August 6, 2002
Appeal of
CUSTOM LIVING, INC.
LEASE AGREEMENT
PSBCA No. 4888
APPEARANCE FOR APPELLANT:
Abraham Kinstlinger, Esq.
APPEARANCE FOR RESPONDENT:
Stuart James, Esq.
OPINION OF THE BOARD
Appellant, Custom Living, Inc., has appealed from the decision of the contracting officer finding Appellant liable for repairs to the Blauvelt, New York Main Post Office, which Respondent, United States Postal Service, leases from Appellant. This appeal is being decided on the record in accordance with the Board's Accelerated procedure. 39 C.F.R. §§955.12, 955.13. Only entitlement is at issue in this proceeding.
FINDINGS OF FACT
1. By lease dated February 29, 2000, Appellant agreed to lease a property in Blauvelt, New York for use as the Blauvelt Main Post Office. The lease was for a ten-year period beginning on December 1, 1999, and contained four five-year renewal options exercisable by Respondent. Respondent intended to renovate the leased space in order to adapt it to Postal Service needs. (Appeal File Tab (AF) 1; Declaration of Henry Burmeister, dated June 12, 2002 (Burmeister Decl.) ¶2).
2. Clause A.22 ("Applicable Codes and Ordinances") of the lease General Conditions provided that,
"The Lessor, as part of the rental consideration, agrees to comply with all codes and ordinances applicable to the ownership and operation of the building in which the rented space is situated and to obtain all necessary permits and related items at no cost to the Postal Service." (AF 1).
3. Clause A.23 ("Damage or Destruction of Premises") of the General Conditions provided,
"If the demised premises or any portion thereof are damaged or destroyed by fire or other casualty, Acts of God, of a public enemy, riot or insurrection or are otherwise determined by the Postal Service to be unfit for use and occupancy, the Postal Service may:
a. terminate this lease …, or
b. require the Lessor to repair or rebuild the premises as necessary to restore them to tenantable condition to the satisfaction of the Postal Service …, or
c. accomplish all repair necessary for postal occupancy and deduct all such costs, plus administrative burden from future rents." (AF 1).
4. The lease further provided that the lessor was obligated to provide an electrical system "in good working order having a separate electrical meter." (AF 1, General Conditions, Clause A.24, "Lessor Obligations").
5. Under the lease's Maintenance Rider, Respondent was responsible for "ordinary repairs to, and maintenance of the demised premises except for those repairs that are specifically made the responsibility of the Lessor in this lease." The lessor was made responsible for, among others,
"All repairs to structural elements and all parts of the roof system. The term 'structural elements' as used in this clause is limited to the foundation, bearing walls, floors (not including floor covering) and column supports and includes non-bearing exterior walls.…"
If the lessor failed to perform work that it was responsible for under the Maintenance Rider, Respondent was entitled to have the work performed and to withhold the cost of such work from payments otherwise due the lessor under the lease. (AF 1, Maintenance Rider, para. c., d.(2), e.).
6. The floor tiles in the area leased by Respondent contained asbestos. Under lease provisions making the lessor responsible for asbestos-containing material (AF 1, General Conditions, Clause A.17, "Hazardous/Toxic Conditions"), Appellant had the floor tiles removed, but did not replace the tiles with new floor covering. When the asbestos tiles were removed, areas of raised concrete strips remained. The majority of the affected areas were in the lobby. These areas needed to be leveled off so that new flooring could be installed. (Burmeister Decl., ¶¶5, 6).
7. By letter dated May 23, 2001, the contracting officer formally advised Appellant's president of the condition of the floor and demanded that Appellant have the necessary work performed to level the underlying floor, using a "self leveling compound." By letter dated July 12, 2001, the contracting officer advised Appellant's counsel that because Appellant had failed to perform the necessary work, the Postal Service would have the work done and establish a claim for reimbursement against Appellant. Appellant did not perform the work, and Respondent paid to have the floor leveled. (AF 2, 3; Burmeister Decl. ¶6).
8. During the course of the renovation, the local electrical inspectors advised the Postal Service that the building's existing electrical system did not meet the applicable code in certain areas. As a result, the inspectors would not permit connection of the Postal Service's electrical meter to the existing system. By letter dated November 26, 2001, the contracting officer advised Appellant's president of the deficiencies identified by the electrical inspectors and demanded that Appellant have corrective work done on an expedited basis. Appellant failed to have the electrical work done, and Respondent ultimately paid to have the work performed. (Burmeister Decl. ¶7-9; AF 4).
9. In a final decision dated December 7, 2001, the contracting officer demanded payment of $7,000.00 for the floor leveling work and $16,780.00 for the electrical work.[1] By letter dated December 13, 2001, Appellant filed a timely appeal with the contracting officer. The appeal was forwarded to the Board on or about February 4, 2002. (AF 5, 6, 7).
DECISION
With regard to the floor work, Respondent argues first that Appellant damaged the floor in the process of removing the asbestos-containing tiles and that, under the provisions of General Provision A.23 ("Damage or Destruction of Premises")(Finding 3), Appellant was responsible for repairing the damage. Second, Respondent relies on the language of the Maintenance Rider, arguing that "pieces of concrete jutting through the floor is a structural element contemplated by the Maintenance Rider" and that Appellant is responsible for its repair.
With regard to the electrical service, Respondent cites General Provision A.22 ("Applicable Codes and Ordinances")(Finding 2), and argues that Appellant was liable for the costs of bringing the building into compliance with the electrical code. In addition, Respondent relies on the language of General Provision A.24 ("Lessor Obligations")(Finding 4), arguing that the fact that the electrical inspectors refused to connect the meter to the system because it did not meet code demonstrates that the electrical system was not in good working order.
In its Complaint,[2] Appellant states, without further elaboration, that it was not obligated to perform the work because there were no lease provisions requiring it to do so.
Respondent, as the party asserting the claim, bears the burden of proving its entitlement to recover. J. Leonard Spodek d/b/a Colo. Postal Holdings, PSBCA No. 4128, 00-1 BCA ¶ 30,675; Real Properties MLP Limited Partnership, PSBCA No. 3453, 95-2 BCA ¶ 27,829 at 138,756, and cases cited therein.
Concerning the floor work, under the language of the Maintenance Rider (Finding 5), Appellant's maintenance responsibility included repairs to structural elements, specifically defined to include floors. Respondent's evidence is sufficient to demonstrate that the raised strips in the concrete floor represented a defect in the floor that required correction. Accordingly, we conclude that the reasonable cost of correcting the defect in the floor was Appellant's responsibility under the lease.
With respect to the electrical work, we agree with Respondent that Clause A.22, "Applicable Codes and Ordinances," required the lessor to provide an electrical system that complied with the local electrical code. Respondent's uncontroverted evidence establishes that the electrical inspectors refused to allow connection of the building's electrical system because the system did not meet code. Therefore, the contracting officer was justified in demanding that Appellant correct the deficiencies in the system. In the absence of correction by Appellant, the contracting officer was also justified in having the work performed and may recover the reasonable cost of the work from funds otherwise due Appellant. M.R. Kaplan, et al. (Penner Financial Group), PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827 at 105,313.
Accordingly, the appeal is denied. Inasmuch as only entitlement was at issue in this proceeding, the appeal is remanded to the parties for the negotiation of the amount of Respondent's recovery. If the parties are unable to agree, the contracting officer is to issue a further final decision, which may then be appealed.
David I. Brochstein
Administrative Judge
Vice Chairman
I concur:
James A. Cohen
Administrative Judge
Chairman