A Congress Heights landlord sparred with attorneys for the District of Columbia in Superior Court this month over whether a judge should drop a requirement that the landlord pay for renovation of a dilapidated apartment complex in Southeast, rather than allowing the firm to redevelop the land.
Geoffrey Griffis — founder of development company CityPartners, which owns the four-building complex surrounding the entrance to the Congress Heights Metro station — told Judge Kelly A. Higashi during a May 15 hearing that the buildings are in such disrepair that, based on the company’s analysis, renovating them would be nearly as costly as reconstructing them.
Street Sense Media reported in 2016 the complex suffered from rodent infestations, bed bugs, leaky roofs, a broken heating system, and other structural problems. Last November, a fire damaged all three floors at 1331 Alabama Ave. SE and spread to its sister building next door.
Renovating the 24 rent-controlled units at 1331 and 1333 Alabama Ave. SE would cost about $2.75 million, or 82 percent of the $3.4 million it would take to fully reconstruct the buildings, according to Griffis’s initial calculations that he presented in court. Griffis said the industry standard is not to renovate if costs exceed 60 percent of the estimated reconstruction cost. Griffis, a trained architect, led the D.C. Board of Zoning Adjustment for six years and recently completed a four-year term as a mayoral appointee to the National Capital Planning Commission. He also chairs the Southwest Business Improvement District.
“If you had an old car with 120,000 miles on it, you could keep putting money into it. You could rebuild the engine over and over again, but you would never get the value of it,” Griffis said in his testimony. He also blamed the District’s rent-control law for the apartments not being able to generate more revenue.
After a May 7 hearing in the case, Griffis increased his estimate of the renovation costs required to bring the buildings up to code by almost $370,000. He said his original analysis had erroneously attributed the $1.7 million spent on renovations so far to only half of the properties, 1331 and 1333 Alabama Ave. when the receiver, in fact, used that money to make repairs at all four of the buildings owned by CityPartners in Congress Heights. For the revised number, Griffis also included an additional $940,000 worth of repairs needed to bring the buildings up to the housing code that had not been a part of his original analysis.
Calculating these costs is an evolving process that results in varying estimates, Griffis said at the May 15 hearing. He added that the change did not alter his contention that it’s more feasible to redevelop the site than to renovate the existing buildings.
The legal dispute over these four properties began in 2016 when D.C. Attorney General Karl Racine sued the complex’s former owner, the notorious landlord Sanford Capital. The lawsuit alleged that the company was purposely allowing the buildings to deteriorate and become uninhabitable.
After agreeing to cease doing business in the District until 2025 due to its track record of willful negligence at its properties, Sanford Capital found itself in even more trouble. The company transferred its Congress Heights properties to CityPartners in 2017 without giving the tenants a chance to buy their units. Residents, in a separate lawsuit, accused Sanford Capital of violating the Tenant Opportunity to Purchase Act, which gives renters first priority to buy their units if landlords decide to sell.
Meanwhile, the Congress Heights apartments declined further, and CityPartners became the primary defendant in the attorney general’s lawsuit. In 2017, a judge appointed David Gilmore as a third-party property manager — called a receiver — to oversee the rehabilitation of the buildings. It was under Gilmore’s watch that the 2018 fire severely damaged six units. Today, only about 10 families live in the apartment complex.
At the May 15 hearing, attorney Argatonia Weatherington of the District’s legal team called a property manager to the stand as an expert witness in an effort to discredit Griffis’s cost estimate as far too high. The expert, Raven Cerny, works at Catalyst Property Solutions, the company the District has nominated to replace Gilmore, who has asked to step down.
“To bring all of the apartments [in 1331 and 1333 Alabama Ave. SE] back online, we’re looking at $1.2 million,” Cerny said.
That figure did not include electrical or plumbing repairs because Catalyst Property Solutions hasn’t yet evaluated the extent of the damage to those systems. Cerny, who inspected the properties in mid-April, noticed that many of the pipes in the building had cracked.
“There is some concern with the plumbing of the property and how the property was winterized,” Cerny said, referring to the possibility that cold weather contributed to the damage. “We saw a lot of cracks when we were there. A lot of pipes still had water in them, so we know when we turn the water back on, there are going to be some pretty major leaks.”
When CityPartners attorney Gwynne Booth asked Cerny whether the fire could have caused the pipes to crack, Cerny did not rule out the possibility.
Both parties were given 20 minutes to make their final arguments at a subsequent hearing on May 17. Each side focused on interpreting the District’s Tenant Receivership Act and the receivership order handed down by Judge John M. Mott on Sept. 26, 2017.
Booth, an associate with Greenstein Delorme & Luchs, argued that nearly all costs under the current receivership are higher than they should be, including those for security, repairs, and the rent differential for relocated tenants. For instance, she said the District’s estimate of $15,000 to cover the monthly difference in rent for the displaced tenants is “far above market rent for the area” and noted CityPartners had offered all tenants the opportunity to move into a one-bedroom apartment at Griffis’s T Street SE property at a cost of $950 per month. She said the fire had significantly changed the dynamics of the situation, noting that Griffis did not cause what an April 15 court order described as an act of arson that occurred as part of a domestic violence incident. Booth added that her client also had not caused the existing housing code violations before the fire.
Griffis’s visit to see the fire damage firsthand the day before the May 7 hearing had led CityPartners to believe the scope of necessary work would prompt the D.C. Department of Consumer and Regulatory Affairs to require the complex be brought up to current housing codes, instead of older standards that applied due to their age. She cited sprinkler systems as an example of something that would be newly required under current standards. Maintaining renovations could not be completed in an economically viable way, Booth contended forcing CityPartners to repair rather than redevelop the site would constitute a government “taking” of the property prohibited under the Fifth Amendment.
Booth further argued the Tenant Receivership Act empowers the receiver only to “collect all rents and payments for use and occupancy” and said there is no legal support for the District’s request to use insurance proceeds to pay for the renovations being overseen by the receiver.
In a letter to CityPartners from Westminster American Insurance Co. previously submitted to the court, an attorney representing the company disputed that assertion. “I am concerned that your reading of the receiver’s powers may be narrower than the applicable statute and governing court order provide,” Charles Peoples wrote on April 17, one month prior to the hearing.
Whether or not the receiver is allowed to put Griffis’s insurance proceeds from the fire to use, Booth stressed that “the sky is not the limit” when it comes to making reasonable repairs and fulfilling Mott’s order, which she interpreted as specifying an initial amount for these repairs and leaving the option open for the receiver to petition the court for more.
In line with this interpretation, the defense claimed the receiver had been repairing more units than were necessary to safely house the remaining 10 tenants. The receivership was put in place to bring the units of current tenants up to code, not to remedy conditions in all of the units, Booth said.
Attorney Jimmy Rock, representing the District, countered that re-letting other units in the four-building complex is necessary to foster a sense of community and increase safety, making it a better option than letting the majority of units sit vacant and rundown.
The District’s summary centered around the intent of the Tenant Receivership Act — “to safeguard the health, safety, and security of the tenants of a rental housing accommodation if there exists a violation of District of Columbia or federal law which seriously threatens the tenant’s health, safety, or security.”
This passage from the 2001 law was one of several exhibits on large poster boards Rock pointed to and read from throughout his presentation. “Nothing here discusses the owner’s economic desires or well-being,” Rock said of the law’s statement of purpose.
The District argued 5914 LLC, the CityPartners subsidiary that owns the property, should have reasonably anticipated the cost of complying with receivership and making all needed repairs when it took ownership of the properties. Griffis previously acknowledged he and Sanford Capital CEO Carter Nowell were aware of the buildings’ poor condition, Rock said.
The District’s attorney claimed the fire-damaged units could be repaired for several hundred thousand dollars less than CityPartners’s insurance company is willing to pay and argued the proceeds should be used by the receiver for that purpose. Rock questioned the analyses of the properties’ value Griffis supplied to the District on May 8 and May 14 after having been asked to speak to these figures during cross-examination on May 7. Rock argued the costs of renovation would not exceed 60 percent of the cost for redevelopment, the industry standard Griffis had previously cited as a threshold for deciding whether to renovate or build anew.
The District had sought to have that portion of Griffis’s testimony stricken from the record after the May 7 hearing, but the judge turned down the request. Booth explained her client’s analysis was evolving as he continued to learn more information.
“Griffis is always going to find a number,” Rock said in response. “He is always going to find a way to justify his desire to redevelop.”
Rock characterized CityPartners as essentially seeking termination of the receivership, though its request was “styled as modification.” The company is asking to be released from paying for renovations, which the District sees as effectively meaning termination. “This has already been heard by the court. We’re now rehashing what CityPartners requested when they obtained the property,” Rock said.
On July 13, 2018, the court denied the company’s second request to terminate receivership — months before the November fire. In response to Rock’s argument, Booth reiterated her claim the fire damage had fundamentally changed what was at stake in the receivership. She argued it would be unreasonable for the court to require CityPartners to pay for the scope of renovations sought by the District unless the intent of the receivership is to punish CityPartners.
Higashi did not hear arguments on who should be the new receiver on May 15 or 17, although she confirmed the court had received written recommendations from both parties. The District subsequently filed a brief in opposition to CityPartners’s recommendations.
Aside from an Aug. 20 mediation session specific to litigation surrounding the D.C. Consumer Protection Procedures Act, no further court proceedings are scheduled. Higashi is expected to issue a written decision regarding CityPartners’s request for a preliminary injunction and modifications to the remediation plan. The judge previously rejected the company’s motion for a temporary restraining order.
This article was co-published with TheDCLine.org.