March 2021

A problem sometimes faced by purchasers of leased post offices involves unexpected liability for maintenance costs that arise out of events occurring before the closing of the purchases.  As one of its remedies when a postal lessor fails to perform maintenance required under a lease, the USPS can perform the maintenance itself and recover the cost of the maintenance by withholding future rent.  If a purchase closes after the USPS performs the maintenance in question but before the USPS has fully recovered the expense through such withholding, a purchaser that is unaware of the situation will be surprised when the USPS later withholds rent to recover the expense.

Purchasers can use contract provisions to protect themselves against potential losses related to sellers’ past failures to perform maintenance.  First, a purchase contract can include a representation from the seller that the seller knows of no events occurring prior to the closing that create a right in favor of the USPS to withhold or otherwise refuse to pay rent.  Second, a contract can also include an indemnity provision requiring the seller to indemnify the purchaser against losses resulting from events or occurrences prior to the closing of the sale.  While such provisions will not prevent the USPS from withholding rent for expense recovery, they will give the purchaser a claim to recover the lost rent from the seller.

Also, a post office purchaser should always inspect the post office in question and the maintenance obligations the purchaser will assume under the lease.  If conditions are found that exist prior to the closing and will require the purchaser to spend money on maintenance after the closing, an adjustment of the purchase price can be made prior to the closing to allow the purchaser to retain the funds required for the maintenance.  Such a solution will obviously require the purchaser to conduct its investigations and discover the condition(s) within the inspection period under the purchase contract.