Owner Could Terminate 99-Year Lease

Although plaintiff and defendant had the common goal of construction of a worship center in order to promote the practice and advancement of Zoroastrianism, an ancient Persian religion, plaintiff tenant failed to meet any time deadlines to commence or complete construction during the course of its 99-year lease of seven acres of property in Vienna, and the Alexandria U.S. District Court says defendant was entitled to terminate the lease.

Two documents control here. The first is the Original Lease, under which plaintiff Zoroastrian Center and Darb-E-Mehr of Metropolitan Washington, D.C., was to pay nominal rent of $1 per year, as well as all utilities and taxes on the property, for 99 years. ZCDMW’s main obligation under the Original Lease is found in Article VI which outlines the use of the property. That clause mandates that the property “only” be used for construction of a place of worship for all Zoroastrians of the world; construction of a facility for the advancement of the Zoroastrian religion; and construction of a dwelling suitable for residence of a Mobed (priest). Although the Original Lease did not include a firm deadline for this construction, it did contain a “time is of the essence” clause.

ZCDMW did not begin actual construction on the property for several years following execution of the Original Lease. This inaction led to the creation of the second principal document in the controversy: an amendment to the Original Lease, or “Lease Amendment.” This Amendment was executed in January 2009, and noted that in the event of any conflict between the terms of the Lease and the Lease Amendment, the Lease Amendment governed.

Speeding the pace of construction of a place of worship was the motivating factor for the Lease Amendment. ZCDMW had not met the “Start Date” deadline for construction and defendant Rustam Guiv Foundation began pursuing different options for construction of a place of worship and ZCDMW was asked to cease construction. On April 20, 2013, defendant RGF sent ZCDMW a formal notice of termination.  On May 14, 2013, plaintiff filed a complaint for declaratory judgment that the 99-year lease was still in effect. RGF removed the action to federal court and submitted a counterclaim complaint for breach of contract and related claims.

The Lease and Lease Amendment formed a complete, integrated and unambiguous agreement. The only major inconsistency between the Original Lease and the Lease Amendment is the lack of deadlines in the former. This alteration gets to the very heart of the lease arrangement’s purpose as well as this dispute. The Lease Amendment proposes three distinct and specific deadlines on plaintiff: the 2009 Start Date; the 2011 Completion Date; and the 2013 Final Completion date. Plaintiff has failed to meet every one of those deadlines. Each one of these failures constituted a material breach of the lease agreement.

This much would end the matter in most cases. Here, however, things are complicated by the course of dealings between the parties. The court also must consider whether a 2011 Memorandum of Understanding altered the legal relationship between the parties. The MOU is extremely ambiguous and were it not for the extensive history between the parties, would unarguably be unenforceable on its face. The most definite clauses in the MOU outline broad tasks for ZCDMW to complete. The record makes abundantly clear that ZCDMW failed to complete most of the outlined tasks.

Under any interpretation of the MOU, it does nothing to alter the court’s conclusion that ZCDMW materially breached the integrated lease agreement.

Having found that plaintiff materially breached the terms of its lease agreement with RGF and RGF properly terminated plaintiff’s tenancy in 2013, the court agrees with RGF that plaintiff’s memorandum of lis pendens should be struck from the land records. There is absolutely no evidence that the memorandum of lis pendens was carried out with malice. The court finds in favor of RGF on its breach of contract and quiet title counterclaims but dismisses the slander of title counterclaim.

Zoroastrian Center v. Rustam Guiv Foundation (O’Grady) No. 1:13cv980, May 12, 2014; USDC at Alexandria, Va. VLW 014-3-248, 17 pp.