FREMONT — Although the city apparently messed up when it failed to write some key language into a contract with a housing developer, it’ll come out hundreds of thousands ahead when all is said and done.
Century Communities agreed to pay the city $500,000 to end a costly months-long legal dispute and move on with the business of selling the remaining 110 houses in its 232-home Enclave project in Warm Springs.
“We appreciate the city leadership working cooperatively with Century to reach a fair agreement and are pleased to restart the project,” Nick Arenson, division president of Colorado-based development company, said in a statement to this news organization.
The city says it believed Century was selling the homes exclusively to people “55 years and older,” just as intended when it approved the project in 2016 as part of a larger master-planned senior housing development.
Because the city neglected to explicitly spell out the strict age-requirement in a development agreement, however, Century later started selling the homes under provisions of a state law that allow projects to qualify as senior housing as long as at least one person 55 and older lives in a unit.
In September, Fremont refused to continue inspecting the homes and issuing permits when it concluded Century was skirting the rules. Century responded by suing the city for breach of contract in Alameda County Superior Court, and in February a judge sided with the developer.
According to court documents, the city argued it always intended for all homes in the development to be “exclusively for the city’s senior population,” citing several staff reports and project studies stating that as evidence. It claimed Century pulled a “bait and switch.”
But Judge Richard Seabolt said those documents amounted to little more than “extrinsic” evidence and didn’t offset the fact that the development agreement never specified age restriction terms.
The city appealed but the 1st District Court of Appeals wasn’t swayed and ordered the city to resume issuing permits and inspections for the 68 homes already under construction and issue any permits needed to close out sales for 54 completed homes.
Century said in court filings that it initially tried to sell “exclusively” to people 55 and older, but the restrictions ultimately “made the homes unmarketable.”
By negotiating the $500,000 payout to the city during a mediation session earlier this month, Century now can put the dispute behind it and take advantage of a hot housing market.
The City Council ultimately approved the settlement agreement during a closed session meeting Tuesday night.
City officials still believe they were in the right, at least in spirit.
“The intent to create a senior only community was clear from all of the city’s documentation including the staff report, developer presentation, development agreement and initial Conditions, Covenants & Restrictions,” Interim City Attorney Debra Margolis said in an email to this news organization Thursday afternoon.
“The city was initially hopeful that the courts would uphold that demonstrated intention of the city but rather the courts indicated a willingness to rely on a technical legal loophole which allowed the developer to amend the CC&Rs without the city’s consent,” Margolis said.
The city spent about $150,000 fighting the case, Margolis said.
Fremont Mayor Lily Mei did not respond to requests for comment on the issue Friday.
Councilman Raj Salwan said the city’s intent was “very clear,” noting that 497 homes and apartments are being built for seniors in the area by multiple developers, as well as a brand new senior center.
“It is rather unfortunate that the developer used a loophole in order to not honor their commitment to senior housing,” Salwan said. “It certainly leaves a bad taste in your mouth.”