July 17, 2000
Appeal of
NATIONWIDE POSTAL MANAGEMENT
LEASE AGREEMENT
(Ashland, ME - MPO)
PSBCA No. 4132
APPEARANCE FOR APPELLANT:
J. Leonard Spodek
APPEARANCE FOR RESPONDENT:
Samuel J. Schmidt, Esq.
OPINION OF THE BOARD
Appellant, J. Leonard Spodek d/b/a Nationwide Postal Management, has appealed from the final decision of a contracting officer withholding $3,760.50 plus administrative costs and interest from rent otherwise due Appellant for repairs to a building leased to Respondent, United States Postal Service. The appeal is being decided on the record in accordance with 39 C.F.R. §955.12.
1. On November 25, 1968, Respondent[1] entered into a lease for a one-story building and the surrounding property at 52 Main Street, Ashland, Maine 04732-9998 for use as the Ashland Main Post Office (“Ashland MPO”). The lease was for a ten-year period, beginning September 1, 1968, with four five-year options. In 1992, Respondent exercised the fourth and final five-year option, extending the lease term to August 31, 1998. (Appeal File (AF) Tabs 1 and 5).
2. The lease (POD Form 1449, May 1966) provided at paragraph 7, that the lessor was required to maintain the premises, including the building and any equipment or fixtures, "in good repair and tenantable condition, except in case of damage arising from the act or the negligence of [Respondent's] agents or employees. " (AF Tab 1).
3. Under paragraph 9 of the lease, the Postal Service had the right to make
"alterations, attach fixtures and erect additions, structures or signs in or upon the premises. . . ." However, upon 60 days notice by the lessor prior to the expiration of the lease, Respondent was required to restore the premises to their original condition. The clause specifically excluded ordinary wear and tear and damages by the elements or by circumstances over which Respondent had no control. (Id.)
4. In mid-December, 1993, Appellant purchased the Ashland MPO property and became the assignee of the lease (AF Tabs 2 and 3).
5. In August, 1996, various areas of the concrete sidewalk adjacent to the Ashland MPO were deteriorated and required replacement (Admission 1).[2] Additionally, there were large cracks and potholes in the asphalt parking area, which required repair (Admission 2).
6. By letter dated August 14, 1996, the Ashland MPO postmaster notified Appellant of the need for repairs to the sidewalk and parking areas. The postmaster advised Appellant that the repairs needed to be initiated within 30 days, and encouraged Appellant or his agent to contact the Postal Service and arrange for an inspection of the facility (AF Tab 7 and Declaration of William Hay, AF Tab 28 (“Hay Decl.”) ¶ 4).
7. Appellant responded to the postmaster by letter dated August 19, 1996, and requested photographs of the areas needing repair (AF Tab 8; Hay Decl. ¶ 6).
Appellant also questioned the need for additional sidewalk repairs as the parties had jointly replaced the sidewalk a year earlier (id.).
8. By letter dated August 27, 1996, Respondent sent Appellant the requested photographs showing the sidewalk and parking areas requiring repair (AF Tab 9; Hay Decl. ¶ 7). The letter also explained that the prior sidewalk repairs were in a different area and that the requested repairs were necessary because the damaged areas created a hazardous condition (id.).
9. Appellant did not respond to the August 27, 1996 letter or take any action to repair the sidewalk or parking area (Declaration of Marcus Nielsen, AF Tab 26 (“Nielsen Decl.”) ¶ 7).
10. By letter dated November 8, 1996, the contracting officer again notified Appellant of the need to repair the sidewalk and parking areas. The letter warned Appellant that if he did not present a signed contract to repair both areas within ten days of receipt of the letter, Respondent would hire a third-party contractor and deduct the costs plus administrative fees from rents otherwise due Appellant. (AF Tab 10; Nielsen Decl. ¶ 8).
11. On November 20, 1996, Appellant requested deferral of the repair work until the spring of 1997 (AF Tab 11). Respondent agreed to the deferral, but again reminded Appellant that a third-party contract would be awarded if the work was not completed within a reasonable time after the return of favorable weather conditions (AF Tab 12; Nielsen Decl. ¶ 8).
12. By letter dated May 7, 1997, the contracting officer once again reminded Appellant of the necessity to complete the repairs and further warned that Respondent would hire a third-party contractor and deduct the costs plus administrative fees from the rent if the work was not started within 30 days (AF Tab 15; Nielsen Decl. ¶ 9).
13. Appellant did not respond to the May 7, 1997 letter (Nielsen Decl. ¶ 9). As of September 2, 1997, the sidewalk and parking area repairs had not been performed (Admissions 5 and 6).
14. After securing several estimates, Respondent awarded a contract to Prestige Sealer and Safety Products, Inc. (Prestige) on September 2, 1997, to make the necessary repairs (AF Tabs 19, 23, 24, 25 and Declaration of Kent Holbrook, AF Tab 27 (“Holbrook Decl.”) ¶ 6). The contract with Prestige required the removal and replacement of damaged sections of concrete sidewalk, the removal and repair of damaged asphalt paving and the routing and filling of cracks in the asphalt paving (AF Tab 19). The agreed price for the work was $3,760.50 (AF Tabs 18 and 19).
15. The repairs were completed by Respondent’s contractor in September, 1997, and on October 6, 1997, the contracting officer authorized payment of $3,760.50 to Prestige for the completed work (AF Tab 20; Nielsen Decl. ¶ 11; Holbrook Decl. ¶ 10). The repairs to both areas were necessary and proper (Admissions 3 and 4) and did not represent a capital improvement to the facility (Holbrook Decl. ¶ 5). The cost of the repairs was fair and reasonable for the work performed (Holbrook Decl. ¶ 6).
16. On October 6, 1997, the contracting officer issued a final decision in which he found Appellant responsible for the cost of repairing the sidewalk and parking areas in the total amount of $3,760.50 for the repairs, plus $200 in administrative costs. The contracting officer advised Appellant that an additional $200 in administrative costs plus interest would be withheld from rents otherwise due if a check was not received by October 17, 1997. (AF Tab 17).
17. Respondent incurred administrative expenses to have the repairs performed. The assessed administrative costs represented a conservative estimate by the contracting officer of the actual administrative expenses incurred to have the repairs performed and to implement the rental deductions (Nielsen Decl. ¶ 17).
18. By letter dated October 13, 1997, Appellant timely appealed the contracting officer’s final decision (Notice of Appeal).
Decision
Appellant contends that he had consistently fulfilled his obligations under the lease and that the repairs were unnecessary because the sidewalk and parking lot conditions did not pose a safety threat to Postal Service employees or customers. In addition, Appellant argues that the scope of the work and costs were excessive for a lease with only one year remaining and that he could have performed temporary repairs at a lesser cost. Appellant also argues that the repairs should be considered required restoration work, and therefore Respondent’s responsibility, under paragraph 9 of the lease. Finally, Appellant questions the amount of the administrative costs charged to his account.
Respondent argues that the repairs were Appellant’s responsibility under the lease and not the result of Respondent’s fault or negligence. Respondent also asserts that the repairs were necessary and proper and performed at a reasonable cost after Appellant failed to have the repairs performed.
The lease clearly required that Appellant maintain the premises in good repair and tenantable condition (Finding of Fact No. (FOF) 2). The evidence establishes that various areas of the concrete sidewalk at the Ashland MPO were deteriorated and required replacement and that there were large cracks and potholes in the asphalt parking area which required repair (FOF 5). Although Respondent notified Appellant the work was needed, Appellant did not have the work performed (FOF 6 and 9 - 13). The repairs undertaken by Respondent were necessary and proper and performed at a reasonable cost (FOF 15). While Appellant may have been able to accomplish the repairs at a lower cost, he did not do so even though he had been on notice of the need for the repairs for over a year (FOF 13).
Appellant contends that his previous cooperation in obtaining repairs to the sidewalk shows that he was not neglecting his responsibilities under the lease. However, the earlier repairs were in a different area of the sidewalk (FOF 8) and did not relieve Appellant of his continuing responsibility to maintain the premises in good repair and tenantable condition, regardless of how much time was left in the lease (FOF 2). Furthermore, Appellant’s argument that Respondent should be solely responsible for the costs under paragraph 9 of the lease is misplaced. The restoration clause in the lease only pertains to work required to return the premises to their original condition at the expiration of the lease (FOF 3).
Since Appellant was responsible for maintaining the property in good repair and tenantable condition, Respondent is entitled to be reimbursed for the costs to repair the deteriorated sidewalk and parking areas. As a part of its costs, Respondent may recover the reasonable and foreseeable administrative costs incurred to obtain a third party contractor and to have the repairs performed. See M.R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶20,827 at 105,319. However, Respondent may not recover administrative costs associated with implementing rental deductions. J. Leonard Spodek, Nationwide Postal Management, PSBCA Nos. 4206, 4217, and 4310, 2000 PSBCA LEXIS 14 (May 31, 2000); J. Leonard Spodek, Nationwide Postal Management, PSBCA No. 4207, 00-1 BCA ¶30,593; The Estate of George J. Rutman, PSBCA Nos. 3697, 3705, 97-2 BCA ¶29,115; Real Properties MLP Limited Partnership, PSBCA No. 3453, 95-2 BCA ¶27,829 at 138,756.
The appeal is sustained as to the administrative costs claimed by Respondent for implementing the rental deductions and is otherwise denied.
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
I concur:
William K. Mahn
Administrative Judge
Board Member
[1] Respondent’s predecessor, the Post Office Department, entered into the original lease. Pursuant to the Postal Reorganization Act, P.L. 91-375, 84 Stat. 719 (1970), all the functions, powers and duties of the Post Office Department were transferred to the United States Postal Service, and the Post Office Department was abolished.
[2] After Appellant failed to comply with the Board’s orders to respond to Respondent’s discovery requests, the factual propositions in Respondent’s requests for admission were deemed admitted. See Orders, J. Leonard Spodek d/b/a Nationwide Postal Management, PSBCA No. 4132, dated April 9, 1998 and June 11, 1998.