OPINION OF THE BOARD

Respondent, United States Postal Service, leases the Pender, Nebraska Post Office from Appellant. In 1997, the air conditioning compressors failed and could not be repaired. After Appellant refused Respondent’s demands that it replace the compressors, Respondent did so. The contracting officer demanded reimbursement for the cost of replacement and administrative costs, and Appellant filed this appeal.

At the election of the parties, this appeal was heard on the written record. Both parties submitted evidence and briefs.

FINDINGS OF FACT

1. Respondent first leased the Pender, Nebraska Post Office in 1967 for a term of ten years followed by four five-year options. Under that lease (POD Form 1449, Jan. 1965), the lessor was responsible for maintaining the premises. However, through an amendment to the lease in 1981 (PS Forms 7446 and 7446-B, 1980), it became Respondent’s obligation to “keep the demised premises in good repair and tenantable condition.” (Appeal File, Tab (“AF”) 13, Lease Amendment Riders).

2. Appellant acquired the property in 1992, and just before the lease, as extended through exercise of the options, expired in 1997, Appellant and Respondent negotiated a replacement ten-year lease. (AF 9-13).[1]

3. The parties orally discussed the terms of the intended lease and reached agreement on August 8, 1996. Respondent prepared a lease document using its standard forms and sent it to Appellant on August 16, 1996, for signature (AF 8, 9, 11).

4. The form of lease Respondent sent to Appellant provided,

“Lessor, as part of the rental consideration, shall furnish the following utilities, services and equipment: (See Lessor Obligations of General Conditions (A.24) and/or attached addendum for definitions.) Heating System, Air Conditioning Equipment, Light Fixtures, Sewerage System, Electrical System, Water System. as presently installed.” (AF 9, Lease (RELEASE (Jan. 1995)) Paragraph 6, UTILITIES, SERVICES, AND EQUIPMENT).

5. The language of the Utilities, Services and Equipment paragraph (Finding 4) was Respondent’s standard wording except for the phrase “as presently installed” at the end of the paragraph. That phrase had been proposed by Appellant and agreed to by Respondent. The parties had never discussed the meaning of the addition of the “as presently installed” phrase, but Appellant intended that he would have no responsibility under the lease for the condition of equipment in the premises beyond assuring that it was in good working condition at the beginning of the lease. (AF 7; Declaration of Marcus Nielsen, October 19, 1998; Reply Affidavit of J. Leonard Spodek to the Declaration of Marcus Nielsen, November 10, 1998).

6. On August 23, 1996, Appellant signed and returned the lease to the contracting officer, and the contracting officer executed the lease on September 5, 1996, for a term from February 1, 1997, to January 31, 2007. (AF 7, 9; Declaration of Marcus Nielsen, October 19, 1998, ¶ 5).

7. General Condition A.24 of the executed Lease (part of Respondent’s standard lease form—RETERMS (Jan. 1995)) provides,

“If air conditioning equipment is furnished – Lessor must furnish air conditioning equipment in the demised premises in good working order and, if maintained by Lessor, will be maintained in accordance with the Maintenance Rider included attached hereto.” (AF 9, General Condition A.24, LESSOR OBLIGATIONS, Subsection n).

8. General Condition A.24 also provides,

“If sewerage system is furnished – Lessor agrees to furnish sewerage systems including all equipment, piping, plumbing, lines, connections, septic tanks, field lines, and related devices, as necessary during the continuance of the Lease.” (AF 9, General Condition A.24, LESSOR OBLIGATIONS, Subsection k).

9. Under the lease’s Maintenance Rider (REMAINU (Jan. 1995)), Respondent is “responsible for ordinary repairs to, and maintenance of the demised premises[[2]] except for those repairs that are specifically made the responsibility of the Lessor in this Lease.” The Maintenance Rider lists those repairs for which the lessor is responsible, including repairs resulting from Acts of God or casualty, repairs resulting from defects in building construction or installation of equipment and repairs that would otherwise be the responsibility of Respondent that result from the failure of an element for which Appellant is responsible. The Rider does not specifically mention replacement of equipment under either party’s responsibilities. (AF 9, Maintenance Rider, Subsections b, c, d).

10. In July 1997, the compressors on the air conditioning units at the facility failed. The breakdown did not stem from any failure by Respondent to maintain the equipment. The compressors simply wore out and could no longer be repaired. As of July 1997, the units, which were over thirty years old, were not in good working order and needed to be replaced. (Admissions[3] 7, 9, 10, 11, 13; AF 4; Declaration of Marcus Nielsen, November 6, 1998).

11. Respondent gave Appellant reasonable notice and opportunity to replace the compressors, but Appellant refused to do so, and Respondent performed the work. The cost Respondent incurred to replace the compressors, $1,680, and Respondent’s administrative costs of $250 to accomplish the repairs were reasonable. (Admissions 4, 5, 6, 14, 15; AF 2, 3, 4, 5, 6).

12. On August 5, 1997, the contracting officer issued a final decision asserting Respondent’s claim of $1,930 for the cost of replacing the compressors and administrative costs (AF 2), and Appellant filed this appeal (AF 1).

DECISION

In order for Respondent to recover from Appellant the cost of performing a repair to the leased premises, it is Respondent’s burden to demonstrate that the repair was one that was Appellant’s responsibility under the lease. See Real Properties MLP Limited Partnership, PSBCA No. 3453, 95-2 BCA ¶ 27,829 at 138,756, and cases cited therein. Respondent has failed to meet that burden, because it has not demonstrated that the lease requires Appellant to replace the compressors.

We have held that the lessor’s obligation under a Postal Service lease to maintain the premises “in good repair and tenantable condition” creates a general obligation on the lessor to repair (and to replace if necessary) equipment or building elements. E.g., M. R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827; Carlos N. and Betty Lou Taylor (Taylor Investments), PSBCA No. 1675, January 26, 1988; Paoli Plaza Investment Corp., PSBCA Nos. 3711 & 4057, 98-1 BCA ¶ 29,445. However, in entering into this lease, Respondent chose not to use such standard language to assign to Appellant this general obligation to repair and maintain the premises. Instead, the Maintenance Rider makes Respondent liable for repairs and maintenance “except for those repairs that are specifically made the responsibility of the Lessor in the Lease” (Finding 9), establishing a general residual obligation on Respondent to perform repairs unless the lease specifically requires Appellant to perform them. See Mary Lou Bloom and Kenneth D. Bloom, PSBCA No. 4053, 98-1 BCA ¶ 29,352. There is nothing in the lease that specifically or generally makes repair or replacement of air conditioning equipment Appellant’s responsibility.

Respondent argues that the Utilities, Services and Equipment clause requirement that Appellant “furnish” air conditioning equipment in good working order (Findings 4, 5, 6) requires Appellant to replace it when it wears out. However, there is nothing about the use of the term “furnish” in General Condition A.24 (n) (Finding 7) that suggests a continuing obligation to replace the air conditioning equipment when it fails.[4] We reject Respondent’s argument that unless “furnish” is read as a continuing obligation, the reference in the Maintenance Rider’s definition of “demised premises” to equipment “furnished, or to be furnished, by the Lessor under this Lease” (Finding 9, n. 2, emphasis added) will be rendered superfluous. That provision is simply an all-inclusive boilerplate definition of the demised premises that leaves to other parts of the lease to flesh out what equipment is furnished or to be furnished by the lessor. The provision retains meaning notwithstanding our conclusion that the lease does not require Appellant to replace compressors when those provided at the beginning of the term fail. Moreover, insofar as the equipment to be furnished under the lease is described in the Utilities, Services and Equipment clause (Finding 4), that description is modified by the “as presently installed” language.

Respondent concedes that it is liable under the Maintenance Rider for “ordinary repairs” to the equipment (Finding 9) but argues that “ordinary repairs” do not include replacement of equipment. We need not examine the scope of “ordinary repairs” because the issue in this appeal is whether Appellant is obligated to replace the compressors. Unless there is an express agreement in the lease requiring Appellant to perform the replacement, there is no duty on its part as lessor to do so.[5] See Friedman on Leases, 3d. ed., 1990, §§10.101, 10.301a, 10.501; 51 C.J.S., Landlord and Tenant, §366 (1)(a), 368 (9); Western Motors Servicing Corp. v. Land Development & Investment Co., 152 Cal. App. 2d 509, 313 P.2d 927, 929-930 (19157). Nothing in this lease requires Appellant to perform the work at issue.

Respondent offered the contracting officer’s testimony that the trade practice in the real estate industry is that the lessor in a lease of ten years’ duration is obligated to replace equipment and systems that cannot be repaired. Industry practice can be varied by agreement of the parties, and regardless of what the industry practice in this regard was, the parties by this lease have not adhered to that division of responsibility. We are not persuaded that Respondent relied on such a trade practice in entering into the lease, and Appellant certainly did not. Appellant intended that providing the existing equipment in good working condition at the beginning of the lease satisfied any obligation he had with respect to the maintenance, repair or replacement as is reflected by his request that the “as presently installed” language be inserted into the lease (Finding 5).

Respondent argues that finding in Appellant’s favor will create an impermissible windfall for Appellant in that Appellant will have new compressors when the lease ends in 2007. We are not persuaded that Appellant’s recovery of what would then be ten-year-old compressors that cost $1,680 in 1997 would be a windfall. Additionally, the “windfall,” if any, would simply be a product of the provisions of the lease and is not a basis for refusing to enforce them.

Finally, Respondent argues that the calculation of the rent for the premises was based on Appellant replacing worn out equipment. There is no evidence in the record to support that contention.

Respondent has failed to show that Appellant was responsible for replacing the air conditioning compressors. The appeal is sustained.

Norman D. Menegat

Administrative Judge

Board Member

I concur:

James A. Cohen

Administrative Judge

Chairman

I concur:

David I. Brochstein

Administrative Judge

Vice Chairman

[1] The original lease was transferred in 1992 to J. Leonard Spodek (AF 12). The replacement lease, however, was between Respondent and J. Leonard Spodek DBA Colo Postal Holdings (AF 9). The appeal was filed by J. Leonard Spodek using stationery of Nationwide Postal Management, and the appeal was docketed in that name. We have corrected the caption of the appeal to reflect the lessor/Appellant as J. Leonard Spodek DBA Colo Postal Holdings.

[2] The Maintenance Rider defines the “demised premises” to include “all equipment and fixtures furnished, or to be furnished, by the Lessor under this Lease.” (AF 9, Maintenance Rider, Subsection b).

[3] Appellant failed to respond to Respondent’s discovery requests notwithstanding Board orders that he do so. As a result, the factual propositions set out in Respondent’s Requests for Admissions were deemed admitted. Respondent filed the Requests for Admissions as supplemental evidence.

[4] Contrast A.24 (n) with the sewerage system requirement in A.24 (k) (Finding 8). In the latter, Respondent plainly states an obligation to furnish the described equipment “as necessary during the continuance of the lease.” The drafters of the lease General Conditions apparently knew how to describe a continuing obligation regarding the furnishing of equipment. Cf. Poelstra Properties, PSBCA No. 3109, 92-3 BCA ¶ 25,090.

[5] As discussed above, such duty can be found in a lessor’s general obligation to maintain the premises in good repair and tenantable condition, an obligation not included in this lease.