Construction Law Insights

Clarendon Regency IV, LLC v. Equinox Clarendon, Inc., 2022 U.S. Dist. LEXIS 86096, 2022 WL 1494377 (E.D. Va. May 11, 2022)

Clarendon Regency IV, LLC (“Clarendon”), landlord, and Equinox Clarendon, Inc. (“Equinox”), tenant, entered into a commercial lease (the “Lease”). Under the Lease, Clarendon was to make $5,868,041.00 in structural and architectural alterations and modifications to the building. Within 90 days of receiving Clarendon’s final construction drawings, Equinox was to provide Clarendon with construction work plans. On March 19, 2019, Clarendon provided Equinox with final construction drawings. Equinox was late in submitting plans. Because Equinox did not submit plans, the parties amended the Lease to modify the Commencement Date and provide that Equinox waived its right to terminate the Lease. On December 16, 2019, Equinox filed its initial permit application. On April 1, 2020, Equinox sent Clarendon a letter saying it was unable to commence previously planned construction projects due to COVID-19, which rendered Equinox’s Lease obligations commercially impracticable and impossible for an indefinite period. After confirming the Arlington County permitting office was fully functional, Clarendon sent Equinox a letter on April 10, 2020 rejecting Equinox’s April 1, 2020 letter. On May 21, 2020, Clarendon delivered the premises to Equinox (the “Delivery Date”). When Equinox had still not obtained the necessary permits to complete its work obligations under the Lease, Clarendon sent Equinox a letter on July 9, 2020 regarding its perceived failures, that it was in default under the Lease, and that it had 30 days to cure. On August 28, 2020, Equinox attempted to terminate the Lease. Clarendon asserted that the Lease Commencement Date began on November 17, 2020, 180 days after the Delivery Date. On November 19, 2020, Clarendon sued Equinox for breach of contract.

The Court denied Clarendon’s Motion for Summary Judgment because there were genuine disputes of material fact. The parties disputed when Clarendon submitted its final plans and specifications, thereby triggering the 90-day period for Equinox. Equinox argued the trigger date was June 27, 2019. Second, the parties disputed whether Equinox diligently pursued obtaining necessary permits. The Lease defined “diligently pursue” to include payment of fees and charges, hiring an expediter, and cooperating with the governmental agencies in an expeditious manner. There was evidence that Equinox did apply for permits, but elected to not pursue a third round of permit applications due to COVID-19. Also, the parties disputed the permit filing date.

The Court permitted Count I of Equinox’s Amended Counterclaim for declaratory judgment as to whether or not the Lease was breached to proceed. Clarendon’s allegation that Equinox failed to diligently pursue its permit requirements under the Lease is the only basis on which Clarendon could bring a breach of contract claim. If Equinox is found to have diligently pursued its permits, this determination does not require the factfinder from also assessing whether the Lease was properly terminated, but does preclude Clarendon from obtaining judgment for damages against Equinox on its breach of contract claim. Declaratory relief would serve the purpose of clarifying the rights of the parties and removing the specter of uncertainty.

PLDR Law Scott Kowalski 1 PLDR Law Mark Burgin 1

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