Opinion ID: 1540617
Heading Depth: 1
Heading Rank: 3

Heading: 1988 Master Lease Agreement

Text: A review of the events that led up to the signing of the Master Lease Agreement and of the provisions of that agreement will aid our consideration of whether the agreement violates the Sale Act or other applicable statutes. In 1982, Thomas Bradford, Jr., one of the owners, spoke with then university Assistant Treasurer Maurice K. Heartfield, Jr. and inquired whether the university was interested in purchasing the West End. Mr. Bradford also expressed his interest in exploring the mutual advantages to both the Owners and GWU of a renovation and long-term lease. GWU responded by providing Mr. Bradford with a copy of the assurances it had given the Council in connection with the Bond Act. All negotiations then ceased for some five years, until May 4, 1987, when Mr. Bradford again inquired as to whether the university was interested in the premises. The negotiations which followed led to several proposals culminating in the transmittal to Mr. Bradford on May 12, 1989, of an initial draft of the Master Lease. At about this time, the university's counsel, Vincent C. Burke, III, had a telephone conversation with Mr. Byron Hallstead of the District of Columbia Consumer and Regulatory Affairs Conversion and Sale Office regarding the lease agreement. [7] Without revealing the parties involved, Mr. Burke presented Mr. Hallstead with a hypothetical situation based on the facts of the Master Lease. Mr. Hallstead stated that such an agreement would not violate the Sale Act as the agreement (1) constituted a lease and not a sale, and (2) recognized the rights of the tenants to purchase before any purchase by the university. Prior to signing the lease, GWU Vice-President and Treasurer Charles E. Diehl called Councilmember John Wilson to inquire if Mr. Wilson believed that such a lease was in accordance with the University's Bond Act assurances. Mr. Wilson, according to Mr. Diehl, responded orally that, given the Master Lease's explicit recognition of the tenants' right to purchase, it was his opinion that it did not violate the Bond Act assurances. [8] On August 1, 1988, the university entered into a lease agreement (the Master Lease) with the owners of the West End Apartments for a period of ten years at a rate of $25,000 monthly, or $300,000 each year. The university was granted the exclusive right to purchase the apartment building at the end of the ten-year period (on July 31, 1998) for $6 million, minus a $100,000 credit per rental year, for a net amount of $5 million. This option was made expressly subject and subordinate to the tenants' rights pursuant to the District of Columbia Rental Housing Conversion and Sale Act.... It recognized that GWU must comply with the District of Columbia Rental Housing Conversion and Sale Act and any successor or similar act in existence at the time a contract of sale is entered into, and provide the notices required by the Act relating to said sale and to the exercise of tenants' statutory rights of purchase under said Act. [9] The Master Lease, in addition to giving GWU control over all equipment on the premises, supplies, and transferable permits, as well as the right to challenge any real estate assessments, obligated the university to pay all real property taxes and utilities, to perform all maintenance and repairs, and to obtain all non-transferable permits and purchase liability insurance. The owners, besides holding record title, reserved the right to prevent the university from making any alterations, improvements, or additions to the apartment, to reenter the premises in the event of noncompliance with the lease provisions, and to veto any assignment of rights by the university under the lease.