The contractor leased property to GSA. For over a decade, GSA paid the contractor for electricity at the property. But GSA determined electricity should’ve been included in the rent. GSA demanded reimbursement. The contractor appealed to CBCA, arguing GSA’s years of payments indicated the agency was obligated to pay electricity. The board, however, reasoned the parties' course of conduct can only be considered when a contract is ambiguous. Here, the lease unambiguously stated electricity was included with rent. GSA was entitled to reimbursement regardless of the payment history.
Rockside-77 Properties LLC v. General Services Administration, CBCA 7153
Background
For several years, Rockside-77 Properties leased office space to GSA in Ohio. In addition to rent, GSA paid Rockside directly for the cost of electricity.
In 2008, GSA issued a solicitation office space in Cleveland. Rockside submitted a proposal. This time, Rockside’s final proposal stated electricity would be included in the rental rate. GSA accepted Rockside’s offer. In 2010, Rockside and GSA entered a new lease.
Although the lease stated electricity was included with rent, Rockside invoiced GSA for electricity. GSA paid these invoices for ten years.
But in 2021, GSA determined it shouldn't have made these payments. GSA demanded reimbursement. Rockside refused. GSA withheld rent to recoup the electricity payments. Rockside appealed to the CBCA.
Analysis
Lease Language
Rockside attempted to argue the lease obligated GSA to pay separately for electricity. CBCA disagreed. The plain language of the lease unambiguously included the costs of utilities in the rent.
Form 300
GSA uses Form 300 to order supplies and services. Early in the lease term, GSA issued Form 300 for $71,000 of electricity consumption. Rockside argued this form indicated GSA assumed responsibility for electricity.
The board, however, didn't think Form 300 was binding. Rockside had not signed the form. The parties hadn't exchanged consideration for the form. The form was not part of the contract.
Course of Conduct
Rockside noted GSA paid for electricity for over decade. Rockside reasoned this course of conduct showed GSA acquiesced to the payments.
Not so, said the board. The parties' course of conduct can be considered when a contract is ambiguous. Here, however, the board found the lease unambiguously stated electricity was included with rent. GSA’s history of payments was irrelevant.
--Case summary by Craig LaChance, Senior Editor