Parking change breached contract, violated zoning law

A Fairfax County condominium association’s reallocation of parking spaces violated local and state law and breached its contract with the owner of three commercial condominium units in the development, the Court of Appeals of Virginia upheld.

The owner of the commercial condominium units filed suit over the parking reallocation plan after the plan reduced the number of reserved parking spots for the unit from 30 to 12 and led to the loss of a tenant.

The appeals court affirmed the ruling from the Fairfax County Circuit Court after the condominium association appealed, alleging five assignments of error in the trial court’s decision.

“Upon review, this Court finds no error and affirms the trial court’s judgment,” Judge Vernida R. Chaney wrote.

Judge Clifford L. Athey Jr. joined Chaney’s opinion in Telegraph Square II, a Condominium Unit Owners Ass’n v. 7205 Telegraph Square (VLW 023-7-149).

Judge Daniel E. Ortiz authored a partial dissent, saying he “would reverse on the second and third assignments of error and vacate the damage award of $481,434.84 for the Condominium Association’s breach of contract.”

Background

At the time of trial, the condominium included five phases, governed by the bylaws of Telegraph Square II, the condominium owners association. The condominiums owned by 7205 Telegraph Square, LLC are in Phase IV of the condominium association’s development.

A site plan for the condominium approved by Fairfax County in 1995 required Phase IV owners “be provided with at least 30 reserved parking spaces.” At trial, the site plan’s preparer testified that the 30 parking space minimum “was necessary for compliance with the Fairfax County zoning ordinance.”

7205 Telegraph purchased all three commercial condominium units in Phase IV in 2003 and was awarded a “proportionate share of parking spaces” relative to their ownership of the condominium’s “common elements.” As such, at the time of purchase, “35 parking spaces were marked ‘Reserved 7205.’”

By a 2-0 vote in 2015, the condominium association board elected to reallocate parking “by restricting parking for each unit owner to parking only inside the unit’s designated phase.” The plan permitted Phase I owners “exclusive use of common element parking in Phase I” despite making up less than half of the ownership of the condominium’s units.

Under the reallocation, 7205 Telegraph was reduced to 12 spaces within Phase IV, as 23 of its reserved spaces were located in Phase V.

At the time of the reallocation, 7205 Telegraph was leasing two units to a truck repair company under a five-year lease that began in 2014. The lease required 7205 Telegraph to provide the truck repair “with the exclusive use of 20 parking spaces,” which 7205 Telegraph could no longer guarantee under the reallocation.

After the shop began to lose business, 7205 Telegraph “attempted to reduce the deleterious impact of the Board’s 2015 parking re-allocation” by updating the lease and ensuring more interior square footage for vehicles. The lease still required the exclusive use of 20 parking spaces.

As the truck repair continued to lose business, it and 7205 Telegraph mutually agreed to terminate the lease in 2017. Following the termination, 7205 Telegraph was unsuccessful in attempts to lease or sell the units “due to uncertainty regarding the availability of parking,” which also reduced the value of the units.

Following a bench trial, the trial court ruled in favor of 7205 Telegraph on all counts, finding the parking reallocation breached the condominium association’s contract with 7205 Telegraph and violated both the Condominium Act and the Fairfax County zoning ordinance.

7205 Telegraph was further awarded over $480,000 in damages on the breach of contract claim and received a declaratory judgment voiding the 2015 parking reallocation.

The association appealed, alleging the trial court erred in finding violations in the zoning ordinance, finding that the reallocation resulted in loss of a tenant and awarding lost-rent contract damages based on that tenant loss and failed to address the association’s mitigation of damages defense.

Affirmed

The 2015 parking reallocation converted common element parking located in Phase I to exclusive parking for Phase I owners, which the trial court found “impermissibly converted” the spaces to limited common elements.

Chaney agreed.

“[E]ven if interpreting the 2015 parking re-allocation as designating all of the Phase I common element parking as reserved common elements for the exclusive use of Phase I unit owners, the 2015 parking re-allocation would violate the implied requirement that all unit owners be treated equally with respect to the common elements,” Chaney wrote.

The judge further stated that the association “does not dispute that it did not follow the procedures mandated by the Virginia Condominium Act” to lawfully assign the common element parking as limited common elements.

The association claimed on appeal that the reallocation did not violate the Fairfax County zoning ordinance, despite not disputing that the ordinance “requires compliance with a formula that determines the amount of off-street parking required to support non-residential uses.”

Per the ordinance, 3.6 off-street parking spaces are required per 1,000 square feet of office space, while one off-street spot is required per 1,000 square feet of storage or warehouse use.

Under the formula, the judge noted that “a total of about 27 spaces” were required for 7205 Telegraph.

“This Court finds no error in the trial court’s interpretation of the zoning ordinance … nor in the trial court’s conclusion that 7205 lacked sufficient off-street parking after the 2015 parking reallocation,” Chaney wrote.

The circuit court’s ruling that 7205 Telegraph’s loss of rent was “foreseeable and proximately caused by the Condominium Association’s 2015 parking re-allocation,” she pointed out.

“7205 Telegraph’s damages from lost rent were foreseeable to the Condominium Association because the Condominium Association specifically contemplated that unit owners would use their property to derive income from leasing their units to others,” Chaney wrote. “The Bylaws … specifically regulate the leasing of units by imposing restrictions on lease terms, reserving the option of requiring the use of a standard form lease, and retaining the authority to evict a unit owner’s tenants. Because the Bylaws contemplate that unit owners will lease their units, it is reasonably foreseeable that the Condominium Association’s breach of the Condominium Instruments would cause a loss of lease-derived income.”

The judge further affirmed that lost rental income is a correct measure of the damages proximately caused by the reallocation.

“The Condominium Association’s contention that the correct measure of damages is the diminution of property value from the loss of parking spaces fails because that measure only applies when the property is permanently damaged,” she wrote.

Chaney added that “because the Board’s 2015 parking re-allocation is void, any damage to 7205 Telegraph caused thereby is temporary.”

The judge further found that the association “did not present a mitigation defense that the trial court failed to consider.”

She affirmed the award of damages and attorneys’ fees to 7205 Telegraph as the prevailing party.