Section 2000.4075 Improvements to Real Property

Section 2000.4075

Improvements to Real Property

a)         The Secretary of State will rent private space that requires

minimal improvements to meet State needs. Temporary and permanent improvements

may, however, be necessary to make the property appropriate for SOS use.  When

necessary, these improvements are an integral part of the lease.

b)         Improvements to leasehold property may result in the enrichment

of the building owner.  Unjust enrichment shall be avoided and controlled using

the following:

1)         Temporary Improvements

A)        Temporary improvements are defined as goods and services provided

to meet the specific physical needs of the department occupying leased space.

Temporary improvements are those that primarily benefit the tenant although

there may be coincidental benefits to the lessor after the term of the lease.  The

value of temporary improvements will generally be fully depreciated by the end

of the lease.  Examples of temporary improvements include painting, carpeting,

interior non-load bearing office partitions, and provision of wiring, lighting,

heating, and cooling beyond minimal building standards to satisfy needs for

electronic or scientific equipment or other such reasons.

B)        Temporary improvements may be contracted for as a provision in

a lease, as a lease amendment, or as a separate contract.  The temporary

improvement is integrally related to SOS leasing authority and must be approved

by the CPO.

C)        The CPO will approve temporary improvements only upon a showing

that the requested services and incidental goods are necessary for the

operation of the agency and are of a quality designed to last for the duration

of the lease or some lesser period.  The CPO may suggest or require

alternatives to the temporary improvements requested by the department.

D)        Payment for temporary improvements may be made as an addition

to base rent made in monthly installments over the term of the lease

cidental goods are necessary for the

operation of the agency and are of a quality designed to last for the duration

of the lease or some lesser period.  The CPO may suggest or require

alternatives to the temporary improvements requested by the department.

D)        Payment for temporary improvements may be made as an addition

to base rent made in monthly installments over the term of the lease.  If more

beneficial, a single additional payment may be made to cover the costs of

temporary improvements.

2)         Permanent Improvements

A)        Permanent improvements are those that would clearly benefit the

lessor beyond the term of the lease.  These are defined as goods or services

provided to meet basic occupancy requirements of habitability, building and

health code compliance, and fitness for the general purpose intended (i.e., for

office as opposed to warehouse space, etc.).  Value of permanent improvements

will generally not be fully depreciated under normal depreciation tables.

Examples include structural work, providing basic heating and air conditioning

units, utility service, restrooms, elevators, paving, and insulation.

B)        Permanent improvements may only be contracted for in the

initial lease or as an amendment to the lease.

C)        The CPO will review all requests for permanent improvements and

determine whether they are necessary, whether temporary improvement could

suffice, or whether another location would prove to be more cost-effective.

D)        All permanent improvement items will be assigned a normal life

for depreciation purposes and the cost of such improvements will be noted. The

State will not pay more than its proportionate share of the permanent

improvement cost as shown by the lease term divided by the normal life times

the actual cost

ould

suffice, or whether another location would prove to be more cost-effective.

D)        All permanent improvement items will be assigned a normal life

for depreciation purposes and the cost of such improvements will be noted. The

State will not pay more than its proportionate share of the permanent

improvement cost as shown by the lease term divided by the normal life times

the actual cost.

E)        If circumstances require full payment during the term, the

lease will provide for:

i)          renewals at the State’s option in initial lease term

increments until improvement is fully amortized; and

ii)         an option to remove any permanent improvement that it paid

for, leaving the building in the condition it was in at the start of the lease;

or

iii)        a rebate of the unamortized value of the permanent

improvements.

F)         A

purchase option at fair market value less value of permanent improvements may

substitute for subsections (d)(4) and (d)(5) in extraordinary circumstances.