subcontractor's failure to provide hardhats and fall
protection to its employees. VOSHA issued citations to both the subcontractor and general contractor under its "multi-employer" citation policy. None of
the general contractor's employees were exposed to the hazard. The Court held that a general contractor is not liable under VOSHA for a subcontractor's
failure to protect its own employees.
Davenport v. Summit Contractors, Inc., 45 Va. App. 526, 612 S.E.2d 239 (2005). - No Damages for Delay Clause Declared Invalid.
The Virginia Supreme Court on October 3, 2003 ruled that a "no damages for delay" clause in a public contract let by the Upper Occoquan Sewage Authority
violated the Virginia Public Procurement Act and was therefore unlawful and invalid. The Virginia Public Procurement Act states that any provision in any
public construction contract "which purports to waive, release or extinguish the rights of a contractor to recover costs or damages for unreasonable delay
in performing such contract" is void and unenforceable as against public policy.
Blake Construction Co., Inc. v. Upper Occoquan Sewage Authority, 266 Va. 582, 587 S.E.2d 721 (2003). - Arbitration Award Upheld Despite Apparent Error of Law.
The Virginia Supreme Court has upheld an arbitration award of treble damages against a general contractor, notwithstanding apparent flaws in the
arbitrators’ legal analysis. The Court reasoned that the Virginia Uniform Arbitration Act allows an award to be overturned when “the arbitrators exceeded
their powers.” The proper test is therefore whether the arbitrators had the power under the arbitration provision in the contract to decide the dispute,
not whether the arbitrators misapplied the law.
Signal Corporation v. Keane Federal Systems, Inc., 574 S.E.2d 253 (Va., 1/10/03).
Zoning Law
- New Authority to Assess and Impose Road Impact Fees Enacted.
The 2006 General Assembly enacted legislation (§15.2 – 2317) authorizing localities to impose impact fees for road improvements "benefiting" a new development. Previous rulings from the Virginia Supreme Court have generally held that a locality may not condition a rezoning, special exception, subdivision on site plan approval on the construction of roadway improvements not substantially generated by the proposed development. - New State Traffic Impact Analysis Requirements Enacted.
The 2006 Virginia General Assembly enacted legislation (§15.2-2222.1) which expanded the Virginia Department of Transportation's role in land planning and land development. Effective July 1, 2007 through December 31, 2007, all rezoning applications and site and subdivision plans which generate more than 500 peak hour trips will generally require the submission of a traffic impact analysis. Effective January 1, 2008, the threshold for submitting a traffic impact analysis will change to generally more than 100 vehicle trips per peak hour for residential developments and 250 vehicle trips per hour or 2,500 vehicle trips per day for non-residential developments. - Disapproval of Proposed Subdivision Overturned.
The Virginia Supreme Court on April 20, 2007 ruled that the Alexandria Planning Commission cannot disapprove a proposed subdivision plat based upon the proposed size and design of the homes to be built on the property. The Planning Commission disapproved the proposed subdivision plat based upon complaints by neighbors that the developer planned to constrict large houses which were incompatible with the established character of the neighborhood.
Seymour v. City of Alexandria, 643 S.E.2d 198 (2007). - Loudoun County Comprehensive Rezoning Invalidated.
The Virginia Supreme Court on March 3, 2005 held that the County failed to comply with the statutory public notice requirements for comprehensive amendments to its zoning ordinance and map, and that the adopted amendments and map are therefore invalid. The Court held that the County's advertisement of proposed "provisions to implement the Conservation Design policies in the Revised General Plan" did not constitute a sufficient "descriptive summary" to comply with the statutory requirements. Likewise, the Court held that the advertisements contained an inadequate description of the areas proposed to the rezoned to comply with the statutory requirements.
Gas Mart Corporation v. Board of Supervisors, 269 Va. 334, 611 S.E.2d 340 (2005). - Arlington County's Affordable Housing Guidelines Declared Invalid.
The Circuit Court of Arlington County on December 10, 2004 ruled that the County's "Affordable Housing Guidelines for Site Plan Projects" are invalid and illegal because they exceed the scope of the County's authority under state enabling legislation. The Court rejected the County's argument that the Guidelines were merely "aspirational" and "voluntary" because the evidence at trial demonstrated that every site plan application approved by the County since 2001, other than six projects that were for affordable housing projects themselves, included an affordable housing contribution at on above the level identified in the guidelines.
Kansas – Lincoln, L.C. v. County Board of Arlington, 66 Va. Cir. 274 (2004). - Criteria for Variance Tightened, Then Relaxed.
The Virginia Supreme Court on April 23, 2004 interpreted the Virginia state zoning enabling legislation to prohibit variances absent proof that the effect
of the zoning ordinance upon the property without the variance is to interfere with "all reasonable beneficial uses of the property, taken as a whole."
Based upon this interpretation, the Virginia Supreme Court held that the BZA was powerless to grant variances from side yard set backs to allow for
construction of a proposed new house, a garage or a shed when it was demonstrated that the properties retained beneficial uses and substantial value
without the improvements.
Cochran v. Fairfax County Board of Zoning Appeals, 267 Va. 756, 594. S.E.2d 571 (2004).
In response to this decision, the General Assembly on March 23, 2005 amended the enabling legislation to allow, but not require, local governments to enact amendments to their zoning ordinances allowing the Zoning Administrator to grant "a modification from any provision contained in the zoning ordinance with respect to physical requirements on a lot or parcel of land, including but not limited to size, height, location or features of or related to any building, structure or improvements" upon a finding that there is undue hardship not shared generally and the modification will not be of substantial detriment to other properties or the character of the zoning district. (HB 2159; Va. Code §15.2-2286).
Commercial Leases
- Assignee of Lease from Bankrupt Tenant Entitled to Exercise Option to Extend Lease.
The United States District Court for the Eastern District of Virginia has ruled that an extension option in a commercial lease may be exercised by an assignee of a bankrupt tenant, notwithstanding the provision of the lease restricting the option to the original tenant only. The Court held that such a provision is rendered unenforceable under Section 365(f)(3) of the Bankruptcy Code because it seeks to “modify” the lease “on account of an assignment.”
Double K Properties LLC v. Aaron Rents, Inc. (1:30 cv 00044, July 14, 2003) - Landlord Held to Have no Duty to Mitigate its Damages.
The Virginia Supreme Court has held that a landlord of a shopping center was within his rights under a lease when, following the default of his tenant, he refused an offer by a proposed new tenant to re-lease the premises under the same terms as the defaulted lease. The Court held that the landlord had no duty to mitigate his damages under the terms of the lease which provided that the landlord could re-let the premises “under such terms and conditions as Landlord shall deem reasonable to any tenant or tenants which it may deem appropriate.”
River Road Shopping Center v. Scott, 259 Va. 87, 523 S.E.2d 494 (1/14/00). - Elements of Constructive Eviction.
The Virginia Supreme Court has held that a tenant failed to prove its defense of constructive eviction in an action for unlawful detainer brought by the landlord. The Court held that to constitute constructive eviction, there must be intentional conduct by the landlord that permanently deprives a tenant of the beneficial enjoyment of the premises, and that the tenant must completely abandon the premises within a reasonable time after the landlord's conduct.
North Ridge v. Ruffia, Record #981100, April 16, 1999. - Landlord's Right to Recover for Tenant Alterations.
The Fourth Circuit Court of Appeals has held that a landlord cannot recover his estimated costs of repairing alterations to a building made by a tenant because the repairs were never made and the building was substantially gutted by subsequent tenants in order to accomplish their wholesale remodeling plans.
Parkridge Phase Two Associates v. Lockheed Martin Corporation, et al., CA-97-623-A, February 2, 1999. - Tenant who Assigned its Lease to Another Held Discharged from Liability to Landlord.
Ordinarily, absent an agreement to the contrary, a tenant who assigns its lease to another remains liable under the lease. However, the Fourth Circuit Court of Appeals has held that a tenant is discharged from liability if the assignee of the lease and the landlord materially alter the lease without the tenant's knowledge or consent. The Court reasoned that a tenant which assigns its lease assumes the status of a surety, and that a surety's obligations terminate whenever the principal obligor and creditor materially alter the agreement underlying the suretyship.
The Corner Associates v. W. R. Grace & Company, No. 98-1153, 02/19/99.
Commercial Litigation
- Members of LLC Held Not to Owe Other Members a Fiduciary Duty.
The Circuit Court of Fairfax County has ruled that the Virginia Limited Liability Company Act, Va. Code §13.1-1000 et seq., establishes that a manager of an LLC, owes a fiduciary duty to the LLC, but the Act does not impose fiduciary obligations towards, among on between members.
WAKA LLC V. Humphrey, (Fairfax Circuit Court, #2006-14305, 5/2/07) - Covenants Not to Compete in a "Business Competitive With" Former Employer Invalidated.
The United States District Court for the Eastern District of Virginia has invalidated a one-year covenant not to compete in a "business competitive with" a former employer. The Court reasoned that the restriction was overly broad and therefore invalid because it prohibited the employee from performing some functions which he never performed for the former employer and the restriction did not contain a geographical limitation. Cantol, Inc. v. McDaniel, 2006 WL 1213992 (E.D. Va. 4/28/06). The Court cited the Virginia Supreme Court's 2005 decision in Omniplex World Services v. US Investigations Services, Inc., 618 S.E.2d 340 (2005) where a similar result was reached involving a one-year covenant not to provide "services for any other employer in a position supporting" [the former employer's] customers," irrespective of whether the employee would be competing with the former employer. - Delay by Real Estate Settlement Agent in Notifying Seller of Buyer's Bounced Check Held Breach of Fiduciary Duty.
The Circuit Court of Loudoun County has held a real estate settlement agent liable to a seller for failing to timely inform the seller that the buyer's deposit checks had been dishonored. The Court held that a person who receives money to distribute as required by an agreement is a fiduciary and awarded damages, including the dishonored check, unpaid rent, and costs of eviction and cleaning.
Sedler v. Select Properties, Inc. (Circuit Court of Loudoun County). - Assessment of Punitive Damages Against Managing Member of LLC for Breach of Fiduciary Duty Upheld.
The Virginia Supreme Court has upheld a trial court’s ruling assessing $350,000 of punitive damages and $178,349.02 of attorneys’ fees against the managing member of a limited liability company and prohibiting the member from continuing to serve as a manager. The Court concluded that the managing member had acted maliciously and wantonly for his own personal gain by transferring assets of the limited liability company to another venture in which he had an interest.
Flippo et. al. v. CSC Associates III, L.L.C. (Record No. 002183, 6/8/01).