B-169954, JUN. 25, 1970

B-169954: Jun 25, 1970

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ON BASIS THAT 5-YEAR LEASE WAS SUBJECT TO LESSEE'S RIGHT TO TERMINATE UPON 90-DAYS' NOTICE AND COST OF WORK WAS OUT OF LINE FOR SUCH TENANCY IS DENIED NOTWITHSTANDING GOVERNMENT'S RIGHT TO CANCEL LEASE. COMMON LAW RIGHT OF SET-OFF IS AVAILABLE TO GOVERNMENT TO RECOVER SUCH COSTS. TO POSTMASTER GENERAL: REFERENCE IS MADE TO LETTER DATED JUNE 1. REQUESTING OUR DECISION AS TO THE CLAIM OF A & L HARRIS (LESSORS) FOR THE SUM OF $660 WHICH WAS WITHHELD FROM RENTAL PAYMENTS DUE IT UNDER A LEASE AGREEMENT COVERING POST OFFICE QUARTERS AT LAKE BLUFF. THE SUM WITHHELD WAS FOR THE COSTS INCURRED BY THE POST OFFICE DEPARTMENT IN HAVING THE INTERIOR OF THE BUILDING REPAINTED BY A THIRD PARTY. A LEASE WAS EXECUTED BETWEEN THE POST OFFICE DEPARTMENT AND THE CHICAGO NATIONAL BANK.

B-169954, JUN. 25, 1970

LEASES--REPAIRS AND IMPROVEMENTS--REIMBURSEMENT TO GOVERNMENT BY LESSOR LESSOR'S CLAIM FOR AMOUNTS ADMINISTRATIVELY DEDUCTED FROM RENT COVERING INTERIOR PAINTING COST, NECESSITATED BY LESSOR'S REFUSAL TO PERFORM SAME, ON BASIS THAT 5-YEAR LEASE WAS SUBJECT TO LESSEE'S RIGHT TO TERMINATE UPON 90-DAYS' NOTICE AND COST OF WORK WAS OUT OF LINE FOR SUCH TENANCY IS DENIED NOTWITHSTANDING GOVERNMENT'S RIGHT TO CANCEL LEASE, SINCE GOVERNMENT HAD IN FACT RENEWED LEASE FOR 5 YEARS AND LESSOR'S COVENANT TO MAINTAIN PREMISES IN GOOD REPAIR HAS BEEN HELD TO INCLUDE INTERIOR PAINTING. ACCORDINGLY, COMMON LAW RIGHT OF SET-OFF IS AVAILABLE TO GOVERNMENT TO RECOVER SUCH COSTS. SEE COMP. GEN. DECS. CITED.

TO POSTMASTER GENERAL:

REFERENCE IS MADE TO LETTER DATED JUNE 1, 1970, WITH ENCLOSURES, FROM THE ASSISTANT GENERAL COUNSEL, REAL PROPERTY AND PROCUREMENT DIVISION, REQUESTING OUR DECISION AS TO THE CLAIM OF A & L HARRIS (LESSORS) FOR THE SUM OF $660 WHICH WAS WITHHELD FROM RENTAL PAYMENTS DUE IT UNDER A LEASE AGREEMENT COVERING POST OFFICE QUARTERS AT LAKE BLUFF, ILLINOIS. THE SUM WITHHELD WAS FOR THE COSTS INCURRED BY THE POST OFFICE DEPARTMENT IN HAVING THE INTERIOR OF THE BUILDING REPAINTED BY A THIRD PARTY.

ON OCTOBER 1, 1958, A LEASE WAS EXECUTED BETWEEN THE POST OFFICE DEPARTMENT AND THE CHICAGO NATIONAL BANK, AS TRUSTEE FOR LEONARD AND ELEANOR HARRIS, FOR THE USE OF CERTAIN PREMISES LOCATED IN LAKE BLUFF, ILLINOIS, AS POSTAL FACILITIES FOR A PERIOD OF 10 YEARS AT AN ANNUAL RENTAL OF $4,800. THE LEASE FURTHER PROVIDED AT PARAGRAPH 5 FOR A 5 YEAR RENEWAL OF THE LEASE AT THE OPTION OF THE GOVERNMENT AT AN ANNUAL RENTAL OF $3,550. THIS PROVISION READS AS FOLLOWS:

"5. THIS LEASE MAY, AT THE OPTION OF THE GOVERNMENT, BE RENEWED AT A RENTAL OF THIRTY-FIVE HUNDRED AND FIFTY DOLLARS ($3,550.00) PER ANNUM, PLUS REAL ESTATE TAXES LEVIED DURING TENTH YEAR OF BASIC LEASE TERM, FOR ONE ADDITIONAL, SUCCESSIVE, FIVE-YEAR PERIOD, WITH CLAUSES (A) AND (B) OF PARAGRAPH 10 REINSTATED DURING RENEWAL PERIOD, AND OTHERWISE UPON THE TERMS AND CONDITIONS HEREIN SPECIFIED, PROVIDED NOTICE BE GIVEN IN WRITING TO THE LESSOR AT LEAST SIX MONTHS BEFORE THIS LEASE WOULD EXPIRE: PROVIDED THAT NO RENEWAL THEREOF SHALL EXTEND THE PERIOD OF OCCUPANCY OF THE PREMISES BEYOND THE THIRTIETH DAY OF SEPTEMBER 1973."

THIS OPTION WAS EXERCISED ON MARCH 29, 1968.

PARAGRAPH 7 OF THE LEASE PROVIDES:

"7. THE LESSOR SHALL, UNLESS HEREIN SPECIFIED TO THE CONTRARY, MAINTAIN THE SAID PREMISES IN GOOD REPAIR AND TENANTABLE CONDITION DURING THE CONTINUANCE OF THIS LEASE, EXCEPT IN CASE OF DAMAGE ARISING FROM THE ACT OR THE NEGLIGENCE OF THE GOVERNMENT'S AGENTS OR EMPLOYEES. FOR THE PURPOSE OF SO MAINTAINING THE PREMISES, THE LESSOR RESERVES THE RIGHT AT REASONABLE TIMES TO ENTER AND INSPECT THE PREMISES AND TO MAKE ANY NECESSARY REPAIRS TO THE BUILDING."

BY LETTER DATED AUGUST 21, 1968, THE LESSORS WERE ADVISED OF THREE MAINTENANCE ITEMS, INCLUDING PAINTING OF THE INTERIOR, WHICH WERE THEIR RESPONSIBILITY UNDER THE LEASE AND WERE ASKED TO ATTEND TO THEM. THE INTERIOR HAD NOT BEEN PAINTED SINCE THE LEASE BEGAN ON OCTOBER 1, 1958. IT IS ADMINISTRATIVELY REPORTED THAT REQUESTS FOR INTERIOR DECORATION OF THE BUILDING WERE ALSO MADE ON SEPTEMBER 23, 1968, MARCH 20, 1969, AND AUGUST 21, 1969. WHEN THE LESSORS DID NOT COMPLY WITH THE REPAINTING REQUESTS THEY WERE ADVISED BY LETTER DATED SEPTEMBER 5, 1969, THAT BIDS WOULD BE SOLICITED FOR THE WORK.

THE FAILURE ON THE PART OF THE LESSORS TO COMPLY WITH THE GOVERNMENT'S REQUEST FOR REPAINTING CAUSED THE GOVERNMENT TO AWARD A CONTRACT TO PAINT THE QUARTERS ON JANUARY 6, 1970. THE $660 WITHHELD FROM RENTAL PAYMENTS BY THE GOVERNMENT REPRESENTS THE COST OF HAVING THE PAINTING DONE UNDER THE CONTRACT.

THE LESSORS CONTEND THAT UNDER PARAGRAPHS 10(A) AND (B) OF THE LEASE THE RENEWAL TERM OF THE LEASE IS FOR 90 DAYS, RATHER THAN 5 YEARS, AND THAT THE COST OF THE WORK IS OUT OF LINE FOR A 90-DAY TENANT. PARAGRAPHS 10(A) AND (B) OF THE LEASE, WHICH WERE DELETED DURING THE BASIC LEASE TERM BUT THEREAFTER REINSTATED DURING THE RENEWAL PERIOD BY PARAGRAPH 5, STATE:

"(A) THIS LEASE MAY BE TERMINATED UPON NINETY DAYS' NOTICE IN WRITING TO THE LESSOR WHENEVER THE POST OFFICE DEPARTMENT SHALL DECIDE TO MOVE THE OFFICE INTO A GOVERNMENT-OWNED BUILDING WHICH SHALL HAVE BEEN PROVIDED FOR IT.

"(B) THIS LEASE MAY BE TERMINATED UPON NINETY DAYS' NOTICE IN WRITING TO THE LESSOR WHENEVER, IN THE JUDGMENT OF THE DEPARTMENT, THE GROWTH OF THE SERVICE AT THAT OFFICE RENDERS ADDITIONAL ROOM NECESSARY AND THE LESSOR IS UNABLE OR UNWILLING TO FURNISH SUITABLE AND SUFFICIENT ADDITIONAL SPACE AT AN ADDITIONAL RENTAL SATISFACTORY TO THE DEPARTMENT."

A CAREFUL READING OF PARAGRAPHS 10(A) AND (B) CLEARLY SHOWS THAT THE GOVERNMENT HAS RESERVED TO ITSELF A RIGHT TO TERMINATE UNDER SPECIFICALLY IDENTIFIED CIRCUMSTANCES. PARAGRAPH 5 OF THE LEASE CLEARLY STATES THAT IF THE LEASE IS RENEWED, IT IS RENEWED FOR A 5-YEAR PERIOD. ALTHOUGH THE GOVERNMENT HAS THE RIGHT TO CANCEL THE LEASE UNDER CERTAIN CIRCUMSTANCES IF 90 DAYS' NOTICE IS GIVEN TO THE LESSORS, SUCH NOTICE WAS NOT GIVEN; HENCE, THE TERM OF THE LEASE WAS NOT 90 DAYS BUT 5 YEARS FROM OCTOBER 1, 1968, TO SEPTEMBER 30, 1973.

OUR OFFICE HAS HELD THAT COVENANTS BY THE LESSOR TO REPAIR AND MAINTAIN THE PREMISES IN GOOD REPAIR AND TENANTABLE CONDITION DURING THE CONTINUANCE OF THE LEASE INCLUDES THE PAINTING OF THE INTERIOR OF THE PREMISES. 6 COMP. GEN. 215 (1926); 21 ID. 90 (1941); 48 ID. 289 (1968); B -165308, DECEMBER 20, 1968. IF THE LESSOR FAILS TO COMPLY WITH REQUESTS TO REPAINT MADE OF HIM, THE COMMON LAW RIGHT OF SETOFF IS AVAILABLE TO THE POST OFFICE TO RECOVER THE COSTS OF HAVING THE REPAINTING DONE BY A THIRD PARTY.

ACCORDINGLY, THE LESSORS' CLAIM MUST BE DISALLOWED ..END :