PSBCA No. 4605
December 31, 2001
Appeal of
THE HELLER GROUP, INC.
LEASE AGREEMENT
PSBCA No. 4605
APPEARANCES FOR APPELLANT:
John C. Maloney, Jr.
Lisa A. Breen
APPEARANCE FOR RESPONDENT:
Daniel M. Curts, Esq.
OPINION OF THE BOARD
Appellant, The Heller Group, Inc., has appealed a final decision of the contracting officer that denied Appellant’s claim for return of $23,906.84 which was deducted from rental payments otherwise due Appellant to cover the costs of replacing the windows in the Avalon, New Jersey Post Office. The parties have elected to have the appeal processed on the record, pursuant to 39 C.F.R. §955.12. Only entitlement is at issue.
FINDINGS OF FACT
1. On August 26, 1960, Respondent[1] entered into a lease with Appellant’s predecessor-in-interest for the Avalon, New Jersey Post Office. The initial term of the lease ran from June 20, 1960, to June 19, 1970, with 5 five-year options exercisable at the discretion of Respondent. (Respondent’s Supplemental Appeal File, tab 1).
2. Appellant, The Heller Group, purchased the facility in January of 1994. At the time of purchase the windows in the facility had been sealed shut by Appellant’s predecessor-in-interest. (Affidavit of Timothy Tracy).
3. On October 14, 1994, Respondent entered into a new lease with Appellant, with a five-year term commencing on June 20, 1995, and terminating on June 19, 2000. This lease required the lessor to maintain the facility in good repair and tenantable condition except for damage resulting from the acts or negligence of Respondent’s agents or employees. The lease also provided that if the lessor failed to make necessary repairs, after receiving written notice from Respondent of the need for the repairs and a reasonable time in which to accomplish them, the Postal Service had the right to perform the repairs by contract or otherwise, and deduct the cost of the repairs from rents otherwise due Appellant. Finally, the lease specified that the air conditioning unit be capable of maintaining the facility at a uniform temperature no greater than 78 degrees Fahrenheit. (Appeal File, tab (AF) 1).
4. The windows in the facility were inspected by Appellant in December 1998, and again by a contractor engaged by Appellant in January 1999. At the time of these inspections, at least some of the windows in the facility, although sealed, were leaking air and water. In addition, although the windows were sealed, the HVAC system provided fresh air ventilation and air conditioning when necessary, and was capable of maintaining the premises at a temperature no greater than 78 degrees Fahrenheit. (Declarations of Howard Gendron, Glen Milke; affidavit of Timothy Tracy; Appellant’s Supplemental Appeal File).
5. By letter dated July 2, 1999, the Postmaster of the Avalon Post Office requested that Appellant repair or replace the defective windows in the facility no later than September 30, 1999. In a subsequent letter dated July 16, 1999, the Postmaster advised Appellant that if the defective windows were not corrected by September 30, 1999, Respondent would hire a third party contractor to perform the work and deduct the cost from rental payments otherwise due Appellant. (AF 3, 4).
6. By letter dated October 5, 1999, Respondent’s contracting officer advised Appellant that, since Appellant had failed to take any action to repair or replace malfunctioning windows in the facility, the Postal Service would begin repairing/replacing the malfunctioning windows (AF 5).
7. On October 26, 1999, Respondent issued a work order in the amount of $23,906.84, to Franchi Construction Co., Inc., a third party Indefinite Quantity Construction Contractor, to replace the windows at the Avalon Post Office (Appellant’s Supplemental Appeal File).
8. Work was completed by March 28, 2000, and, on March 29, 2000, Respondent began deducting $23,906.84 from rental payments otherwise due Appellant to offset the cost of replacing the windows in the post office (AF 6).
9. By letter dated June 30, 2000, Appellant objected to the rental deductions, arguing that the windows could have been repaired for much less than the cost of replacement, and requested a ruling from the Postal Service that the rental deductions were improper and that Appellant should be reimbursed for the deductions already taken (AF 11).
10. By final decision dated July 11, 2000, the contracting officer denied Appellant’s request dated June 30, 2000. In his final decision, the contracting officer stated that having windows that opened and shut was required under the lease and that replacement of the windows was the only method of correcting this deficiency. (AF 13).
11. On August 9, 2000, the contracting officer wrote a follow-up letter to Appellant, in which he reiterated that having windows that opened and shut was required under the lease (AF 14).
12. On October 10, 2000, Appellant filed a timely appeal of the final decision (Notice of Appeal).
DECISION
Appellant argues that Respondent’s real reason for replacing the windows was not because they leaked, but because they did not open and close and, therefore, did not provide cross-ventilation. Appellant argues that the failure of the windows to operate did not make the premises untenantable in view of the presence of a fully functioning HVAC system that provided cooling and ventilation. Therefore, Appellant contends that it was not responsible under the terms of the lease for either repairing or replacing the windows.
Respondent argues that it notified Appellant that the windows were malfunctioning and in need of repair/replacement. When Appellant failed to take any action, Respondent argues that it had the right, under the terms of the lease, to correct the defects in the windows and deduct the costs involved from rents otherwise due Appellant.
When the parties entered into the new lease in 1994, the windows in the Avalon Post Office had been sealed shut for at least nine months (Finding of Fact Nos. (FOF) 2, 3), and that condition would have been apparent to Respondent’s officials. Additionally, the HVAC system in the facility provided fresh air ventilation and air conditioning to the level required by the contract (FOF 4). Under these facts, Respondent has not shown that Appellant’s duty under the lease to maintain the premises in good repair and tenantable condition required it to alter the windows so that they opened and shut. Therefore, this circumstance does not provide a basis for replacing the windows.
With regard to the question of leakage, although there was evidence that the windows leaked water and air (FOF 4), Respondent did not show how severe the leakage was, or how many of the windows actually leaked. The discussions between Respondent’s and Appellant’s representatives in 1998, the notices to Appellant regarding the need for repair, the contracting officer’s final decision and his follow-up letter explaining his position (FOF 4-6, 10, 11), were all directed to whether the windows could be opened and closed. There was no mention of windows leaking air and water as a concern until the declarations were filed in this appeal. At that point, for the first time, Respondent’s officials raised the issue of leaking windows. Even then, they did not provide evidence of the seriousness of any leakage. The absence of mention of this “problem” until the litigation surfaced suggests that the leakage was not significant, and Respondent has provided insufficient evidence to meet its burden to demonstrate that replacement of all the windows in the facility was necessary to remedy this condition.
Accordingly, the appeal is sustained.
William K. Mahn
Administrative Judge
Board Member
I concur:
James A. Cohen
Administrative Judge
Chairman
I concur:
David I. Brochstein
Administrative Judge
Vice Chairman
[1] Respondent was then the Post Office Department. 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 Postal Service, and the Post Office Department was abolished.