When should a lessor inspect his/her building?
- ALWAYS CONSIDER AN INSPECTION BEFORE NEGOTIATING A NEW LEASE WITH THE USPS. Knowing the extent of necessary or expected repairs allows lessors to negotiate fair rents to help defray those costs.
- If it has been more than a few years since the last building inspection, a lessor should perform an inspection. It’s prudent to always be aware of the condition of your property.
- Any time a major repair has been performed on the building, it is a good idea to consider an inspection within the warranty period to ensure there are no signs of defects in the repair.
Why should a lessor have an inspection performed?
- Lessors owe legal obligations to the USPS for building maintenance. Under the new USPS lease (and perhaps under common law even with older forms of leases), a lessor’s failure to perform maintenance could create a right for the USPS to terminate a lease. Regular inspections can ensure that lessors stay on top of their maintenance obligations and help prevent early lease terminations.
- Regardless of the parties’ lease obligations, inspections can help lessors maintain the value of their real property investments. Regardless of whether a lessor or the USPS is responsible for repairs in any particular case, the failure to perform necessary maintenance can result in worse damage than might have been the case if repairs had been made promptly. It is simply prudent building management practice for a lessor to conduct building inspections frequently enough to have awareness of conditions which require or may soon require repairs.
- A lessor changing to the new form of USPS lease in a renewal faces significant changes in maintenance obligations. As one example (but hardly the only one), the lessor will become responsible for maintenance of all lighting systems in the building, which was formerly the responsibility of the USPS under the “USPS Partial” maintenance rider. Therefore, before accepting the new maintenance obligation, a lessor should get an inspection to determine maintenance costs the lessor is about to accept, and any maintenance the USPS may have neglected to perform. That way, the lessor can consider making a claim for the deferred maintenance and/or accepting the obligation for necessary repairs and seeking compensation for that through the new lease.
Imagine this nightmare scenario:
Consider the case in which the USPS has failed to perform maintenance the USPS was required to perform, and it is now time for renewal of the lease. The USPS tells the lessor the lessor must use the new USPS lease form for the renewal, and the new lease form includes a representation by the lessor to the USPS that the “Landlord is unaware of any . . . adverse conditions relating to the Property.” Promptly after the new lease is signed, the lessor receives a letter from EMCOR (on behalf of the USPS) stating that the lessor has breached that representation because the property contains “adverse conditions,” with the letter ignoring the fact that the adverse conditions in question exist only because the USPS previously failed to perform maintenance the USPS was obligated to perform. This situation might be avoided if the lessor conducts an inspection before signing the new lease and either obtains agreement from the USPS to repair the conditions the inspection uncovered, or at least inserts language in the new lease to recognize the existence of the conditions and state that their existence does not constitute the lessor’s breached of the representation.
The postal facility inspection benefit:
Inspections are important at any time to keep lessors informed about the condition of their buildings. However, an inspection can be especially important when it is time to renew a lease. In conjunction with a lease renewal, a lessor who obtains an inspection report showing maintenance that has been neglected by the USPS can address those maintenance concerns during the renewal negotiations. For example, as an alternative to making a claim for maintenance costs with the USPS Board of Contract Appeals, the landlord could agree to undertake the required maintenance but ask the USPS to pay for the previously neglected maintenance. Alternatively, the lessor could ask the USPS to pay the amount required for such maintenance by increasing the rent the USPS will pay during the renewal. Either way, the landlord needs to know the condition of his or her building to effectively negotiate fair compensation from the USPS. Having an inspection report gives a lessor a clear picture of the condition of his or her building and also gives the lessor an idea of any maintenance obligations lessor might assume in the case of a change in a lease maintenance rider.
In many cases, a few hundred dollars spent on a postal facility inspection could end up saving a lessor thousands over the course of his or her lease.
What has been the problem with inspections up to now?
One problem lessors have encountered with past post office inspections is that many home inspectors are unfamiliar with the specific areas in a post office. Because such inspectors do not know what areas and items should be inspected, they often fail to include in their inspection reports important building areas and features. That can lead to money wasted on inspections that are insufficiently thorough to be useful in lease renewal negotiations (or for other uses). Also, because inspectors use a variety of inspection software platforms, their inspection report formats vary widely. But the USPS is a federal institution that needs to be able to see consistent and easily understandable reports from buildings throughout the country. The AUSPL inspection program will utilize ASHI inspectors who have been trained to inspect all important features of post office buildings, and will result in inspection reports that are in a consistent format and include all important postal-specific areas of the buildings that are inspected.