By Mark Karolczyk, AUSPL Director of Operations

After completing a lease form revision process which has been ongoing for approximately two years, the United States Postal Service has officially announced its intention to begin using new forms for its postal lease contracts.  The new single tenant lease form is available for review here, and the new multi-tenant lease form is available for review here.

Representing as it does owners of approximately 40% of leased post offices, AUSPL was very involved in the USPS’s lease form revision project.  Through numerous meetings with the USPS in Washington DC and consistent communication with the USPS in support of the interests of postal lessors, AUSPL was effective in preventing the inclusion in the new lease forms of many terms which would have had devastating impacts upon the investments of post office owners in their buildings.

While AUSPL’s participation in the lease form revision project succeeded in preventing the inclusion of some of the worst potential impacts upon lessors, the new lease forms will still place new responsibilities and burdens on postal lessors.  Before agreeing to lease their properties under the new forms, postal lessors will need to understand the forms and the ways the forms will increase the obligations of postal lessors and the additional costs they will now be required to bear.  Before agreeing to lease their properties using the new lease forms, postal lessors will need to ensure the rents being paid are sufficient to cover those new costs.

While a thorough recitation of all the ways the new lease forms will affect postal lessors is beyond the scope of this article, a simple comparison of some of the new lease forms to prior forms provides ample illustration of some those impacts.  For example, comparing the new “General Conditions” form to prior versions of that form reveals that the new “General Conditions” include new provisions which:

• Dispense with prior processes for determining the amount to be paid by the USPS to the lessor for necessary restoration work;
• Permit the USPS, upon lease expiration, to abandon improvements placed in the premises by the USPS without the requirement of compensation to the landlord for their removal and any necessary restoration;
• Require lessors to carry specified types of insurance and mandate new and higher coverage limits for such insurance;
• Place specific requirements upon lessors for restoration of buildings after casualty losses and permit lease termination when restoration is not completed within stated time periods; and
• Create new rights for the USPS when the USPS alleges a lessor has breached a lease, including the right to sue the lessor for damages and the right to terminate the lease.

Similarly, comparing the new form of the USPS partial maintenance rider (labeled, “Maintenance Rider USPS Responsibility (Partial)”) to prior forms of the same maintenance rider makes the following changes (among others) that are potentially detrimental to lessors:

• The definition of repairs that are structural in nature (and thus the lessor’s responsibility) has been expanded to include things such as fences, gates and paths that do not impact the building structure;
• Lessors are specifically responsible for maintaining all components of lighting systems other than the replacement of light bulbs;
• Lessors are now specifically made responsible for maintenance of all electrical and plumbing systems, conduit and related “components” other than those installed by the USPS; and
• Lessors are required to clean all gutters and remove snow and ice from building roofs.

Obviously, the implementation by the USPS of the new lease forms will involve many new challenges for lessors, as well as potentially significant new costs that will be imposed upon lessors.  Lessors will need to become familiar with new lease requirements and new ways of doing business.

Although this article cannot describe all the ways the new lease forms will affect lessors, AUSPL will continue to strive to educate postal lessors about those matters.

Finally, AUSPL members should see the article linked here regarding a negotiating technique that may prove useful in avoiding implementation of the new lease forms in leasing their buildings.