Developer sues Chandler over garage rent default - SanTan Sun News SanTan Sun News

Developer sues Chandler over garage rent default

January 20th, 2022 development
Developer sues Chandler over garage rent default

By Ken Sain, Staff Writer

In a dispute that could cost taxpayers millions of dollars, the City of Chandler is being sued for failing to pay its rent of the parking garage at the Overstreet development at Arizona Avenue and Chandler Boulevard.

Developer DT Chandler’s lawyers filed the lawsuit in Maricopa County Superior Court in mid-October and City Council went into executive session on Monday to discuss how to deal with it.

At the heart of the dispute is DT Chandler’s claim that the city did not exercise its option to buy the parking garage correctly. It says that option is now gone, and the city must pay rent as part of their lease agreement.

The city wants to buy the garage for about $8.7 million. If the court sides with DT Chandler, then it would have to pay a little more than $65,000 a month in rent for the next 27 years – about $21.1 million over the life of the lease, DT Chandler claims. Under the terms of the lease, the city paid $26,250 a month for the first three years. The rent increases starting the fourth year.

According to the lawsuit, the city had to notify DT Chandler it planned to exercise its option to purchase the garage for $8,690,351 in writing at least 30 days before the third year ended.

DT Chandler said it was not notified until it received a letter on Aug. 27. It claims the city did not state it was exercising the option and that the letter was not sent to the escrow holder.

It also claims the city did not provide the required $150,000 deposit to the escrow holder.

And it claims that written notice of the city’s intent to exercise the option was due on or before Aug. 12, since the lease began on Sept. 11, 2018.

DT Chandler argues the city failed to give the required notice, or take the required steps toward actually purchasing the garage, and therefore must pay the higher rent for the rest of the lease agreement, which was for 30 years.

But the city not only has denied the charges, but also has countersued the developer.

The city contends that the lease “ represents only a portion of the overall dealings between the parties” and that the lease “must be read in conjunction with” development and option agreements.

Besides, the city says, the document the plaintiff attached to the complaint “does not bear the stamp of a document recorded with the Maricopa County Recorder’s Office and which the City considers the official version of the document.”

The City also notes that the pandemic was a major event that automatically extended the deadline for any action on Chandler’s part.

It also says it offered the purchase agreement “in the form required by the documents which DTC refused to execute” and that DT Chandler’s allegations “misstate the nature of the documents and imposes and assumes obligations not set forth in the documents. The City denies failing to comply the terms of the documents.”

The City also disputes the calculations DT Chandler made in what it is owed, suggesting DT Chandler has over-simplified the whole matter.

“The City acknowledges the dispute over the Option is one issue before the Court,” the responses states. “However, that issue will also require the Court to resolve whether a valid, enforceable agreement exists between the parties, and …whether Plaintiff is a proper party to any agreement, whether it breached any contract that exists and the damages incurred by the City as a result of that breach. The City denies this dispute is capable of simple resolution with only a determination of the ‘option’ issue.”

Chandler also filed a counterclaim against DT Chandler, contending it had already agreed to extend the deadline for exercising its option to October 2022 and that it had agreed on a sale price of $8.8 million, with rent payments going toward that purchase.

It asks the court to rule that the city is the actual owner of the site or declare the lease escalation rate “unenforceable.”

The case has been assigned to Superior Court Commissioner Richard Albrecht.