B-162328, OCT. 23, 1967

B-162328: Oct 23, 1967

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

A LESSOR UNDER A CONSTRUCTION-LEASE AGREEMENT WHO DENIES RESPONSIBILITY FOR RECONSTRUCTION OF DRIVEWAY AND MANEUVERING AREAS WHICH WERE NOT GRADED PURSUANT TO THE SPECIFICATIONS ON THE BASIS THAT THE GRADING WORK WAS ORIGINALLY DONE WITH FULL KNOWLEDGE OF THE LEASEE IS REGARDED AS RESPONSIBLE FOR THE RECONSTRUCTION. THE GENERAL COUNSEL SUBMITTED FOR OUR CONSIDERATION THE QUESTION AS TO WHICH LEASE PARTY IS TO BEAR THE RESPONSIBILITY FOR CERTAIN NECESSARY ALTERATIONS TO BE MADE TO THE HERSHEY. THE TERM OF THE ANTICIPATED LEASE WAS SPECIFIED THEREIN TO BE 10 YEARS COMMENCING NOVEMBER 1. - PROVIDED AT PARAGRAPHS NOS. 7 AND 10 (C) THAT THE LESSOR WAS TO MAINTAIN THE LEASED PREMISES IN A TENANTABLE CONDITION AND FIT FOR USE FOR THE PURPOSES LEASED.

B-162328, OCT. 23, 1967

LEASES - CONSTRUCTION (LEASE AGREEMENTS - REPAIR COSTS DECISION TO POSTMASTER GENERAL CONCERNING WHICH LEASE PARTY HAS RESPONSIBILITY FOR ALTERATIONS TO FACILITY AT HERSHEY, PA. UNDER A CONSTRUCTION AND LEASEBACK ARRANGEMENT. A LESSOR UNDER A CONSTRUCTION-LEASE AGREEMENT WHO DENIES RESPONSIBILITY FOR RECONSTRUCTION OF DRIVEWAY AND MANEUVERING AREAS WHICH WERE NOT GRADED PURSUANT TO THE SPECIFICATIONS ON THE BASIS THAT THE GRADING WORK WAS ORIGINALLY DONE WITH FULL KNOWLEDGE OF THE LEASEE IS REGARDED AS RESPONSIBLE FOR THE RECONSTRUCTION. B-161840, SEPT. 18, 1967.

TO MR. POSTMASTER GENERAL:

BY LETTER DATED AUGUST 17, 1967, WITH ATTACHMENTS, THE GENERAL COUNSEL SUBMITTED FOR OUR CONSIDERATION THE QUESTION AS TO WHICH LEASE PARTY IS TO BEAR THE RESPONSIBILITY FOR CERTAIN NECESSARY ALTERATIONS TO BE MADE TO THE HERSHEY, PENNSYLVANIA, POST OFFICE UNDER A CONSTRUCTION AND LEASEBACK ARRANGEMENT ENTERED INTO WITH THE HERSHEY CHOCOLATE CORPORATION (LESSOR).

THE RECORD DISCLOSES THAT SUBSEQUENT TO NEGOTIATIONS CONDUCTED THROUGH THE PHILADELPHIA REGIONAL OFFICE, THE LESSOR EXECUTED ON JUNE 30, 1960, AN AGREEMENT TO LEASE WHEREBY THE LESSOR AGREED TO CONSTRUCT A POSTAL FACILITY ON LESSOR-OWNED LAND IN FULL COMPLIANCE WITH THE PRELIMINARY DRAWINGS, POST OFFICE DEPARTMENT PUBLICATION NO. 39, ENTITLED,"CONSTRUCTION REQUIREMENTS FOR LEASED POSTAL FACILITIES" AND ALL ADDENDA ATTACHED THERETO. THE TERM OF THE ANTICIPATED LEASE WAS SPECIFIED THEREIN TO BE 10 YEARS COMMENCING NOVEMBER 1, 1960, OR THE DATE OF COMPLETION OF THE BUILDING, WITH TWO CONSECUTIVE OPTIONS TO RENEW FOR 5- YEAR PERIODS EACH.

THE LEASE, EXECUTED ON DECEMBER 20, 1961, EFFECTIVE RETROACTIVELY TO NOVEMBER 1, 1961--- THE DATE THE DEPARTMENT TOOK POSSESSION OF THE FACILITY--- PROVIDED AT PARAGRAPHS NOS. 7 AND 10 (C) THAT THE LESSOR WAS TO MAINTAIN THE LEASED PREMISES IN A TENANTABLE CONDITION AND FIT FOR USE FOR THE PURPOSES LEASED.

WE ARE ADVISED THAT THE DRIVEWAY AND MANEUVERING AREAS CONSTRUCTED AT THE REAR OF THE BUILDING BY THE LESSOR UNDER THE TERMS OF THE AGREEMENT TO LEASE WHICH SPECIFIED A 3 TO 8 PERCENT GRADE WERE, IN FACT, CONSTRUCTED UPON A 15 TO 17 PERCENT GRADE.

THE RECORD FURTHER SHOWS THAT AS EARLY AS DECEMBER 1962, THE HERSHEY POSTMASTER INDICATED THAT DIFFICULTY WAS BEING EXPERIENCED AT THE FACILITY WITH REGARD TO THE EXCESSIVE GRADE FROM THE LOADING PLATFORM TO THE REAR OF THE MANEUVERING AREA MAKING IT VIRTUALLY IMPOSSIBLE FOR POST OFFICE VEHICLES TO BACK INTO THE LOADING PLATFORM DURING PERIODS WHEN THE AREA IS COVERED WITH ICE AND SNOW. IT APPEARS THAT VARIOUS ATTEMPTS TO ALLEVIATE THE PROBLEMS CAUSED BY THE ACCUMULATION OF ICE AND SNOW ON THE DRIVEWAY AND MANEUVERING AREAS WERE MADE DURING THE INTERVENING YEARS BY THE HERSHEY POSTMASTER; HOWEVER, IT HAS BEEN DETERMINED BY THE DEPARTMENT THAT THE ONLY PRACTICAL SOLUTION WOULD SEEM TO BE COMPLETE RECONSTRUCTION OF THE PROBLEM AREAS TO ELIMINATE THE EXCESSIVE GRADES.

ON JUNE 6, 1967, THE ATTORNEY FOR THE LESSOR IN RESPONSE TO A LETTER FROM THE DEPARTMENT DATED APRIL 21, 1967, ADVISING THAT THE DEPARTMENT WAS HOLDING THE LESSOR RESPONSIBLE FOR CORRECTION OF THE PROBLEMS STATED ABOVE, DENIED THE RESPONSIBILITY OF THE LESSOR ON THE GROUNDS THAT THE DRIVEWAY AND MANEUVERING AREAS WERE GRADED WITH THE FULL KNOWLEDGE AND APPROVAL OF THE DEPARTMENT, AND THAT THERE IS NO CONTINUING LIABILITY UNDER THE TERMS OF THE LEASE REQUIRING THE LESSOR, AT HIS EXPENSE, TO ALTER THE GRADES THEREAFTER.

IN VIEW OF THE RATIONALE SET FORTH IN UNITED POST OFFICES CORP. V. UNITED STATES, 79 CT. CL. 173; UNITED POST OFFICES CORP. V. UNITED STATES, 80 CT. CL. 785; AND PARTICULARLY OUR RECENT DECISION B-161840, SEPTEMBER 18, 1967, WE ARE OF THE OPINION THAT THE LESSOR IS OBLIGATED UNDER THE TERMS OF THE LEASE TO MAINTAIN THE FACILITY IN A WHOLLY TENANTABLE CONDITION FOR THE TERM OF THE DEPARTMENT'S OCCUPANCY. OUR CITED DECISION B-161840, SUPRA, APPEARS TO BE ON ALL FOURS WITH THE INSTANT CASE AND WHAT WE HELD IN THAT DECISION IS EQUALLY APPLICABLE HERE. IN THAT CASE, WE HELD IN PERTINENT PART, AS FOLLOWS:

"WE HAVE FOLLOWED THE PRINCIPLES STATED IN THE ABOVE CASES (SEE 15 COMP. GEN. 1064 AND 45 COMP. GEN. 617) AND CAN FIND NO BASIS FOR DISTINGUISHING THE PRESENT CASE. YOUR CONSTRUCTION OF THE BUILDING IN CONFORMITY TO THE REQUIREMENTS OF THE POST OFFICE DEPARTMENT DID NOT AFFECT YOUR OBLIGATIONS UNDER THE LEASE TO MAINTAIN THE PREMISES IN TENANTABLE CONDITION, AND YOUR FAILURE TO PROVIDE ADEQUATE DRAINAGE FOR THE PARKING AREA MUST BE REGARDED AS A BREACH OF THAT OBLIGATION. SINCE THE LEASE REQUIRED YOU NOT ONLY TO MAINTAIN THE PROPERTY IN TENANTABLE CONDITION FOR THE TERM OF THE GOVERNMENT'S OCCUPANCY BUT ALSO TO RESTORE IT TO SATISFACTORY CONDITION WITH DUE DILIGENCE IN THE EVENT IT BECAME UNFIT IN WHOLE OR IN PART FOR USE FOR THE PURPOSES LEASED, WE MUST CONCUR WITH THE VIEW OF THE POST OFFICE DEPARTMENT, WHICH IS SUPPORTED BY THE COURT CASES AND DECISIONS OF OUR OFFICE CITED ABOVE, THAT YOU BORE A SEPARATE AND CONTINUING RESPONSIBILITY UNDER THE LEASE TO MAINTAIN SATISFACTORY DRAINAGE OF THE PREMISES FOR THE TERM OF THE LEASE.'

THE ATTACHMENTS FORWARDED BY THE LETTER OF AUGUST 17, 1967, ARE RETURNED HEREWITH.