In its efforts to cut costs, USPS officials announced their desire to close 3,600 post offices in July 2011 and to eventually close up to 15,000 buildings nationwide, along with half their mail processing centers. Postal lessors and customers fought back and in December 2011, USPS agreed to a six-month moratorium on closings, which ended in May 2012. Instead of closing 13,000 post offices, USPS came up with the POStPlan, which reduced hours to two, four or six hours per day, mostly at rural post offices. Community meetings were held and postal customers voted for reduced hours because the alternatives would mean the closure of their post office. Today, we are 70% through the conversion of POStPlan offices with the other 30% to occur next September.

 Still, USPS seeks alternate space for retail mail services and seeks legislation to modify delivery service days. So, we must prepare for the possibility USPS will move out of our building. Your building and land have value. Do your homework by talking with local real estate agents and investors so you will know how likely it is to obtain a new tenant and what the prospects will be for selling your building.

 If the Postal Service moves out before the lease terminates, it is responsible for the lease payment until the end of the lease term, providing there is no early termination clause. Check your lease: USPS may be responsible for the building maintenance during the lease term. In addition to rent and maintenance, USPS is responsible for taxes and security until the lease expires.  As a lessor, you do not have control of the building until lease expiration.

If there is still time to negotiate a buyout with USPS, here are some ways to do so:

  1. If you purchased the building years ago, have you gotten your money out of it?
  2. Can you convert the building to a new use? Can you find another tenant? Talk with real estate professionals and investors where the property is located.
  3. If you can find a new tenant, you might want to ask USPS to consider an early buy out of the lease.
  4. Make the best deal you can.
  5. Set a price based on your situation. What is the market value of your building if you have a tenant in place?

 If the Postal Service moves out and your lease has expired, the USPS is required to make all necessary repairs, restore the building and to deliver it “broom clean” per the terms of the lease and has 30 days to accomplish this.

 Remember, much of the specialized equipment belongs to you, including signs, flagpole, casework, counters, lobby desk, loading docks, loading dock leveler, box section (not the post office boxes), impact doors, security cameras/equipment, etc.  Further, contact the utility company and other vendors to change these bills from the Postal Service to you or the new lessee.

 Perhaps the Postal Service is willing to share the building space if it needs less space, which means you may be allowed to lease a portion of the building to another business. Discuss this before USPS moves out of the building.

 What’s more, most interior space, as designed, can be converted to other uses. Even loading docks can be removed, if necessary. Keep in mind that many buildings may require renovations. If you are able to find a new tenant, will you need a property manager or a real estate agent if you want to sell? If the building is vacant, you will be responsible for security, continuing electricity, water and heat, any burglar and fire protection systems on site and any landscaping or garbage collection.

 What about insurance?

Coverage will change dramatically should the Postal Service move out of your building; however, AUSPL Insurance is customized for post offices.

  If you have AUSPL insurance, your coverage automatically changes because of the vacancy or the change in the building’s occupancy.  Virtually all insurance policies, including the AUSPL Insurance Program, have vacancy provisions that automatically reduce coverage if the insured building becomes vacant.  The AUSPL Insurance policy also has an “occupancy” clause which states the building has to be occupied by a USPS, GSA or other approved occupant. It makes no difference if the building is still technically under lease. If a tenant moves out or ceases operations, coverage automatically changes. Claims are settled on an Actual Cash Value basis instead of Guaranteed Replacement Cost. Loss payments are also reduced because they are calculated by factoring in depreciation. In older properties, depreciation can be substantial, and payments for losses can be much less when compared to replacement cost.

 Also, under the AUSPL policy, you have an obligation to make sure that “building services” continue even when the building is vacant otherwise you will lose valuable coverage. Building services include continuing electricity, water and heat, any burglar and fire protection systems (if these were there previously) as well as maintaining landscaping/garbage collection. Some of the most important coverage you lose includes vandalism, glass breakage, water damage and theft of building components such as copper or plumbing fixtures. Again, these only become excluded if building services are not continued so make sure they are even if they are USPS’s responsibility.

 If the USPS shutters your building, the change in insurance coverage is automatic even if you don’t notify your carrier. AUSPL Insurance has options available to keep the building covered, both as a vacant property and when leased to a new tenant. Call Rick Austin at AUSPL Insurance for more information at 877-642-8775.

 To learn more, come to Conference 2014 in New Orleans March 27-28, 2014. There’s discussion of this subject during the meeting.