The Law

District of Columbia Court of Appeals has upheld a restrictive covenant that prohibits the operation of a nightclub. The ruling affirms a Superior Court decision that enforced the covenant, which was originally established in 2008 to address safety and neighborhood concerns.

The property at the center of the legal battle, 1412 I Street, NW, Washington DC, is located entirely within a network of public alleyways, with no frontage on any public street. Vehicular access is limited to narrow alleys and a private driveway owned by JP Morgan Chase Bank, which directly abuts the property to the west. The property has a history of controversy, as it was previously home to the Zei Club, a nightclub that operated before 2008. During its operation, the Zei Club was associated with incidents of violence, including a near‑fatal beating of a patron in 1998.

In 2008, Power Station Limited Partnership, the then‑owner of the property, sold it with a Special Warranty Deed containing a restrictive covenant. The covenant explicitly prohibited the property from being used as a nightclub, discotheque, or any establishment selling alcoholic beverages after midnight. Power Station included the restriction to address concerns about loitering, violence, crime, and the challenges posed by the property’s secluded alleyway location, which made access difficult for emergency and service vehicles. The covenant was intended to protect neighboring properties and maintain their value.

The property changed hands again in 2015, with the new owner using it as office space. In 2023, DTLD, LLC purchased the property at an auction, fully aware of the restrictive covenant. Despite this, DTLD leased the property to Iraklion, LLC, which planned to open a nightclub featuring nude dancing and “Vegas‑style” shows. The proposed venue was designed to accommodate up to 1,200 patrons, with operating hours extending until 3:00 AM on weekdays and 4:00 AM on weekends.

The controversy began when DTLD and Iraklion submitted an application to the Alcoholic Beverage and Cannabis Board (ABC Board) in July 2023 to transfer a Retailer’s Class CN license to the property. This license would allow the operation of a nightclub with nude dancing. The application quickly became a point of contention, with neighboring property owners and businesses, including Power Station and JP Morgan Chase Bank, raising concerns about the potential negative impact of a nightclub on the area.

Opponents of the license transfer cited fears of increased noise, crime, and disruptions to vehicular and pedestrian safety. They also argued that the nightclub could negatively affect property values and the overall character of the neighborhood. JP Morgan, which owns property adjacent to 1412 I Street, expressed concerns about the potential for nightclub patrons to use its private driveway, disrupting its operations.

The ABC Board held a two‑day protest hearing to evaluate the license transfer application. While the Board ultimately approved the transfer on June 5, 2024, it declined to consider the restrictive covenant, stating that it was outside the scope of its authority. The Board found that the proposed nightclub could operate safely and would not unduly impact neighboring properties, but noted that its findings were subject to re‑examination every two years under D.C. law.

Meanwhile, Power Station and neighboring property owners filed a lawsuit in November 2023 in the Superior Court, seeking to enforce the restrictive covenant and prevent the nightclub from opening. DTLD and Iraklion counterclaimed, arguing that the covenant was unreasonable and should be invalidated. They contended that the covenant was outdated, citing improved crime rates, increased foot traffic, and the economic benefits the nightclub would bring to the area. They also pointed to the challenging commercial real estate market following the COVID‑19 pandemic, which had led to high office vacancy rates and a decline in tax revenue for the District.

On November 22, 2024, the Superior Court granted summary judgment in favor of Power Station and neighboring property owners, ruling that the restrictive covenant was valid and enforceable. The court found that the covenant’s language was unambiguous and that DTLD and Iraklion had both actual and constructive notice of the restriction when they purchased the property and pursued the nightclub license. The court also determined that the covenant continued to serve its original purpose of addressing public safety and neighborhood concerns, as the alleyway location of the property remained unchanged.

DTLD and Iraklion appealed the decision, arguing that the covenant was unreasonable and that its enforcement would impose undue hardship and interfere with public policy. However, the Court of Appeals upheld the Superior Court’s ruling, emphasizing that restrictive covenants are generally enforceable unless they are shown to be unreasonable or against public policy.

The Court of Appeals applied the “radical change doctrine,” a legal test used to determine whether changed circumstances in a neighborhood render a restrictive covenant unenforceable. The court found no evidence of a radical change in the character of the neighborhood that would defeat the purpose of the covenant. It noted that the secluded alleyway location, which was the primary reason for the covenant, had not changed and continued to pose public safety and vehicle access challenges. The court also emphasized that the covenant restricted only one specific use of the property and did not render it unfit or unprofitable for other uses.

The appellants also urged the court to consider a “reasonableness test” established by the Supreme Court of New Jersey in Davidson Bros. Inc. v. D. Katz & Sons, Inc., which evaluates the enforceability of restrictive covenants based on present commercial, demographic, and other realities. While the Court of Appeals acknowledged the relevance of some Davidson factors, it concluded that applying them would not change the outcome of the case.

The court found that the covenant was reasonable in its original purpose, did not impose an undue restraint on trade, and did not interfere with the public interest.

(DTLD LLC, et al. V. Power Station Limited Partnership, et al.) (District of Columbia Court of Appeals, Docket: No. 24-CV-1163))

Argued: December 2025
Decided: February 2026

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