The Austin City Council agreed to lease a location from MetCenter for 10 years at a cost of $31 million to house the new Municipal Court. That was in May. Now MetCenter is suing the city for pulling out of the deal. The agreement was tentative, but MetCenter alleges bad faith negotiations and double-dealing.
Plans to move
The city council was making plans to move the Municipal Court from its current location, which is outdated, to a new location. The city started negotiating with MetCenter. The city has not yet revealed its reason for reversing course, but apparently does still plan to move.
On October 12, the city released documents stating that it was considering a second location for the Municipal Court very near the MetCenter location with Capital Commercial Investments-Burleson (CCI-Burleson). The city claimed the new location was a more cost-effective option and approved negotiations on October 18.
Basis for lawsuit
MetCenter is now suing the city, alleging that CCI-Burleson was only able to propose its lease because the city gave CCI-Burleson design materials developed by MetCenter. MetCenter is also claiming breach of contract, even though neither side had yet signed a formal lease, claiming fraud and deception by the city. MetCenter is asking for $500,000 in damages for work spent on designs for the Municipal Court. They also allege that they lost another prospective tenant for the space because of the city’s bad faith negotiating.
Not the first change of plans
The city has been ready to move the Municipal Court for years. First, it used bond funds from 2006 to purchase an old Home Depot on I-35, but dropped that plan. Next it negotiated a joint venture with Travis County. The county is creating a new civil and family courthouse, and the Municipal Court would have combined with that space. It abandoned that plan in favor of the MetCenter location.
The City of Austin has not yet answered the complaint. Contract disputes can arise for many reasons in real estate deals. Generally, special laws apply when those deals involve municipalities or other government entities.