CBCA 6433

GRANTED: February 7, 2022 CBCA 6433 1425-1429 SNYDER REALTY, LLC, Appellant, v. DEPARTMENT OF VETERANS AFFAIRS, Respondent. Paul Jay Cohen of Cohen Marraccini, LLC, Southampton, PA, counsel for Appellant. Neil S. Deol, Office of General Counsel, Department of Veterans Affairs, Decatur, GA; and Donald Mobly, Office of General Counsel, Department of Veterans Affairs, Denver, CO, counsel for Respondent. Before Board Judges RUSSELL, ZISCHKAU, and O’ROURKE. O’ROURKE, Board Judge. Appellant, 1425-1429 Snyder Realty, LLC (Snyder or lessor), appealed the deemed denial of its claim for back rent that began accruing when respondent, the Department of Veterans Affairs (VA or agency), unilaterally rescinded a bilateral agreement that gave the agency unlimited access to the basement for an additional $5000 per month. The agency argues that the agreement lacked consideration because the lease already provided for the same access through two of its clauses. We disagree and grant the appeal. CBCA 6433 2 Findings of Fact On September 22, 2011, the parties entered into a contract for leased space in Philadelphia, Pennsylvania. The contract required the lessor to provide a fully built-out space for a residential rehabilitation treatment program for veterans, along with all services, utilities, maintenance, operations, and alterations. Upon completion of construction, the VA would occupy the first through fourth floors of the property, paying rent at a monthly rate of $36,677.08, for a fixed term of ten years with two five-year option periods. The build-out phase of the project was lengthy and expensive. The lessor’s proposed cost for construction was approximately $3.4 million. This was the lessor’s first lease with the Federal Government. To keep the project on track, the lessor worked daily and closely with VA personnel from engineering, contracting, and medical departments. During construction, the lessor constantly expressed concerns about cost overruns. The VA reassured the lessor that the VA would cover costs to move walls, plumbing, and electric, among other things. As costs crept toward $6 million, the lessor informed the VA that it could not continue to fund the overruns. The parties began discussing possible solutions to the escalating construction costs, and on October 25, 2012, they executed a bilateral supplemental lease amendment (SLA), SLA0001, which gave the VA unlimited access to the basement for $5000 per month. The basement was not part of the original lease. With the exception of a daycare that occupied a portion of it, the basement was a large, vacant space. The boiler room and sprinkler room were also located in the basement. The VA wanted to use the available space for storage and to avoid having to haul equipment back and forth for various purposes. The lessor agreed to give the VA exclusive access to, and use of, the unoccupied areas in the basement for the additional monthly payment. This arrangement satisfied the VA for its space needs and satisfied the lessor’s additional funding requirements. The lessor determined that with an extra $60,000 per year, it could secure more funding from the bank to cover its costs. The lessor gave the VA the key to the basement to use as it wished, and for four years, the VA paid rent consistent with the lease and the amendment. However, in the fall of 2016, without notice or explanation to the lessor, the VA stopped paying all rent, though it continued to operate the rehabilitation center and enjoy unlimited basement access. For months, the lessor’s inquiries about overdue rent fell on deaf ears. Unbeknownst to the lessor, a new contracting officer had taken over the lease and determined that SLA0001was redundant because, from the contracting officer’s view, the lease already provided for access to the basement and boiler room through Federal Acquisition Regulation (FAR) clause 552.270-10, Failure in Performance (Sept. 1999), and FAR clause 552.270-9, Inspection–Right of Entry. 48 CFR 552.270-9, -10 (2011). Consequently, the new contracting officer issued a unilateral modification (P00015) to rescind SLA0001. CBCA 6433 3 Eventually, the VA resumed paying monthly rent in the amount of $36,677.08.