June 27, 2006
Appeal of
LOUIS B. FINE FAMILY, LLC
LEASE AGREEMENT
PSBCA No. 5307
APPEARANCE FOR APPELLANT:
Morris H. Fine, Esq.
Fine, Fine, Legum & McCracken, LLP
APPEARANCE FOR RESPONDENT:
Carrie M. Branson, Esq.
OPINION OF THE BOARD
Appellant, Louis B. Fine Family, LLC, leases a post office to Respondent, United States Postal Service. Respondent notified Appellant that the air conditioning ductwork system at the post office needed to be repaired and that it was Appellant’s responsibility to do so. Appellant asserted that it was not responsible under the lease for the work. In a final decision, the contracting officer advised Appellant of his determination that the lease required Appellant to repair the ductwork and demanded that Appellant perform the work promptly. Appellant appealed that determination.
At the election of the parties, this appeal
is being decided on the record without an oral hearing in accordance with 39
C.F.R. §955.12, and Appellant elected application of the Board’s accelerated procedures,
39 C.F.R. §955.13. Only entitlement will
be addressed.
FINDINGS OF FACT
1. Effective December 22, 1967, Respondent
leased the building housing the Chesapeake, Virginia Post Office from
Appellant’s predecessor for a 20-year term at $34,454.80 per year followed by
six five-year options all at $33,000 per year.
Through exercise of renewal options, Respondent continues to lease the
post office from Appellant. (Appeal
File, Tabs (“AF”) 13-18).
2. The lease provides,
“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.”
(AF 18, Lease paragraph 6(d)).
3. The lease further provides, in pertinent
part,
“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 18, Lease paragraph 7).
4. The lease authorizes Respondent to make
alterations to the premises (AF 18, Lease paragraph 9).
5. Problems arose with the originally-installed
air conditioning system in 1994 through 1996.
The parties disagreed regarding the scope of Appellant’s responsibility
to repair the equipment. The air
conditioning system continued to perform, but water from the air conditioning
ductwork on the building’s roof leaked into the building. (Respondent’s Supplemental Exhibits (“Resp. Exh.”) K, L, P-Y).
6. By
2005, the insulation on the roof-mounted ductwork had significantly
deteriorated, and the ducts were rusting.
Both parties agree that replacement of the insulation and repair of the ductwork
are urgently needed to stop leaks into the building but disagree about which is
responsible under the lease to do so. (AF
8-12; Resp. Exh. B, C, K).
7. By
final decision dated
8. On
DECISION
Respondent
argues that the lease’s requirement that Appellant maintain the premises in good repair and tenantable condition
places responsibility for repair of the ductwork upon Appellant. Appellant argues that the lease only requires
the lessor to furnish air conditioning equipment at the beginning of the lease
(which Appellant did) but that repairs to or replacement of the system, other
than minor servicing such as providing refrigerant and filters, are the
responsibility of Respondent.
The parties agree that the insulation on the roof-mounted ductwork needs to be replaced and the ductwork itself repaired or replaced to stop leaks into the building (Finding 6). The lease requirement that Appellant maintain the premises, including all equipment furnished by Appellant, “in good repair and tenantable condition” (Finding 3) obligates Appellant to take corrective action to stop the water leakage into the building and to repair (and to replace if necessary) the air conditioning equipment that the parties agree is causing it. See J. Leonard Spodek d/b/a Colo. Postal Holdings, PSBCA No. 4128, 00-1 BCA ¶ 30,675; M. R. Kaplan, et al., PSBCA Nos. 1147, 1298, 1303, 1310, 88-3 BCA ¶ 20,827 at 105,322-324. Accordingly, absent lease language qualifying this obligation (“unless herein specified to the contrary” (Lease paragraph 7 (Finding 3))), Appellant is responsible for repairing or replacing the ductwork and insulation at the Chesapeake Post Office.
Appellant argues that the lease provision that requires the lessor to furnish air conditioning equipment (Finding 2), by omitting any mention of an obligation to repair or replace air conditioning equipment beyond minor servicing, establishes that Appellant is not obligated to replace the equipment if it fails during the lease. According to Appellant, to the extent the general maintenance provision (Finding 3) could be read to require anything more, it is inconsistent with and must give way to the more specific provision, paragraph 6(d) (Finding 2), dealing with the air conditioning equipment, and any ambiguity must be interpreted against Respondent as the drafter of the lease.
We do not see the
provisions as conflicting. Appellant’s
obligation to service the lessor-furnished equipment included but was “not
limited to” the minor items listed in paragraph 6(d) (Finding 2). That provision does not address, limit or
conflict with Appellant’s duty under the maintenance clause to maintain the
equipment in good repair. In similar circumstances,
we held that a lease with language identical to paragraphs 6(d) and 7 of
Appellant’s lease obligated the lessor to replace elements of an air
conditioning system that no longer could be economically repaired. Nationwide Postal Mgmt., PSBCA No.
3938, 99-1 BCA ¶ 30,126. Appellant
has not shown that the applicable lease provisions should be interpreted
differently here.
Appellant suggests that its duty to maintain
the air conditioning system was extinguished by Respondent’s addition of two
compressors to the system without Appellant’s permission. That Respondent added equipment was not proved,
but, in any event, the lease permitted Respondent to make alterations to the
premises (Finding 4). If Respondent
added compressors, Respondent may be responsible for their maintenance and for
any damage to the system caused by their addition, but responsibility for the
entire air conditioning system does not shift to Respondent. See Greater Eastern Holding Co.,
PSBCA No. 1128, 84-3 BCA ¶ 17,636 at 87,893. Here, there is no evidence that new
compressors contributed to the problem with water leaking in the building.
Finally, Appellant notes that the rental
rate diminishes slightly at the end of the 20-year, base term and then remains
the same throughout all lease option periods.
Appellant contends that such flat rent would not compensate Appellant
for replacement of worn-out equipment during the lease and does not reflect an
intention that the lessor would be responsible for such replacement. However, there is no evidence regarding the
parties’ calculation of the rent at the inception of the lease that would be
necessary to support Appellant’s contentions in this regard. See J. Leonard Spodek
d/b/a
The record reflects that there may be other
disputes between the parties regarding the air conditioning equipment, some
arising after the contracting officer issued his final decision regarding the
roof-mounted ductwork (Finding 7). The
record before us contains no appeals relating to those disputes. Accordingly, we have no jurisdiction to
consider them. See National Constr. Co., PSBCA Nos. 4302, 4303, 4564, 02-1 BCA
¶ 31,661 at 156,427.
The appeal is denied.
Norman D. Menegat
Administrative
Judge
Board Member
I concur:
William A. Campbell
Administrative
Judge
Chairman