Appeal of

GENE WALZ
     and
GAIL WALZ

PSBCA No. 5289

LEASE AGREEMENT

APPEARANCE FOR APPELLANTS:
Gene R. and Gail F. Walz

APPEARANCE FOR RESPONDENT:
Maria R. Infanger, Esq.
Chicago Law Office
United States Postal Service

OPINION OF THE BOARD

            Appellants, Gene R. Walz and Gail F. Walz, have appealed the partial denial of their claim for restoration costs, following the expiration of their lease with Respondent, United States Postal Service, for the rental of a facility in South Elgin, Illinois.  At issue in this appeal is whether Appellants are entitled to recover damages in excess of the amount conceded by Respondent and granted by the contracting officer.  At the election of the parties, the appeal is being decided on the record, in accordance with 39 C.F.R. §955.12.  Both entitlement and quantum are at issue in this proceeding (Order of November 4, 2005).

FINDINGS OF FACT

            1.  Through a lease dated July 28, 1980, Appellants leased a building in South Elgin, Illinois, to Respondent for a ten-year period from February 1, 1979, through January 31, 1989, at an annual rent of $16,200.  The building contained approximately 3,600 square feet of interior space (60 feet x 60 feet), plus a loading dock and parking and maneuvering areas.  The lease also contained two five-year option periods.  Respondent exercised both lease options, extending the term of the lease to January 31, 1999.  (Appeal File Tab (AF) D, p. 70; Attachment 18 to Appellant’s Notice of Appeal (NOA, att. 18)); AF E, pp. 245, 246 (Resp. Supplemental Evidence, Items 1 & 2)).

            2.  Under the 1980 lease, Appellants (Lessor) were responsible “for all maintenance.”  In addition, paragraph 9 of the lease, provided in part,

“9.  The Postal Service shall have the right to make alterations, attach fixtures and erect additions, structures or signs in or upon the premises hereby leased …; which fixtures, additions or structures so placed … shall be and remain the property of the Postal Service and may be removed or otherwise disposed of by the Postal Service.  Prior to expiration or termination of this lease the Postal Service shall, if required by the Lessor by notice in writing sixty days in advance of such expiration or termination, restore the premises to as good condition as that existing at the time of entering upon the same under this lease, reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the Postal Service has no control, excepted.”

(AF D, p. 71).

            3.  On July 28, 1980, the same date as the lease, the contracting officer issued a letter to Appellants, which letter stated that it was “to clarify and define certain responsibilities and obligations covered under the … Lease Agreement….”  In the letter, the contracting officer listed Postal Service responsibilities to include, among others, mowing lawns, trimming shrubbery, cutting weeds, removing snow from the grounds “so as not to permanently damage shrubs, grass, sidewalks, and wheel stops,” replacement of damaged wheel stops, cleaning and waxing of interior floors, dusting, window washing, and cleaning of restrooms.  On February 20, 1982, Appellants indicated their acceptance of the letter by signing it.  (NOA, att. 19).

            4.  At the time of the initial lease, in 1980, the facility included a retail/lobby area, covering approximately one-third of the total area of the building.  Interior walls and counters divided the retail area from the mail processing area that comprised the rest of the interior.  Within the retail area of the building there was a “dropped” ceiling suspended several feet below the level of the ceiling in the mail processing area, and including acoustic tiles, a metal grid, and lighting fixtures.  Within the retail area, several of the walls were finished with wood paneling.  (AF D, p. 70;  NOA, att. 14; Declaration of Gene R. Walz, dated January 4, 2006 (Walz Decl.); NOA, Photographs, pp. 2, 4, 5, 7; Wei Declaration, dated January 17, 2006 (Wei Decl. II)).

            5.  At the time of the initial lease, the customer entrance to the building was an aluminum and glass door.  There were two outside mail collection boxes adjacent to the front door, and a sidewalk extended along the east side of the building between the parking lot and the front door.  Bushes had been planted in the space between the sidewalk and the front wall of the building.  In approximately 1984, Respondent installed three or four collection boxes in the post office parking lot and allowed customers to drive through the lot to deposit mail.  (Declaration of Gene R. Walz and Gail Walz, dated January 18, 2006 (Walz Decl. II), ¶ 12; NOA, Photographs, pp. 1, 17, 18).

            6.  In 1984, an engineer who inspected the facility for Respondent reported that the front sidewalk showed “severe spalling” and that the concrete apron at the loading dock also showed signs of spalling.  The engineer stated that the spalling could have been caused by “no air entrainment” or “over-finishing,” presumably at the time of installation, or “improper de-icing chemicals.”  (AF E, pp. 105-07).

            7.  In approximately April 1998, Respondent renovated the facility to convert it from a retail postal unit to a carrier unit.  As part of the renovations, Respondent removed the retail counter,[1] lock boxes, one or more interior walls, an interior glass door with window wall, and the dropped ceiling with its associated lighting fixtures; removed wall-mounted writing desks and display boards from two wood-paneled walls that remained; modified some ductwork; and installed a drywall ceiling and new lights in place of the dropped ceiling and its lighting.  In addition, in late 2002, Respondent replaced the aluminum and glass front door with a metal door, and at another time removed a drinking fountain that had been present from the inception of the lease.  (Wei Declaration, dated January 3, 2006 (Wei Decl.); AF E, pp. 116-119, 165-166; Thomas Declaration, dated January 18, 2006, attachment J; NOA, Photographs, pp. 10, 20).  In connection with removing the retail counter, Respondent installed a piece of wood paneling in the approximately 13-foot wall adjacent to the postmaster’s office at the location previously abutted by the counter.  The piece of paneling covered the lower half of the wall, was approximately 6 feet in width and was similar in color and pattern to the rest of the paneling in that wall.  However, the vertical lines in the paneling did not line up with similar vertical lines in the original paneling directly above it.  (NOA, att. 14 (building diagram) and Photographs, pp. 5, 10).

            8.  In October 1998, the parties entered into another lease for the facility, for the period beginning February 1, 1999, and ending January 31, 2002, at an annual rental rate of $36,200.  Under the terms of the new lease, Respondent took over general responsibility for repairs to and maintenance of the facility, including the roof, with certain specific exceptions.  In addition, in place of the standard clause allowing Respondent to make alterations to the facility (clause A.21), an addendum to the lease contained a specially drafted clause that provided,

“PRIOR TO EXPIRATION OR TERMINATION OF THIS LEASE THE POSTAL SERVICE SHALL, IF REQUIRED BY THE LESSOR BY NOTICE IN WRITING SIXTY DAYS OR MORE IN ADVANCE OF SUCH EXPIRATION OR TERMINATION, RESTORE THE PREMISES TO AS GOOD CONDITION AS THAT EXISTING AT THE TIME OF ENTERING UPON THE SAME UNDER THE LEASE BETWEEN THE POSTAL SERVICE AND GENE R. WALZ & GAIL F. WALZ DATED THE 28^TH DAY OF JULY, 1980, REASONABLE AND ORDINARY WEAR AND TEAR AND DAMAGES BY THE ELEMENTS OR BY CIRCUMSTANCES OVER WHICH THE POSTAL SERVICE HAS NO CONTROL EXCEPTED.” [Emphasis Added].

The parties later extended this lease for three more years – i.e., agreeing to a termination date of January 31, 2005 – with no change in the rent or other provisions relevant to this appeal.  (AF D, pp. 45-69; NOA, att. 20, 21).

            9.  On numerous occasions from 1999 through 2005, Appellants requested that upon termination of the lease, Respondent restore the building to its 1980 condition (Walz Decl.; NOA, att. 4, 9; AF E, p. 170).

            10.  In January 2004, Appellants secured an estimate, in the amount of $2,960, to remove and replace the loading dock roof (AF C, p.16).

            11.  Between October 2004 and February 2005, in anticipation of the expiration of the lease, Respondent had the following work done at the facility through contractors:

a.  Replaced seven “plastic louvers int lenses”
b.  Installed exit sign with battery backup above main entrance door
c.  Removed conduit, wiring and a receptacle associated with a tracking scanner
d.  Interior and exterior painting
e.  Replaced 110 ceiling tiles; painted ceiling grid
f.  Replaced nine overgrown bushes with new bushes
g.  Removed brush and leaves from the parking area
h.  Removed all “tire cement stoppers”
i.  Patched holes in wall panels and walls
j.  Replaced approximately 40 floor tiles
k.  Removed and replaced a “slop” sink
l.  Stripped floors
m.  Removed satellite dish and associated conduit
n.  Removed signs and performed external touch-up
o.  Cleaned building

(Wei Decl., ¶8, Attachments D-H).

            The contractor that performed the work under item “i,” patched a number of holes associated with wall-mounted writing tables and display cases that had been in place as of the commencement of the 1980 lease and had been removed at the time of the 1998 renovation, and associated with the installation (and subsequent removal) of a pay telephone on the paneled interior of the building’s south wall.[2]  The material used to patch those holes did not match the color or pattern of the paneling, making the repair visually obvious.  Respondent paid $250 to have the patching done.  (NOA, Photographs, pp. 7 (bottom left and right), 10 (bottom right); Wei Decl., ¶8, Attachment G).

            12.  With regard to the work performed under item “f,” the bushes that were removed had initially been planted in the space between the front (east) sidewalk and the building.  Respondent had allowed the bushes to grow, and they eventually grew over and largely covered the sidewalk.  (NOA, Photographs, pp. 1, 14).  Photographs taken after the work was performed do not show substantial damage to the sidewalk (AF E, pp. 228-230).

            13.  Respondent did not restore or replace the doors, cabinets, counters, interior walls, or the dropped ceiling (and associated lighting and ventilation ducts) that were present when the 1980 lease was entered into and that it had removed during the term of the lease (Walz Decl. II;  NOA, Photographs, pp. 8, 10).

            14.  Because of complaints from Appellants that the loading dock roof was leaking, on November 1, 2004, Respondent’s Architect/Engineer (A/E) responsible for maintenance in the area including South Elgin had a roofing contractor inspect the roof.  The inspector reported that he inspected the roof, the loading dock, and the mail sorting areas during a heavy rain, but found nothing wrong.  Respondent’s A/E also checked the roof at a later time and found no holes.  However, he noted that there was a hole in the underside of the loading dock canopy that he estimated would cost $200 to repair.  (Wei Decl., ¶9, Attachment I; NOA, Photographs, p. 13).

            15.  By letter dated February 10, 2005, following expiration of the lease, Appellants filed a certified claim with the contracting officer, seeking $116,720 for nine specific items that Respondent allegedly failed to restore as required by the contract.  The items for which Appellants sought compensation were:

The amount sought with respect to each item was based on a February 6, 2005 proposal Appellants received from a contractor located in Elgin.  (AF C, p. 13).

            16.  By letter dated April 12, 2005, Appellants requested that the contracting officer issue a final decision on the claim filed with their February 10, 2005 letter.  In the letter, Appellants also stated that they claimed $4,000 per month from January 31, 2005, for loss of rent, because they contended the building did not meet code and could not be rented in its then-current condition.  (AF E, p. 215).

            17.  In a final decision dated April 18, 2005, the contracting officer stated that Respondent had spent a considerable sum performing work on the facility before returning it to Appellants, and that the facility had been returned in a “rentable condition.”  With regard to Appellants’ claims, the contracting officer granted Appellants’ February 10, 2005 claim in part and denied it in part, as follows:

The contracting officer stated that payment of the allowed amounts would be made to Appellants upon receipt of satisfactory evidence of the work having been done and payment made by Appellants.  The final decision did not address Appellants’ claim for lost rent.  (AF B).

            18.  Appellants filed a timely notice of appeal of the April 18, 2005 final decision.

            19.  In October 2005, Appellants’ contractor increased the amount of each individual item set out in its proposal by a uniform 10 percent, citing a recent rise in the cost of fuel, material, and labor – thereby increasing the total from $116,720 to $128,392.  Appellants submitted this proposal, in the form of a declaration by the contractor, as part of their supplemental evidence in this proceeding.  (Appellants’ Supplemental Evidence, Tab 7).

            20.  On December 12, 2005, the facility was inspected by the South Elgin Community Development Department to determine its eligibility for the issuance of a certificate of occupancy.  The inspector who performed the inspection noted the existence of remodeling work for which no building permit had been issued and indicated that work concealed by the construction might have to be exposed for a visual inspection.  He also directed Appellants to provide construction documents for consideration in issuing an after-the-fact building permit.  In addition, he listed the following code violations that had to be corrected prior to the issuance of a certificate of occupancy for “Business Use:”

a.  Install compliant threshold at the east [front] door
b.  Remove non-compliant electrical wiring in the building and outside the north [loading dock] door
c.  Install code-compliant north door
d.  Reinstall drinking fountain or provide bottled water on occupancy
e.  Replace non-compliant “plumbing piping” to water heaters
f.  Install 6-inch minimum address numbers on the building.  Label utility services accordingly.
g.  Install handicap accessible parking with appropriate signage
h.  Install “Knox Box, Fire Department Key Box(s) as needed.”

(Appellants’ Supplemental Evidence, Tab 4 (Kruse Declaration)).

            21.  Beginning in December 2004, Appellants, through a real estate agent, marketed the facility at a rental of $12 per square foot ($3,600 per month).  As of December 2005, that effort had been unsuccessful.  In a December 21, 2005 letter to Appellants, the agent recommended that Appellants correct the problems listed by the inspector (Finding 20), in order to make the property more marketable.  (Appellants’ Supplemental Evidence, Tab 6). 

            22.  In a declaration submitted by Appellants as part of their rebuttal evidence in this proceeding, Appellants included a claim for $3,600 per month until the building meets South Elgin Village codes (“Plus the rents and damages we have previously claimed ….”) (Walz Decl. II).[4]  In addition, Appellants claimed $352 for an inspection fee and postage.  In a statement submitted with their initial brief, Appellants (1) amended their damages claim to claim what they allege to be the full cost of repairing the parking lot, in lieu of the one-half previously claimed; (2) claimed a total of $7,185 to cover such items as inspection fees, postage and copy fees, permit fees, consultant’s fees, and air fare for trips to the facility to meet with Respondent’s representatives; and (3) claimed $2,500 for the cost of replacing the doors on the north side of the building in order to meet current building codes.  The record does not reflect that the claims summarized in this paragraph had been previously submitted to the contracting officer.[5]

DECISION

            In this appeal, Appellants, as the parties seeking recovery, have the burden of proving by a preponderance of the evidence both their right to recover and the amount to which they are entitled.  E.g., Jereld Michael, PSBCA No. 4779, 04-1 BCA ¶ 32,497.  Appellants generally argue that under the terms of the lease, Respondent was required to return the building to its 1980 condition, except for normal wear and tear.  Appellants argue that Respondent failed to comply with this obligation, particularly with regard to the items included in Appellants’ claim.  Appellants claim that the items removed during the 1998 conversion of the facility had value to them and would make the facility more rentable for retail use.

            Appellants also contend that Respondent’s failure to restore the building left the facility in a condition that does not meet local building codes and, therefore, that it cannot be rented.  As a result, Appellants argue that they are entitled to receive rents that they would otherwise have received from tenants.  In this connection, Appellants take the position that because the building met building codes when it was leased in 1980, Respondent was required to ensure that the building was code-compliant when it was returned to Appellants at the expiration of the lease term.

            With regard to its failure to restore the retail/lobby facility to its 1980 state (Finding 15, Claim Item 2), Respondent argues primarily that Appellants have not shown that they were damaged by Respondent’s failure – i.e., that Appellants have not shown that the value of the property for rental purposes was diminished by the fact that it no longer contained the items that comprised the retail portion.  Nevertheless, Respondent concedes Appellants are entitled to $2,910 for removal of exposed electrical conduit, and that undisputed amount is not at issue.

            With regard to the paneled south wall, the sidewalk, the loading dock roof, tree removal, and parking lot replacement (Claim Items 3, 6, 7, 8, and 9, respectively), Respondent argues that any damage did not exceed ordinary wear and tear.  Therefore Respondent contends that Appellants are not entitled to any damages for Respondent’s failure to restore those items.

            With regard to three of the items allowed by the contracting officer – the front door/threshold, water fountain, and parking lot wheel stops (Claim Items 1, 4, and 5) – Respondent argues that the amounts allowed by the contracting officer were reasonable and that the sums demanded by Appellants were excessive.  Respondent concedes Appellants’ entitlement to the amounts allowed by the contracting officer, and those amounts are not at issue here.

            As found above, Appellants provided written notice to Respondent that they wished to invoke their option to have the facility restored “prior to expiration … of this lease.”  (Finding 9).  Thus, Respondent was obligated to restore the premises “to as good condition as that existing at the time of entering [into the 1980 lease], reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the Postal Service has no control excepted.”  (Finding 8).  Appellants have argued that Respondent failed to comply fully with this requirement.  Respondent, by conceding Appellants’ entitlement to at least part of their restoration claim, apparently agreed that Respondent had not fully complied with the contract requirement.  To that extent, we conclude that Respondent breached its contract obligation to restore the premises “prior to expiration or termination of this lease.”  Appellants are entitled to recover any damages they suffered by virtue of Respondent’s failure to restore the premises as required by the lease.  E.g., Diamond Plaza, Inc., PSBCA No. 3846, 97‑1 BCA ¶ 28,737.  What is at issue in this appeal is the proper measure of those damages.

Claim Items 2 and 3 – Restoration of the Retail/Lobby Area

            The largest portion of Appellants’ claim relates to their contention that they have been damaged by Respondent’s failure to restore the interior of the building to its 1980 condition – i.e., to replace the counters, interior walls and door, dropped ceiling, lighting, cabinets, etc. removed by Respondent during the course of the lease.  In denying this part of Appellants’ claim, the contracting officer took the position that the value of the building as rental property had not been diminished by Respondent’s failure to restore those items, and Respondent has taken the same position in defending this portion of the appeal.  Inasmuch as the damage to the paneling (claim item 3) occurred during the same 1998 renovation project that resulted in removal of the above items, we consider the two claim items together.

            While the reasonable cost of restoration is ordinarily the measure of damages for a party’s breach of its obligation to restore a property to a specified condition, those damages, as argued by Respondent, are limited to the diminution of the fair market value of the property caused by such breach.  That is, Appellants may recover the reasonable cost of restoration except to the extent that such costs exceed the amount by which the value of their property has been diminished by Respondent’s failure to restore the property.  Appellants bear the burden of proving both the cost of restoration and that the cost of restoration does not exceed the diminution of value caused by Respondent’s breach.  See, e.g., Missouri Baptist Hospital v. United States, 213 Ct. Cl. 505, 511, 555 F.2d 290, 293 (1977); Dodge Street Building Corp. v. United States, 169 Ct. Cl. 496, 499, 341 F.2d 641, 643 (1965); National Construction Co., PSBCA Nos. 3902, 3929, 99-2 BCA ¶ 30,509 at 150,648; Annot. Measure and elements of damages for lessee's breach of covenant as to repairs, 45 A.L.R.5th 251, §7.  In this instance, Appellants offered evidence of the cost to restore the property by replacing the items removed during Respondent’s 1998 renovation and repairing or replacing the paneling.  However, they offered no specific evidence that the value of the property had been diminished for rental (or sale) purposes by the absence of the items so removed – i.e., that the property would command a higher rent (or sale price) with the counters and other items restored than it would without those items.  In the absence of such evidence, Appellants have not met their burden of proof and may not recover under these claim items, beyond the amount conceded by Respondent for the removal of exposed conduit.

Claim Items 1, 4, and 5 – Front Door, Water Fountain, and Wheel Stops

            The contracting officer allowed the full amount originally claimed for replacement of the water fountain, and a portion of the amounts claimed for replacing the front door and the parking lot wheel stops.  Having considered the record evidence with respect to these items, we agree with Respondent that no further recovery is justified.

            Front Door:

            With respect to the front door, Appellants offered into evidence only the overall proposal received from their general contractor, which listed the cost of the replacement at $5,180 (Finding 15).  The proposal contained no other information supporting that estimate or explaining how it was developed.  Respondent’s evidence consisted of an estimate from a company representing that it specialized in “automatic pedestrian door equipment,” offering to replace the door and threshold for $2,112 (Wei Decl., Attachment A).  Appellants offered no evidence to rebut Respondent’s estimate.  Therefore, Appellants have not met their burden of proving entitlement to more than the amount conceded by Respondent.

            Drinking Fountain:

            With respect to replacing the drinking fountain, Respondent concedes Appellants are entitled to recover $1,350, the amount they initially demanded.  The only difference between the parties appears to be the 10 percent increase contained in the revised proposal received from Appellants’ contractor (Finding 19).  However, Appellants have shown no basis for recovery of the increased amount.  The record does not persuade us that Appellants could not have had the fountain replaced at the amount they had initially claimed.

            Wheel Stops:

            With respect to replacing the missing parking lot wheel stops, Appellants offered into evidence the proposal from their general contractor, which proposed to replace the wheel stops for $1,850 (later increased to $2,035 (Finding 19)), but, as with the door replacement, the proposal provided no supporting documentation.  Respondent offered into evidence a proposal from a parking lot maintenance company, which offered to replace the wheel stops for $1,200 (Wei Decl., Attachment B).  As with the front door replacement, Appellants have not met their burden of proving, by a preponderance of the evidence, that they are entitled to more than the amount allowed by the contracting officer.  Appellants argue that Respondent’s estimate did not include such items as sales tax and permit fees, which Appellants state they would have to pay.  However, even if true, the record does not contain evidence from which we can calculate those add-ons.  Accordingly, Appellants’ recovery is limited to the amount allowed by the contracting officer and conceded by Respondent.

Claim Items 6, 7, 8, and 9 – Sidewalk, Dock Roof, Tree Removal, and Parking Lot

            Appellants argue that each of these claim items represents damage to the premises that Respondent was obligated to correct in order to restore the premises to its 1980 condition, ordinary wear and tear excepted.  Respondent takes the position with respect to each of these claim items that any damage present at the termination of the lease did not represent damage in excess of ordinary wear and tear and, therefore, is not damage for which Respondent is responsible under the lease.

            Sidewalk:

            Appellants allege that the sidewalk was damaged or destroyed due to Respondent’s use of improper ice melting chemicals and the fact that it allowed bushes to overgrow the sidewalk.  Respondent argues that the sidewalk was not severely damaged and that any damage was within the parameters of ordinary wear and tear.

            Photographs taken after the bushes were removed do not support Appellants’ contention that the sidewalk was destroyed.  While the photographs are not of the best quality, they are clear enough to demonstrate that the sidewalk was not destroyed or substantially damaged (Finding 12).  We note also that the sidewalk showed severe spalling when it was inspected in 1984, shortly after the lease commenced, and that the inspector was of the opinion that such damage could have been caused by the use of improper de-icing chemicals or could have been the product of deficiencies in the original installation (Finding 6).  On this record, we cannot conclude that any damage to the sidewalk was caused by Respondent’s use of de-icing chemicals or was in excess of “reasonable and ordinary wear and tear and damages by the elements.”  Accordingly, Appellants may not recover on this part of their claim.

            Loading Dock Roof:

            Appellants have not shown that there were any deficiencies in the condition of the dock roof as of the expiration of the lease term.  While Appellants secured an estimate to replace the roof in January 2004, there is no direct evidence that it was leaking at that time.  In fact, the only direct evidence regarding the condition of the roof indicates that it did not leak when it was observed during a heavy rain shortly before expiration of the lease and that a subsequent inspection by Respondent’s A/E also showed no deficiencies (Finding 14).[6]  In the absence of such evidence, we cannot conclude that the roof exhibited damage that was in excess of that caused by “reasonable and ordinary wear and tear and damages by the elements,” or that the condition of the roof demonstrated a failure by Respondent to fulfill the maintenance responsibilities it undertook under the 1998 lease (Finding 8).  Accordingly, Appellants may not recover under this portion of their claim in excess of the amount allowed by the contracting officer and conceded by Respondent for repair of a hole in the underside of the loading dock canopy.

            Tree Removal:

            The record is nearly devoid of any meaningful evidence with regard to this claim item.  In their claim, Appellants refer to the removal of three trees that were not present in 1980, but were allowed to grow because “USPS did not maintain the property per the lease.”  An undated photograph submitted by Appellants and marked “Trees allowed to grow on south side of building” shows what appear to be a number of thin trees and other bushes along one edge of the parking lot on the south side of the building (see NOA, Photographs, p. 13 (middle photo); AF C, p. 33).  On the assumption that it is these trees to which Appellants refer, we note that it is not possible to determine from the photograph that the trees in question caused any damage to “shrubs, grass, sidewalks, and wheel stops” (Finding 3) or to the building itself.  In the absence of any such damage, we also cannot conclude that the presence of the trees made the premises not “as good as” the condition existing in 1980, so as to possibly invoke Respondent’s restoration obligation.  Under these circumstances, Appellants may not recover under this portion of their claim.

            Parking Lot:

            Appellants contend that the photographs they submitted show the parking lot was in poor condition and was in need of replacement as of the expiration of the lease.  Appellants argue that increased traffic caused by Respondent’s installation of collection boxes in the lot (Finding 5) was the primary cause of the damage.  Appellants also allege that Respondent’s failure to sweep debris from the parking lot and its use of a particular chemical (calcium chloride) for snow and ice removal also caused damage to the parking lot.

            Respondent argues that Appellants have not demonstrated that installation of the collection boxes created an increase in traffic or that the chemical alleged to have been used was a cause of damage to the parking lot.  Respondent also argues that any damage to the parking lot present at the conclusion of the lease term did not exceed ordinary wear and tear, citing a declaration from its Architect/Engineer who examined the lot at about the time the lease expired (Wei Decl., ¶12).

            The record contains a number of undated photographs of the parking lot showing the presence of cracks, most, but not all, of which appear to have been filled, and two unidentified, relatively small areas in which the asphalt surface appears to have been penetrated (NOA, Photographs, pp. 14, 16-18).  These photographs, when compared to a photograph apparently taken at the commencement of the lease (NOA, Photographs, p. 1), demonstrate that the condition of the parking lot at some later time was not the same as the newly constructed lot.  However, they do not demonstrate that the condition of the parking lot in the later photographs was worse than that which would have been caused by “reasonable and ordinary wear and tear and damages by the elements.”  Appellants argue, without proof, that any increase in vehicle traffic caused by the installation of the collection boxes materially affected the condition of the lot, and that the use of calcium chloride as an ice and snow melt was improper and caused damage.

            On balance, we are not persuaded that any damage to the parking lot as of the expiration of the lease was in excess of that which would have been caused by reasonable and ordinary wear and tear and damage by the elements.  Therefore, Respondent was not obligated to make repairs to the parking lot, and its failure to do so was not a breach of the lease.  Accordingly, Appellants are not entitled to any recovery under this portion of their claim.

            Lost Rent:

            Appellants argue that at the expiration of the lease, Respondent left the premises in a condition that did not meet local building codes.  As a result, Appellants contend that they have been unable to rent the building to a successor tenant, and claim lost rents for the period beginning with the expiration date of the lease and extending until repairs are made following conclusion of this appeal.

            Respondent argues that its restoration obligation did not extend to ensuring that the building met local building codes in effect at the expiration of the lease.  It also argues that Appellants have not provided evidence of unsuccessful attempts to lease their building, so as to support a claim for lost rents.  Finally, Respondent argues that the amount of lost rent sought by Appellants is excessive.

            Respondent was required to fulfill its restoration obligations under the lease prior to expiration of the lease.  As we have found that Respondent failed to do so, the damages that Appellants may recover include loss of rents, provided Appellants can demonstrate an actual loss of rental income.  See, e.g., Diamond Plaza, Inc., PSBCA No. 3846, 97-1 BCA ¶ 28,737; Annot. Measure and elements of damages for lessee's breach of covenant as to repairs, 45 A.L.R.5th 251, §25.  While we agree with Respondent that its restoration obligation did not include a general requirement to ensure that the building met local code requirements in effect as of the expiration of the lease, e.g., National Construction Co., PSBCA Nos. 3902, 3929, 99-2 BCA ¶ 30,509 at 150,642, at least two of the items that Respondent improperly failed to restore by the end of the lease term – replacement of the front door threshold and replacement of the drinking fountain - coincidentally represented code violations that would have prevented issuance of a certificate of occupancy necessary for “Business Use” of the premises (Finding 20).

            Nevertheless, we conclude that Appellants may not recover under their claim for lost rent because the record does not demonstrate that Appellants’ failure to rent their facility was caused by Respondent’s failure to restore the property.  Appellants have provided evidence that their property was being offered for rent through a realtor, but did not provide evidence, for example, that there were potential lessees who declined to rent the property because of deficiencies that Respondent failed to correct.  In this regard, we note that there were code violations for which Appellants were responsible, and there is no evidence those violations were corrected.  Absent some showing that Respondent’s restoration failures caused a loss of rental income, Appellants may not recover lost rentals.

            Other Claims:

            As noted in Finding 22, in documents filed during the course of this litigation – including with their brief – Appellants demanded payments under claims not first submitted to the contracting officer.  Other than their claim for $3,600 in lost rents which, as discussed in footnote 4, was intended to be simply a modification of their initial demand of $4,000 per month, the Board has no jurisdiction to consider Appellants’ other claims since they have not been first submitted to the contracting officer for a decision.  See 41 U.S.C. § 605(a); Paragon Energy Corp. v. United States, 645 F.2d 966, 971 (Ct. Cl. 1981); Ronald L. Johnson, PSBCA No. 5282, 06-1 BCA ¶ 33,234.  Accordingly, those claims are dismissed for lack of jurisdiction.

            Summary:

            As discussed above, the “other claims” are dismissed for lack of jurisdiction.  The appeal is otherwise denied.

David I. Brochstein
Administrative Judge
Vice Chairman

I concur:                                                                      I concur:
William A. Campbell                                                     Norman D. Menegat
Administrative Judge                                                  Administrative Judge
Chairman                                                                     Board Member

[1]   It appears that Respondent previously had replaced the original retail counter with other counters and postal-specific service items.  (Walz Decl. II, ¶14 and Photographs; Wei Declaration, dated January 3, 2006, ¶14; compare NOA, Photographs, pp. 2-5 with p. 6).

[2]   From the photographs in evidence, it appears that the holes had been made as part of fastening these items to the paneled wall and were present, although not visible, as of the commencement of the 1980 lease.

[3]  Erroneously entered as $78,125 in the original breakdown.

[4]   In a “financial claims” statement submitted with their brief, Appellants state that they are claiming lost rent at the rate of $3,600 per month from January 31, 2005, until the building meets code.  Thus it appears that the $3,600 per month claim was actually intended to be in place of, rather than in addition to, the $4,000 per month they initially claimed in their April 12, 2005 letter.  (See Finding 16).

[5] Appellants also submitted additional documentary evidence with their brief, although much of it duplicated documents appearing elsewhere in the record.  However, inasmuch as the time for filing supplemental and rebuttal evidence had passed, the Board did not consider any evidence newly submitted with the brief in deciding this appeal.

[6]   We note that an inspection report and photographs submitted with Appellants’ brief indicates some damage to the roof.  However, in addition to the fact that this information was not timely submitted (see footnote 5, above), the inspection described in the report took place nearly a year after the lease term expired.  (See tab 5, attachment G, to Appellants’ initial brief).