HPA No. 1984-566 (In re. Cooper House)

• HPA Number: 1984-566
• Case Name: Application for a Demolition Permit for Buildings Located at 2521-23 K Street, N.W., respectively Lot 802 in Square 15 and Lot 803 in Square 15
• Location of Property: 2521-23 K Street, N.W.
• Date of Decision: August 1, 1985
• Type of Case/Type of Permit Sought: Demolition
• Disposition: Denied
• Date of Case Summary: November 26, 2014
• Subject Areas: Mayor's Agent – Procedural ; Unreasonable Economic Hardship:

Summary of Decision:

Donnelly Associates Limited Partnership (the "Applicant") sought a permit under Section 5 of the Historic District Protection Act of 1978, D.C. Law 2-144 (the "Act") to demolish two buildings located at 2521 and 2523 K Street, N.W. (the "Cooper Houses"). The Cooper Houses were designated historic landmarks on October 24, 1984 by the Historic Preservation Review Board (the "Review Board"). The houses were considered an example of mid-nineteenth century architecture in the District. The 2521 K Street, N.W. location was constructed in 1843 and was detailed with Flemish bond brick work, tall parapet, molded window lintels and a stylized doorway. The 2523 K Street, N.W. location was constructed in 1868 and had wood detailing in Italianate style on the door and cornice. The Cooper Houses were the oldest buildings in the Foggy Bottom neighborhood. The Applicant considered several alternatives to demolishing the Cooper Houses but concluded that each alternative, except razing the buildings, was economically unfeasible. The Applicant argued that the failure to grant the demolition permit would result in an unreasonable economic hardship and that such demolition was consistent with the purposes of the Act and in the public interest.

The Mayor's Agent denied the application to demolish the Cooper Houses, concluding that the Applicant had failed to demonstrate that no reasonable economic use existed and finding that the demolition would not be consistent with the purposes of the Act since the Act encourages the adaptive use and/or restoration of historic landmarks.

Mayor's Agent – Procedural:

• The Applicant argued that the Review Board lacked jurisdiction to consider the designation applications. The Mayor's Agent dismissed this procedural objection, noting that the Mayor's Agent does not have the authority to rule on challenges to the Review Board's designation of landmarks until it is overturned by a Court of competent jurisdiction. Until such time, the Mayor's Agent must assume that the designation is valid.

• The Mayor's Agent dismissed the Applicant's argument that Section 5-1002(b)(6) of the Act amounted to a taking of property and is not consistent with due process noting that the Applicant's concerns that section 5-1002(6)(b) amounted to a taking had already been considered and rejected in Weinberg v. Barry, 604 F.Supp. 390 (D.D.C. 1985).

• The Applicant contended that the 120 day period in which the Mayor's Agent had to make a decision had expired. The Mayor's Agent concluded that the provision that stated that the Mayor's Agent was to make a determination in 120 days was only directory and the Applicant had not shown that he was prejudiced by the decision not being made sooner. The decision had been delayed to accommodate a public hearing and to allow the Applicant to prepare his case.

• The Applicant argued that the Review Board could not take adverse action against the Applicant based on laches and estoppel. The Mayor's Agent found that the Applicant had not proved that the doctrine of laches or estoppel applies because the Applicant had not shown that it had taken actions in response to the government's affirmative acts.

• The Mayor's Agent concluded that the issue of unreasonable economic hardship, which is equated to a taking, is not ripe for consideration since the Applicant did not seek approval for all uses that would enable it to derive economic benefit from the subject property. Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 53 U.S.L.W. 4969 (filed June 28, 1985).

Unreasonable Economic Hardship:

The Applicant argued that failure to grant the demolition permit would result in unreasonable economic hardship. Pursuant to Section 5(e) of D.C. Law 2-144, a demolition permit may not be issued unless the Mayor or his designated Agent finds that "failure to issue a permit will result in unreasonable economic hardship to the owner." "Unreasonable economic hardship" is defined under Section 3(n) as a "taking of the owner's property without just compensation." To meet its burden of proving unreasonable economic hardship, the Applicant must show that denial of the demolition permit would preclude it from reasonable use of its property or a return on its investment.

The Applicant argued that, after considering many alternatives, no reasonable use existed for the property. After learning that the Cooper Houses were subject to historic landmark designation, the Applicant explored the following alternatives to demolition thereof: (1) renovating and reselling the property; (2) performing minimal cosmetic repairs to satisfy the D.C. Housing Code and then renting it; (3) rehabilitating the Cooper Houses to meet the needs of the Foggy Bottom neighborhood; (4) developing the property into family flats; (5) adding a rear addition for a clinic; (6) constructing a chancery; (7) constructing a four-story apartment building; (8) constructing a wrap around in the rear for a clinic; (9) developing non-medical office buildings; and (10) demolishing the buildings and constructing one bedroom and efficiency condominiums. For each of the alternatives, with the exception of the tenth alternative, the Applicant would experience a significant financial loss. The Applicant determined that he could not exact an acceptable profit (i.e., an 8% to 10% rate of return) and might lose a substantial amount of money by performing any of the above-listed alternatives because the cost of such alternatives coupled with the costs incurred in acquiring the Cooper Houses (i.e., $460,000) would far exceed the amount of money that could be generated either by selling or renting the property for any of the above-listed purposes. Without any renovations, the Cooper Houses were worth $350,00 to 400,000; however, the best offer that the Applicant had received for both houses was $265,000.

The Mayor's Agent found that the Applicant's profit expectations were relevant since the Cooper Houses were purchased before they were designated historic landmarks, but that the Applicant failed to include Investment Tax Credits, conservation easements and depreciation deductions into his considerations. Furthermore, the Mayor's Agent found that profitability to the Applicant is determined by the existence of any reasonable economic use of the properties. The landmark designation did not deprive the Applicant of the economic use which existed at the time the Applicant purchased the properties (i.e., single family dwellings). The Mayor's agent found that the buildings were suitable for single-family residents and that the Applicant had not fully considered other alternatives, such as partial demolition and rear additions, which would not require the demolition of the Cooper Houses. Therefore, the Mayor's Agent concluded that the Applicant failed to prove that it could not use the Cooper Houses and that they were not suitable as single-family dwellings. In addition, the Applicant failed to show that the Cooper Houses could not have been rehabilitated to obtain a reasonable rate of return.

The Mayor's Agent also concluded that the Applicant had not shown that if the application was not granted, it would amount to a taking without just compensation and that there was no reasonable use of the property that would preclude such compensation. The Mayor's Agent noted that the Applicant's reliance on his real estate appraiser's assessment – that an appropriate rate of return was 11% and that none of the alternatives to demolition described above were economically feasible – was misplaced because the assessment had been made a few days before the hearing and not before the demolition application had been submitted.

Subsequent History:

See HPA No. 1990-139, 1990-140, order dated June 29, 1990 for subsequent history.

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