Tue07292014

Last updateWed, 19 Nov 2014 8pm

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County files legal response to Project Faith’s counterclaim for $300K

King George County recently filed its legal response to an amended counterclaim by Project Faith, Inc.  Another court hearing, the case’s third, is expected to be set for later this summer for lawyers on both sides to argue their cases.

THE CASE
The initial lawsuit was filed last October by the County to get back a 5.53-acre parcel on Route 3 (Kings Hwy), adjacent to the County’s Sheriff’s office.

The land had been donated to the non-profit residential development company in mid-2012 in return for Project Faith’s agreement to construct and operate a facility under strict terms requiring leasing space only to government agencies for social programs and to other non-profits.

Conditions included a prohibition against leasing to any for-profit and/or commercial uses, with Project Faith solely responsible for the continued maintenance and operation of the facility for its stated and intended purposes.

But the project never got off the ground.

Project Faith continues to blame the County for not approving a building permit in time for it to meet the Aug. 1, 2013, deadline for commencement of construction.  

But, Project Faith also blamed the County for its inability to obtain financing, alleging it did not provide lease commitments. Those were claims also made during two preliminary hearings, with the County prevailing in both last December and this past April.  

COUNTY DELAY?  OR, LACK OF CONSTRUCTION FUNDING?
So which is it? The county delayed providing a building permit? Or, the developer didn’t have the money for construction?  

Project Faith says both.

It again alleges that the County was slow to sign off on a request for changes to the road entrances needed for a building permit. It alleges that VDOT was also to blame in part by sending its review comments to an incorrect email address for Project Faith.

But if that were factual, it would imply that the developer had obtained the financing to pay for construction.  
If it had financing, it seems likely that Project Faith have not have waited until three weeks before footings had to be poured on the four buildings it had on its approved site plan.  It provided initial submissions toward building permits to the County’s office of Community Development on July 9, 2013.

King George Community Development staff routinely informs applicants for commercial projects they should expect the process to take 45 days, at a minimum, to obtain building permits. As an experienced housing project developer, Project Faith should already have been aware of that timetable.

In addition, it would have been expected that it would have taken at least 30 days to procure a construction contractor, which was likewise not being sought while only three weeks away from the contractual deadline for commencement of construction.

But the counterclaim also contends that it did not have financing “due to circumstances beyond its control,” blaming the County for willful acts and for omissions.

LATEST CLAIM
The amended counterclaim filed by Project Faith in the end of April asks for rescission by direction of the Court, since its previous claim and arguments were overruled.

But it also asks that the County be required to pay it $300,000 and an unnamed amount for “other and further relief as deemed appropriate.”

Once again, Project Faith claims it is due $300,000 from the County to “restore it” for money spent towards its contractual performance for its site plan development, engineering work, design services, design and construction schematics and development of construction documentation.

The “other and further relief” likely refers to costs incurred for Project Faith’s four law firms with numerous lawyers that have been involved defending its various positions since King George issued its notice of default last Aug. 2, 2013, and filed its subsequent October 2013 court filing for breach of contract in the current action.

According to the counterclaim, King George County, its officials, the Virginia Department of Transportation (VDOT), this newspaper, and a member of the King George Social Services board, are to blame for the developer’s failure to commence construction by Project Faith’s own requested deadline extension of Aug. 1, 2013.  

COUNTY’S RESPONSE
The County’s response, in part, says the developer’s plea for damages for construction development costs is at odds with its plea for rescission of the contracts and that it is “fatally flawed.”

The County notes that, as in its previous losing court action, Project Faith is again seeking to recover $300,000 for costs of performance, which the developer was contractually obligated to incur.

Project Faith cites case law as precedent. But the County notes that awards in successful suits seeking rescission are ordinarily for damages to the injured party based on the expected financial benefit it would have derived, if the contract had been performed.

The county notes that determining lost profits is a very speculative proposition given the proposed facility was a new enterprise. Furthermore, it states the facility by definition was always intended to be not-for-profit in any event.

In addition, the County points out that while Project Faith’s amended counterclaim lacks any allegation of fraud against the County, its pleading for rescission relies on specific case law that granted rescission based on fraud as the reason for breach of contract.

But, as the county’s brief points out, the developer’s counterclaim omits the citations from that part of the case law cited.  

CONTROVERSIAL FROM THE START
The land giveaway was controversial from the start, with opinions and emotions running high in the community on both sides for numerous reasons.

Other commercial property owners and developers in the County expressed outrage privately and publicly that in the midst of a sluggish recovery from the Great Recession and with empty buildings and closed storefronts going begging for leases, that the County should give away prime property, and in effect, take potential leases for the departments of Health and Social Services, Extension Service and others off the market.

There is no successful model for such a center anywhere in the state, with Project Faith’s executive director Froncé Wardlaw often saying that it would be the first of its kind in Virginia. There may be financial reasons for that.
Developing and long-term leasing of property according to the performance agreement has always seemed a risk-laden venture under the strict terms of the guiding contracts. It would be competing with other developers and management firms with experience and the financial resources to weather the whims of the leasing marketplace and the ability to lease to commercial enterprises, in addition to government agencies and non-profits.

It was always likely that the cost of the building and subsequent mortgage loan paybacks could command a higher lease rate than non-profits could or would pay. And possibly more than state agencies would be able to likewise afford when following state rules for procuring space with price being an important factor.

Phyllis Cook

 

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