DC Cir. Court Finds Refusal to Waive Covenant Upon Request Constitutes Adequate Grounds for Claims in Cases Where the Defendant had the Authority to “Release or Extinguish” the Covenant

In the Defendants’ original Motion to Dismiss, Defendants moved for the court to dismiss Plaintiff’s challenge to the Inclusionary Development Covenant as unripe. Plaintiff countered that its challenge to the Covenant was ripe because DHCD has the authority to release the Covenant and Plaintiff had requested that DHCD release or modify the Covenant and DHCD refused. In the lower court’s decision, the court agreed with the Plaintiff that DHCD had the authority to waive the Covenant and that Plaintiff’s claim became ripe upon DHCD’s refusal of Plaintiff’s request that the Covenant be waived. On appeal, the Defendants challenged the court’s reasoning and contend that the court was mistaken in concluding that “[n]either the requirement that a covenant be executed, nor the provisions of the covenant, are dictated by the Inclusionary Zoning Act or the Zoning Commission regulations; both are established by DHCD’s implementing regulations codified in title 14, chapter 22, and thus can be waived by the DHCD.”

The Defendant, DHCD, contends it may only waive provisions that are “not required by the Zoning Commission’s Inclusionary Zoning Regulations or the Inclusionary Zoning Act. However, pursuant to the implementing regulations for the Inclusionary Development Covenant, “The Inclusionary Development Covenant … at a minimum, shall include: … (d) A provision providing for the release or extinguishment of the Inclusionary Development Covenant only upon the reasonable approval of the Department of Housing and Community Development Inclusionary Zoning Administrator.” Thus, the District Court reasoned that even though DHCD may not waive the provision in the implementing regulations requiring the recordation of a covenant before a building permit shall be issued, that does not prevent DHCD from complying with the separate provision requiring that the covenant be releasable or extinguishable upon the reasonable approval of the DHCD Inclusionary Zoning Administrator.

Accordingly, the District Court for the D.C. Circuit held that since DHCD had the authority to “release or extinguish” the covenant, and Plaintiff asked DHCD to waive the covenant and DHCD refused, the Court would reaffirm its ruling that Plaintiff’s claims with respect to the covenant are ripe. The Defendants’ Motion for Reconsideration was therefore denied.

2910 Georgia Avenue LLC v District of Columbia, 2014 WL 1379248 (D. DC 4/9/2014)