Virginia Supreme Court Ruling Denies Real Property Taxation of Non-Exempt Entity for Taxes Associated with an Exempt Entity's Ownership Interest in Property Owned as Tenants in Common.

Posted by Aaron Rosenfeld on April 05, 2012

The Virginia Supreme Court recently considered whether a municipal corporation has the authority to impose additional real property taxes against a tax paying entity which owns real property as a tenant in common with a tax exempt entity.  The court held that there is no such authority.

The City of Richmond sought to impose real property taxes (both prospectively and retroactively) on two properties that SunTrust Bank, a tax paying entity, and Richmond Redevelopment and Housing Authority (“RRHA”), a tax exempt entity, owned as tenants-in-common.  As a tax exempt entity, RHHA did not pay real property taxes on its interests in the properties.  Agreements between SunTrust and RHHA allowed SunTrust to use the entirety of the properties without paying rent to RHHA for use of its undivided interests in the properties.  The City contended that it had the authority to tax SunTrust for RHHA’s ownership interest because:

                i.  pursuant to the operating agreements, SunTrust had the exclusive right to use and possess the properties as if it were the fee simple owner;

                ii.  SunTrust did not use the properties for a "public purpose”; and 

                iii.  leasehold interests exempt from taxation of the owner are assessed to the lessee and the practical effect of the agreements between SunTrust and RRHA was to create a leasehold interest in RHHA’s undivided property interest.

The court held, however, that, as a tenant in common, SunTrust has the right to use and possess the properties without any agreement with RRHA; no Virginia law imposes a “public purpose” requirement to maintain RHHA’s exempt status; and the arrangement between SunTrust and RHHA do not constitute a leasehold because the parties are tenants-in-common.  Consequently, the City’s arguments did not prevail.  Throughout its opinion, the court indicated that holding title to the properties as tenants-in-common, rather than as joint venturers, was a significant factor in its decision. 

Virginia Supreme Court Holds Private Cause of Action Permitted Under State Consumer Real Estate Settlement Protection Act

Posted by Elizabeth Johnson on March 05, 2012

Last week, in First American Title Insurance Co. v. Western Surety Co., the Virginia Supreme Court ruled that a title insurance company, First American Title Insurance Co., could maintain a private cause of action based in common law against its surety company, Western Surety Co., for Western’s breach of a surety bond required under the Virginia Consumer Real Estate Settlement Protection Act (“CRESPA”), Va. Code Ann. § 55-525.16, et seq. 

The Virginia Supreme Court first held that CRESPA did not afford First American a private right of action to bring suit under the statute itself.  However, the Court noted that CRESPA did not expressly abrogate a common law cause of action for parties injured by a breach of a required bond.  As a consequence, the Court held that in Virginia, a statutory bond that expands liability from the statute requiring the bond, like CRESPA here, was still enforceable as a “common law voluntary obligation.” 

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Virginia Supreme Court Takes On Non-Competition Agreements

Posted by Aaron Rosenfeld on September 15, 2011

Virginia businesses and employees are eagerly awaiting rulings from the Virginia Supreme Court on two cases that it has heard or is preparing to hear concerning the enforceability of non-competition agreements between employers and employees.  The results of these cases should provide businesses and employees in Virginia with greater clarity on the scope of enforceable non-competition agreements.  The Virginia Supreme Court heard the first case, Home Paramount Pest Control Cos. Inc. v. Justin Shaffer, et. al., earlier this week.  That case addresses restrictions in an employment agreement which prohibit a former employee from engaging in certain specific competitive activities, including soliciting customers of the former employer, within a defined geographic area.  The second case, BB&T Insurance Services, Inc. v. Thomas Rutherfoord, Inc., et. al., for which a hearing date has not yet been scheduled, also involves the solicitation of the former employer’s customers.  Unlike Home Paramount, this case addresses the fact that the post-employment non-competition covenants were provided as a condition precedent to the employer’s purchasing the employee’s business.  We will keep you posted on the decisions in these cases and their impact on non-competition agreements in Virginia.

Back to Basics: Contract Repudiation as a Defense to Breach

Posted by Brooke Ringel on June 21, 2011

A recent opinion by the Virginia Supreme Court reminds us of the basic – but important – principle of contract law that repudiation can be a defense to breach of contract.

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Real Estate Tort Liability Under the Virginia Consumer Protection Act

Posted by Brooke Ringel on December 18, 2010

Jennifer Kasman contributed to this post.

A recent Virginia Supreme Court case held that a real estate developer may be subject to claims under the Virginia Consumer Protection Act (VCPA) and a tort claim for fraud in the inducement  in addition to a breach of contract claim for breach of a sales agreement.  The holding of this case, which overturned the trial court’s order dismissing plaintiffs’ compliant, is a cautionary tale for real estate developers. 

In the case, all of the plaintiffs had signed real estate sales contracts with the defendant developer, Concord, for the purchase of new-construction condominiums.  In those contracts, Concord promised that the condos would be furnished with a specific type and size of hardwood flooring, subject to substitution of “substantially equivalent materials and finishes.”  The plaintiffs did not discover until after closing that Concord had installed a different-sized “prefabricated engineered hardwood,” which they argued was not substantially equivalent to the promised flooring. 

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