A D.C. hospital operator's effort to get its HVAC system upgraded has backfired in nightmarish fashion for the operator.
Hospital operator DCA leased its Northeast D.C. premises from Capitol Hill Group starting in late 2014.
Shortly before the lease was signed, Capitol Hill Group had broken off a portion of the building as a residential property and decoupled the existing HVAC system, which involved installing HVAC components in the remaining hospital premises. The DCA lease acknowledged that Capitol Hill Group “has installed a new HVAC system within the [b]uilding.”
Upon occupying the premises, DCA came to believe that this “new HVAC system” did not adequately heat, cool, and ventilate the hospital. The alleged inadequacy related to the fact that Capitol Hill Group had installed only new boilers, chillers, and pumps, not new distribution components (i.e., air handlers and fan-coil units).
After fruitlessly complaining to Capitol Hill Group about the alleged inadequacy of the HVAC system, DCA began to withhold rent payments over the issue (and other issues not relevant here). This led to litigation, initially filed by Capitol Hill Group to recover the unpaid rent.
The lawsuit turned on whether the lease required Capitol Hill Group to install new distribution components as part of the “new HVAC system.” The courts – ultimately including the D.C. Court of Appeals, in an opinion decided March 6, 2025 – concluded that the lease did not require new distribution components. This holding was based on, among other things, the fact that the “new HVAC system” statement in the lease simply acknowledged what was already in place. Both parties knew what that was – and it did not include new distribution components. And nothing in the lease entitled DCA to something more.
Perhaps the worst part of the result for DCA is that it must pay $2.7 million in attorney fees to Capitol Hill Group as the prevailing party in the case.
So in the end – DCA is operating with (so it says) an inadequate HVAC system; is out of pocket for its expenses relating to the alleged inadequacy of the system; must pay late fees and interest on the rent it withheld over the HVAC issue; had to pay its lawyers to handle a lengthy lawsuit over these issues; and now must pay the fees of its landlord’s lawyers, as well.
All of which could have been avoided had DCA not signed a lease containing no assurances about HVAC distribution components or, indeed, the adequate functioning of the HVAC system in general.
If you need it, put it in the lease. And, if you don’t put it in the lease – think twice before playing hardball to get it.
