Commerce Plaza Partners, LLC vs Department of Veterans Affairs, 2017 WL 3114025
The Civilian Board of Contract Appeals (CBCA) decided this case. As part of the General Services Administration (GSA), the CBCA hears various cases concerning federal agencies in the executive branch. Under the Contract Disputes Act (41 U.S.C. 7101-7109), the CBCA conducts dispute resolution between government contractors and agencies.
Summary Judgment Background
Commerce Plaza Partners, LLC (CPP) entered into two leases with the Department of Veterans Affairs (DVA). Both leases concerned space in the same property – 755 Commerce Drive in Decatur, Georgia.
On May 1, 2006, CPP and the DVA entered into Lease V247R-0056 (clinic lease) for a period of five years. Both parties later agreed to amend the clinic lease to annual terms, with one-year options. The clinic lease granted the DVA access to the entire second floor and part of the first floor. The clinic lease permitted the DVA access to an “information technology (IT) closet” on the second floor for telecommunication purposes. CPP and the DVA agreed that the lease would terminate on October 12, 2015. By lease termination, the DVA relinquished control, with the exception of the IT closet.
On July 1, 2008, CPP and the DVA entered into Lease V247R-0586 (admin II lease) for a period of five years. Both parties later agreed to amend the admin II lease to annual terms, with one-year options. The admin II lease granted the DVA access to the third and seventh floors. The admin II lease permitted the DVA access to an IT closet for telecommunication purposes. CPP and the DVA agreed that the lease would terminate on February 29, 2016. By lease termination, the DVA relinquished complete control.
It is important to note that the DVA continued to utilize the IT closet on the second floor from October 12, 2015 (expiration of clinic lease) to February 29, 2016 (expiration of admin II lease).
CPP filed several claims against the DVA concerning the clinic and admin II leases.
- CBCA 5220 – Based on existing rental rates and the square footage of the IT closet, the DVA’s contracting officer determined that $2,124.12/month was owed for continued use of the IT closet. But CPP argued that the DVA was a holdover tenant, owing full rent for continued use of the IT closet from October 12, 2015 to February 29, 2016.
- CBCA 5260 – After the clinic lease expired, CPP and DVA representatives conducted a damage assessment report. Both parties signed the report. But the parties disagreed on the cost of repairs. CPP requested $109,172 for repairs. The DVA only approved $15,913.40, based on an independent government estimate.
- CBCA 5313 – CPP alleged constructive occupancy of the second floor. CPP argued that damage caused by the DVA made the second floor unsuitable for a new tenant. The second floor needed $94,187.70 in repairs. But the DVA’s contracting officer did not respond to CPP’s claim for repairs.
To settle the above-mentioned claims, CPP appealed to the CBCA for review. The CBCA combined the claims and appeals into the present case. Both CPP and the DVA filed motions for summary judgment, requesting a final determination from the CBCA.
Sumary Judgment Analysis
The CBCA first explained the parameters of summary judgment. If any “genuine issue” of material fact exists, then summary judgment is not appropriate. Summary judgment is only appropriate for matters of law with “undisputed material facts.”
The CBCA reviewed the matter and determined that genuine issues of material fact exist. It was not possible for the CBCA to determine, as a matter of law, whether the DVA “rendered the entire second floor un-tenantable.” Further court proceedings are required to determine whether another tenant could have shared the second floor and IT closet with the DVA.
The CBCA first underlined a key tenet of property law. The CBCA stated that all leases include an express or implied clause “that a tenant will not commit waste by damaging the property.” After lease expiration, the tenant must return the property to the owner in the same condition, absent normal wear and tear.
As a result, the CBCA determined that the DVA must compensate CPP for damage to the second floor. But the CBCA also noted that genuine issues of material fact exist as to the nature and amount of damages. Further court proceedings are required to determine the amount of compensation due to CPP.
As stated above, the CBCA determined that genuine issues of material fact exist as to the nature and amount of damages. This applies to the constructive occupancy claim as well. The CBCA cannot determine, as a matter of law, whether the damages rendered the second floor “un-tenantable” or if CPP attempted to mitigate damages. Further court proceedings are required to answer these questions.
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