December 29, 1994
Appeal of
J. LEONARD SPODEK
NATIONWIDE POSTAL MANAGEMENT
Under Lease Agreement
PSBCA No. 3530
APPEARANCE FOR APPELLANT:
J. Leonard Spodek
APPEARANCE FOR RESPONDENT:
Patrice R. Dickey, Esq.
OPINION OF THE BOARD
Appellant, J. Leonard Spodek, has appealed the denial of his claim for reimbursement of funds withheld from rental payments due him as lessor of the Greenville, Texas, Post Office. The withheld funds were used by Respondent, United States Postal Service, to pay for the chemical treatment of water used in an air conditioning system installed at the post office. This appeal is being decided on the record in accordance with 39 C.F.R. §955.12. Only entitlement is at issue.
FINDINGS OF FACT
1. Appellant, J. Leonard Spodek, became the owner of the building housing the Greenville, Texas, Post Office on or about March 25, 1992. The property was subject to a lease entered into between Respondent and earlier owners of the property. The term of the lease was from July 1, 1970, through June 30, 1990, with six five-year renewal options, the first of which has apparently been exercised. (Appeal File Tabs (AF) 2a, 2b).
2. The lease between the parties included the following provisions relevant to this dispute:
"6.(d) Lessor agrees to furnish air conditioning equipment in accordance with contractual requirements, servicing of said equipment, including but not limited to, the replacement of necessary refrigerant and filters as required for proper operation of the equipment."
"7. The lessor shall, unless herein specified to the contrary, maintain the demised premises, including the building and any and all equipment, fixtures, and appurtenances, whether severable or non-severable, furnished by the lessor under this lease in good repair and tenantable condition, except in case of damage arising from the act or the negligence of the Government's agents or employees...." (AF 2b).
3. By letter dated May 11, 1992, Respondent's Real Estate Specialist forwarded to Appellant, apparently at his request, an invoice from Chemsearch, a company that was providing water treatment services for the air conditioning system. The Real Estate Specialist stated that withholding funds from the rent for the treatment of air conditioning system water had been going on for some time with the previous owners' consent. The letter further stated that the Real Estate Specialist considered the water treatment "extremely necessary" to the proper operation of the air conditioning system and that he intended to continue deducting the cost of the treatments from Appellant's rent until Appellant demonstrated that the service was being provided by him. (AF 3h). In September 1989 a previous owner had approved payment for one year of the service through deductions from his rent (Declaration of Larry L. Andrews; AF 5b). There is no evidence of the terms of any later agreement to provide the service.
4. By letter to the Real Estate Specialist dated May 19, 1992, Appellant stated that he was returning the Chemsearch invoice to the Real Estate Specialist. Appellant noted that the invoice covered services or shipments that predated his ownership of the building and, therefore, that payment was not his responsibility. (Attachment to Complaint).[1]
5. In a letter to Appellant, dated July 23, 1993, the Real Estate Specialist referenced a telephone conversation between them on July 21 and stated that the Postal Service would continue to withhold the cost of water treatments from the rent until Appellant showed proof that he was providing the service. He also advised Appellant that if he was dissatisfied with this position he should contact the Contracting Officer. (AF 3f).
6. By letter to the Contracting Officer, dated July 28, 1993, Appellant demanded reimbursement of all amounts deducted from his rent payments for water treatment service. He stated that,
"As per the lease, I am not required to provide water treatment. If the lack of water treatment should cause a problem with the HVAC [heating, ventilation, and air conditioning] system, then such problem would be my responsibility." (AF 3e).
7. In reply, the Contracting Officer issued a final decision on August 4, 1993. In that decision, he stated that Appellant had been aware when he bought the building that the facility had a history of requiring water treatments and that he had been aware that the Postal Service was withholding and, based on the May 11, 1992 letter, would continue to withhold rental payments in order to pay for the treatments. The Contracting Officer denied Appellant's claim for reimbursement of the withheld amounts and stated that the Postal Service would continue the withholding until Appellant showed that he was providing the water treatment service. (AF 1).
8. Appellant filed a notice of appeal with the Contracting Officer on or about October 8, 1993. Following advice from the Contracting Officer that he would have to contact this Board directly, Appellant filed a notice of appeal with this Board on or about December 10, 1993. (AF 3a, 3b; Notice of Appeal received by the Board on December 13, 1993).
9. Water treatment services of the nature that were being provided prevent the condenser water tubes within the air conditioner chiller from being coated with solids from the evaporated water, a process that eventually causes the tubes to close off and cause chiller failure or shut down. The coating process proceeds very rapidly or very slowly, depending on the amount of dissolved solids in the water. As the coating builds up, the "head pressure" on the chiller will increase, causing an increased electrical current flow to the condenser and increased power consumption costs. The increased current flow could also cause a condenser motor failure, resulting in a shutdown to repair or replace the motor. (Inspection report from Frank P. Skipper, P.E., Turner Engineers, Exhibit 1 to the Declaration of Larry L. Andrews; AF 5b).
DECISION
Appellant argues that when he purchased the building in 1992 he did not do so subject to any service or maintenance contracts that might have been in effect. Therefore, he argues that he is not bound under any such contracts. Appellant also relies on his response to the Real Estate Specialist's May 11, 1992 letter in which Appellant denied responsibility for paying the Chemsearch invoice.
Appellant also disagrees with the Real Estate Specialist's characterization of the water treatments as "extremely necessary." Appellant contends that there is no evidence that the lack of such treatments would interfere with his ability to carry out his obligations under the lease.
Finally, Appellant argues that the water treatments come under the category of preventive maintenance, which is not his responsibility under the lease. He argues that the lease language relating to the cooling system only requires that he replace the refrigerant and filters, as necessary.
Respondent argues that the water treatment is necessary to the operation of the cooling system, relying on the statements of the engineer who inspected the system (Finding 9). Respondent contends that such treatment is Appellant's responsibility under his lease obligation to maintain the HVAC system and to provide servicing of equipment essential to proper operation of the system.
Respondent also argues that water treatment is necessary to keep the premises in good repair and tenantable condition, as required by the lease. Respondent's position is that for the premises to be in good repair and tenantable condition it is essential that the HVAC system be working.
Finally, Respondent argues that there was already an agreement in effect for water treatment when Appellant acquired ownership and that the Contracting Officer was reasonable in deciding to continue the deductions unless the water treatment was provided by Appellant.
Under the lease, the lessor is responsible for maintaining the premises in "good repair and tenantable condition." This Board has held that that phrase does not include repairs that are in the nature of preventive maintenance, M.R. Kaplan, et. al., PSBCA Nos. 1147, et al., 88-3 BCA ¶ 20,827, at 105,315, for which no "immediate need" has been shown, M.R. Kaplan, et al., at 105,325, or work not required to repair actual damage or to prevent imminent damage to the facility, Edward R. and Lorraine Ester, PSBCA No. 1559, 88-2 BCA ¶ 20,573, at 104,000.
The evidence in the appeal before us indicates that the water treatments were necessary to prevent the occlusion of tubes in the air conditioning system. However, the evidence does not demonstrate that there was a danger of imminent failure of the system if the treatments were discontinued. The engineer who examined the system concluded that water treatments were necessary and described the consequences of failing to provide them. However, he stated that without treatment the coating on the inside of the tubes could develop very rapidly or very slowly, depending on the amount of dissolved solids in the water. He did not define what he meant by a "rapid" buildup -- whether the condition could be expected to cause chiller failure within days, weeks, months, or even years. Further, the evidence does not show what condition existed at the particular site in question here -- i.e., whether the buildup in the tubes could be expected to be very rapid or very slow, however those terms are defined. In the absence of evidence that water treatment was necessary to repair actual damage or prevent imminent damage to or failure of the chiller or that the need for the treatment was otherwise immediate, Appellant was not required to provide water treatment under its lease obligation to maintain the premises in good repair and tenantable condition. Therefore, we conclude that Respondent was not entitled to have the treatments performed at Appellant's expense and Appellant may recover the amounts withheld from him for that purpose, plus Contract Disputes Act interest.
Accordingly, the appeal is sustained. The dispute is remanded to the parties for negotiation of the amount due. If the parties cannot agree, the Contracting Officer should issue a final decision, which may be appealed in accordance with the Contract Disputes Act.
David I. Brochstein
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
James D. Finn, Jr.
Administrative Judge
Vice Chairman
[1] Appellant's Complaint contains an allegation that he "also informed [the Real Estate Specialist] that we did not contract with Chemsearch and would not be held responsible for alleged preventive maintenance services which were contracted by others." Respondent admitted the truth of this assertion but denied, on the basis of lack of information, that these assertions were made on or about May 19, 1992, as asserted in the Complaint. (Complaint; Answer).