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5. Lease Extension Agreement for 248 3rd Ave EastREPORT TO FROM: SUBJECT: City of Kalispell Post Office Box 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758 Honorable Mayor and City Council Chris A. Kukulski, City Manager One Year Lease Extension Agreement for 248 3rd Avenue East MEETING DATE: May 7, 2001 BACKGROUND: Attached is a copy of the Lease Extension Agreement for 248 3 d Avenue East. The Community Development and Building Department offices have both been housed in this building, which is located at the corner of 3`d Avenue East and 3rd Street East, since 1.991. The extension is consistent with the current lease in every way including a rate increase which is determined annually by utilizing the U.S. Dept. of Labor, Bureau of Vital Statistics, Consumers Price Index, West Addition (CPI-U). The CPI -U for the period identified in the lease was 4.1 %, which increases our annual lease payment to $27,254.88. The one year extension was made upon the request of the City. As we continue to work through our space needs analysis, it would not seem prudent to sign into a lease arrangement that would extend beyond one year. The building is functional for the City and the lease rate is competitive. Glen Neier, Craig Kerzman and Susan Moyer have all reviewed the lease. RECOMMENDATION: The City Council authorize the City Manager to sign the attached one year Lease Extension Agreement for 248 3' Avenue East. FISCAL EFFECTS: The annual cost of the lease is $27,254.88. This is an increase of $1,115 over the previous years lease. The lease payment is paid by the Community Development Department's UDAG fund and the Building Code Department's budget. ALTERNATIVES: As suggested by the Council. Respectfully submitted, A, Chris A. Kukulski City Manager Report compiled May 2, 2001 Page 1 of 1 EXTENSION AGREEMENT THIS EXTENSION AGREEMENT, made and entered this260ray of April, 2001, by and between BALSCO, a Montana general partnership, of Kalispell, Montana 59901, hereinafter designated "Lessor"; and THE CITY OF KALISPELL of City Hall, Kalispell, Montana 59901, hereinafter designated "Lessee". The parties do hereby agree to extend that certain Lease Agreement dated April 7, 1998, between the parties hereto regarding the property located at 248 Third Avenue East, Kalispell, Flathead County, Montana, for a period of one year, from May 1, 2001, until May 1, 2002, upon the same terms and conditions as set forth in said Lease Agreement, except that the rent for the extended period of this Lease shall be the sum of $27,254.88 for the year, payable in equal monthly payments of $2,271.24 per month, payable monthly with the first rent payment of the extension period due an payable on May 1, 2001, and the like payment on the I" day of each month thereafter during the extended term of the Lease as set forth above. DATED this,, day of April, 2001. ALSCO B By: LE Its Partners CITY �O�F}KALISPELL By: CDj�A.A, Attest: Its: City Clerk "LESSOR" "LESSEE" LEASE AGREEMENT THIS LEASE, made and entered into this Z day of jZ(" L 1998, by and between BALSCO, a Montana general partnership, of Kalispell, Montana 59901, hereafter designated "Lessor"; and the CITY OF KALISPELL, City Hall, Kalispell, Montana 59901, hereafter designated "Lessee"; WITNESSETH: In consideration of the mutual covenants hereinafter set forth in the premises, the parties hereto agree and covenant as follows: ARTICLE I. Property Leased Section 1.01: Lessor hereby leases and permits the use to Lessee, and Lessee hereby leases from Lessor the following described real property and improvements thereon situated in Flathead County, State of Montana, (hereinafter referred to as "the premises"): Lots 5 and 6 of Block 58 of Kalispell, Montana, according to the plat thereof on file and of record in the office of the Clerk and Recorder, Flathead County, Montana. ARTICLE II. Term and Extension Option Section 2.01: Primary Term The primary term of this lease shall be for a period of three (3) years, commencing on the 1st day of May, 1998, and ending on the Ist of May, 2001. The word "term" as used in the lease shall mean the primary and extended term thereof. Section 2.02: Extension Option. Lessor hereby grants to Lessee the option to extend this lease at the expiration of the primary term for an additional two (2) year term, exercisable by written notice to Lessor at any time prior to 60 days before the expiration of the primary term, upon the same terms and conditions as herein provided, and subject to the rental provisions of Section 3.02 hereafter. ARTICLE III Rent, Security Deposit and Remodeling Costs Section 3.01: Fixed Rent. During the first term hereof, from May 1, 1998, through April 30, 1999, Lessee shall pay to Lessor as rent the sum of TWENTY-FIVE THOUSAND SIX HUNDRED FOUR AND 84/100 DOLLARS ($25,604.84) per year, payable in equal monthly payments of TWO THOUSAND ONE HUNDRED THIRTY-THREE AND 74/100 DOLLARS ($2,133.74) per month, payable monthly with the first rent payment being due and payable May 1, 1998, and on the first day of each month thereafter. Rent for each year during this Lease thereafter, on May 1, 1999, and on May 1 of each additional year during this Lease, shall be adjusted according to changes for the previous twelve (12) month period using the United States Department of Labor, Bureau of Vital Statistics, Consumer Price Index, West Addition (CPI-U) for the annually adjusted month of January, 1998. In no event will the annual Lease payment be less than the base year of $25,604.84. Section 3.02: Extension Rental If Lessee exercises its option to extend this Lease as provided by Section 2.02 above, the fixed annual lease payment for lease year May 1, 2001, through May 1, 2002, shall be adjusted according to changes for the previous twelve (12) month period using the United States Department of Labor, Bureau of Vital Statistics, Consumer Price Index, West Edition (CPI-U) for the annually adjusted month of January, 1998. The rent for each year thereafter during this Lease shall be adjusted according to changes for the previous twelve (12) month period as set forth above. In no event will the annual lease payment be less than the rent for the prior twelve (12) month period. Section 3.03: Advance Rent. Upon the execution of this Lease, Lessee shall further pay to Lessor the sum of $ .00 as advanced rent for the last full calendar month of the primary term of this lease. Section 3.04: Security Denosit Lessee herewith deposits with Lessor the sum of $.00, the receipt of which is hereby acknowledged, the same to be held by Lessor as security for the full and faithful performance and observance by Lessee of all the terms, covenants and conditions herein contained. It is agreed that the sum so deposited is not in advance payment of or on account of the rent herein reserved, or any part or installment thereof, or a measure of Lessor's damages. In the event Lessee shall have faithfully observed and performed all of the covenants, terms and conditions herein contained the aforesaid sum so deposited as security shall be returned by Lessor to Lessee, without interest thereon, at the expiration of the primary term of this lease or any extension thereof as provided herein. On the other hand, if Lessee fails to pay any installment of rent provided herein, or if it fails or neglects to perform or observe any of the covenants, conditions or agreements herein contained, then such portion of said $.00 as shall equal the amount of rent, damages, or other amounts or charges due hereunder shall be and become the property of Lessor, and the balance, if any, shall be repaid by Lessor to Lessee, without interest, at the expiration of the primary term of this lease or any extension thereof. The application of the security deposit as aforesaid by Lessor against the failure by Lessee to perform 2 the provisions of this agreement shall be without prejudice to any other right or remedies available to Lessor. ARTICLE IV Taxes. Assessments and Utilities Section 4.01: Lessor's Obligation to Pay. Lessor shall pay and discharge all real estate taxes and assessments (including assessments for sidewalks sewers, curbs gutters, paving, and like improvements) levied upon and assessed against the premises, with the exception of any real estate taxes and assessments levied upon and assessed against equipment, machinery, buildings or any other asset of any kind or nature placed in or upon the premises by Lessee. The term "real estate taxes and assessments" as used herein shall be deemed to mean and include taxes imposed upon the real property and permanent improvements constituting the premises and shall not be deemed to mean or include any personal property taxes, personal income taxes, inheritance taxes, franchise taxes or any other taxes levied against Lessor which, although they may be levied against Lessor and they constitute a lien on the premises are not levied directly against, or do not directly pertain to, the premises. Section 4.02: Lessee's Obligation to Pay. Lessee shall pay and discharge all taxes, licenses and assessments of every kind, nature and description (including all taxes and assessments and any equipment, machinery, buildings or other assets kind or nature placed of any ki in or upon the premises by Lessee) other than those provided to be paid ki Lessor in Section 4#01 above, and all charges made by any public or private utility or others for gas, water, sewage, electric power, telephone or other services furnished to during the term hereof. or placed upon the premises ARTICLE V. Use of the Premises• Lessor's Covenant of Quiet En'o me= Right of Eutry and Inspection Section 5:01: Use. Lessee shall not use or permit the use of the premises for any Purpose prohibited by law, shall comply with all requirements and demands of all governmental agencies or officials with respect to the condition, use and occupancy of the premises as such may appear from time to time during the term of this lease and shall not commit nor suffer to be committed any nuisance on or waste of the premises. Section 5:02: Quiet Enjoyment. Lessee shall at all times during the term hereof peaceably have, hold and enjoy the said premises without any manner of suit, trouble or hindrance of or from the said Lessor or any other person or persons whomsoever. Section5:03- Right of Entry and Inspection. ssee shall permit Lessor or Lessor' duly authori zed agents, employees of representatives to enter eupon the premises t all easonablestimes 3 for the purpose of inspecting the same or for the purpose of maintaining the premises and of making such repairs, alterations or additions thereon or thereto as Lessor may be obligated to do under the terms of this lease, including with respect to such work the erection of such scaf- folding, canopy, fences and props as may be required. It is specifically understood that any damage done to the premises during the accomplishment of any of the foregoing shall, at Lessor's sole expense be promptly repaired. ARTICLE VI. Repair and Maintenance• Alterations.• Liens• Indemnifications of Lessor; Liability Insurance Section 6.01: Repair and Maintenance. Lessor shall, except to the extent provided by practical impossibility, keep the exterior of the premises, excluding any signs of Lessee, but including the foundation, roof, walls and supporting frame work, in good condition and repair. Lessor shall not be required to make any repairs made necessary by reason of any negligent or deliberate act on the part of the Lessee or of the Lessee's agents, employees or invitees upon the premises. Except as above provided with respect to Lessor's obligations, Lessee at all times during the term of this lease shall keep, maintain and preserve the premises, and all parts thereof, including but not limited to the interior of the building located upon the premises, all glass, all interior operations, all appurtenances thereto and all property therein or thereon, in clean and good order, condition and repair, promptly making all repairs, replacements, renewals and improvements required in that regard. Lessee shall maintain the grass, bushes and trees located o* the premises, and shall keep all entrance ways to the building, the parking lot and all sidewalks continuous thereto free and clear at all times of all rubbish, garbage, refuse, ice and snow. Section 6.02: Alterations. Lessee shall not make any substantial alterations, additions or replacements on or to the premises without the written approval of the Lessor first obtained, which approval shall not be unreasonably withheld. Any such alterations, additions or replacements, except with respect to furniture, furnishings, equipment, and other personal property, shall at once become a part of the realty and, accordingly, shall be the property of Lessor. Section 6.03: Liens. Lessee shall, during the term of this lease, promptly remove or release, by the posting of a bond as either required or permitted by law, any lien against the premises or any portion thereof arising by reason of any fault or omission on the part of Lessee, and shall save and hold Lessor harmless from or against any such lien. In the event any such lien does attach against the premises, and shall not be released as aforedescribed within 15 days after notice thereof, Lessor, in Lessor's sole discretion, may pay and discharge the same and relieve the premises therefrom (thereafter Lessee shall pay and reimburse Lessor upon demand for or on account of any cost or expense, including reasonable attorneys' fees) incurred by Lessor in discharging such lien which sum shall include interest at a rate of 10 percent per annum from the date such lien is paid by Lessor until the date Lessor is reimbursed by Lessee. 0 Notwithstanding the foregoing, Lessee may contest any such lien or claim of lien upon furnishing Lessor with a valid and sufficient bond issued by a reputable bonding or surety company legally qualified to do business in the state of Montana, indemnifying Lessor against any loss, liability or damage on account thereof. Section 6.04: Indemnification. Lessee hereby indemnifies and agrees to hold Lessor harmless from and against any and all actions, claims and demands arising out of the use, occupancy, or non-use of the premises by Lessee or the failure of Lessee to maintain the premises as herein provided, including, but without limitation of the foregoing, any carelessness, negligence, improper conduct or breach of this lease by Lessee or its agents, employees, patrons, suppliers or licensees, and any and all costs, expenses and fees, including attorneys' fees, incurred by Lessor incident thereto. Notwithstanding the foregoing, Lessee shall not indemnify nor save Lessor harmless from any such action, claim or demand arising out of the Lessor's failure to perform its obligations under this lease. Section 6.05: Liability Insurance. To further protect Lessor and assure compliance by Lessee with the foregoing provisions of this agreement, Lessee shall obtain and maintain at all times during the term hereof, with a responsible insurer, for the benefit of Lessor and Lessee as their respective interest may appear, comprehensive general liability insurance against any loss or liability for damages and any expenses of the parties against any claim for damages which might result from the use or occupation or condition of the premises, in such amount or amounts as shall not be less than is customary and usual for operations of the type, character and scope to be carried on by Lessee on the premises, but in no event in amounts affording protection of legs than $500,000.00 in case of injury to or death occurring as a result of or arising out of one accident or event, and $500,000.00 in respect of property damages. Upon request by Lessor, Lessee shall furnish a copy of such insurance policy and renewals thereof to Lessor and such policy shall not be canceled without notice to Lessor. ARTICLE VII. Casualty Insurance Destruction by Fire or Other Casualty Section 7.01: Casualty Insurance. Lessor, at its own expense, shall carry such fire and extended coverage insurance upon the building or buildings located upon the premises as Lessor may determine to be sufficient to protect against loss; in no event, however, shall Lessor be liable to Lessee for any loss of or damage to Lessee's furniture, fixture or property of any kind located upon the premises or for any business interruptions or damage to the business of the Lessee resulting from fire or other casualty in or about the building or buildings located upon the premises. Lessee shall provide itself at its own expense with such insurance, if any, as it shall desire for the protection of its personal effects and property and any additions which it may make to the premises against loss or damage by fire or other casualty. k Section 7.02: Destruction. In the event the premises are, during the term of this agreement, damaged or destroyed by fire or other casualty, so as to render the premises untenant- able, in whole or in part, the parties hereto shall estimate the cost of restoring the premises, and, if such cost does not exceed the proceeds obtained from the fire or casualty insurance as a result of such casualty, Lessor shall use such proceeds to restore the premises in a prompt and diligent manner. If the estimated cost of restoration exceeds the proceeds obtained from the fire or casualty insurance as a result of such casualty, and Lessor shall be unwilling or unable to pay the full amount of such excess, Lessee shall have the right to elect either (i) to pay that portion of the excess which Lessor is unwilling or unable to pay, or (ii) to cancel and terminate this lease, in which event all obligations thereafter arising shall be at an end, and the advanced fixed minimum rent for the last full calendar month of the primary term, as well as the security deposit, shall be returned to Lessee. During the period of time when the premises, in whole or in part, shall be untenantable or unavailable to Lessee, the rent shall be equitably abated or apportioned and adjusted. If the premises are to be restored under the provisions of this Section 7.02, Lessee, shall receive credits against the rent otherwise due after completion of the restoration and the total amount paid by Lessee in respect of its election to bear the excess cost of restoration as hereinabove provided. ARTICLE VIlI. Assignment and Subletti112 Section 8.01: Lessee shall not assign this lease or any part thereof nor underlet or sublet tlr- whole or any part of the premises without the written consent of Lessor being first obtained, but such consent shall not be unreasonably or arbitrarily withheld to any assignment or subletting of said premises to reliable and responsible persons or concerns; provided, however, that any such consent shall not be deemed to release Lessee from its covenants and obligations herein set forth and Lessee shall continue to be responsible for the performance of the said covenants and obligations. ARTICLE IX. Personal Property on the Premises; Lessee's Rights Therein Section 9.01: Personal Property, Lessee, at its sole cost and expense, may place or install such fixtures, furniture, furnishings, equipment and other personal property on the premises as Lessee shall deem necessary for the efficient conduct of the business to be carried on therein. Lessee may also, at its sole cost and expense, place suitable signs on the premises within the designated signage area, for the purpose of indicating the nature of the business carried on by it, provided, however, that the design, size and materials of all signs shall first be approved by Lessor, which consent shall not be unreasonably withheld. 0 ARTICLE X. Default. Lessor's Rights and Remedies• Miscellaneous Default Clauses Section 10.01: Default. The occurrence of any of the following shall constitute an event of default: (1) Lessee shall fail to pay the rent provided for herein; (2) Lessee shall fail to observe or perform any of the obligations of Lessee provided for herein; (3) If a petition in bankruptcy or an application for any relief under any provision of the Bankruptcy Act is filed by or against Lessee; (4) Lessee shall make an assignment for the benefit of creditors; (5) A receiver is appointed for the assets or affairs of Lessee; (6) Lessee shall commit any act of bankruptcy; (7) Lessee's interest hereunder shall be levied upon under execution or seized by virtue of any writ of any court of law or equity; of law. (8) Any assignment of this lease, either in whole or in part, is effected by operation Section 10.02. Lessor's Rights. If Lessee shall be in any default hereunder, Lessor shall have the right to make any payment or perform any act required of Lessee under any provision of this lease, and, in exercising such right, to incur necessary and incidental costs and expenses, including reasonable attorney fees. All payments made and all cost and expenses incurred by Lessor in connection with any exercise of such right, together with interest thereon at the maximum rate of interest and permitted by law from the respective dates of the making of such payments or the incurring of such costs and expenses, shall be reimbursed by Lessee immediately upon demand. Notwithstanding the foregoing, nothing herein shall imply any obligation on the part of Lessor to make any payment or perform any act required of Lessee. Section 10.03. Lessor's Remedies. In the event of default by Lessor hereunder, which shall remain uncured after 30 days' notice of the default, or 15 days in the case of nonpayment of rent or any other sum due hereunder, Lessor may at once thereafter or at any time subsequently during the existence of such breach or default: (1) Enter into and upon the premises or any part thereof and repossess the same, expelling and removing therefrom all persons and property, which property may be removed and stored at the cost of, and for the account of Lessee, using such force as may be necessary, and (2) Either (a) terminate this lease, holding Lessee for damages for its breach, or (b) without terminating this lease re -let the premises or any part thereof upon such terms and conditions as shall appear advisable to Lessor. If Lessor shall proceed in accordance with the last mentioned alternative (b), and the amount received from reletting of the premises during any month or part thereof be less than the rent due and owing from the Lessee during such month or part thereof under the terms of this lease, Lessee shall pay such deficiency to Lessor immediately upon calculation thereof. Notwithstanding the foregoing, any default (except failure to pay rent or any other amount due hereunder) the curing of which shall actually require more than 30 days because of any cause beyond Lessee's control, shall be deemed cured by Lessee if Lessee.shall have commenced to cure said default within the 30 day period and shall thereafter have successfully prosecuted the curation of said default with all due diligence. Section 10.04. Miscellaneous Default Clauses. In the event of breach of this lease, the party at fault shall and will pay to the other party all costs, reasonable attorneys' fees and other expenses which may be incurred by the said other party in enforcing its rights hereunder. The remedies hereinabove mentioned, or the election of any thereof by either parry shall in no case be deemed or considered exclusive of any other remedy or action hereunder or which may otherwise be appropriate, each party having the right to pursue any and all other rights and remedies which it may have at law or in equity. The failure of either party to terminate this lease at any time during the breach of any of the terms hereof shall be deemed only an indulgence by said party for that particular breach and shall not be construed to be a waiver of tlf rights of said party as to any further or subsequent breach. Lessor shall not be deemed to have terminated this lease by reason of taking possession of the premises unless written notice of such termination has been served on Lessee. ARTICLE XI. Surrender Upon Termination• No Holding Over Section 11.01: Surrender. Upon the expiration or sooner termination of this lease, Lessee, at its sole expense, shall remove from the premises all merchandise, furniture, furnishings, equipment and other personal property belonging to it not affixed or attached to any part of the premises and shall quietly and peaceably surrender possession of the premises in good order and repair and in a clean and sanitary condition, reasonable wear and tear and damage by fire, other casualty or the elements excepted. Moreover, it is expressly understood and agreed that, upon and after expiration or sooner termination of this lease, any and all furniture, furnishings, fixtures, equipment and other personal property affixed or attached to any part of the premises by Lessee may also be removed by Lessee at its sole expense, provided that Lessee shall promptly and at its sole expense repair any damage to the premises caused by such removal. Section 11.02: Holding Over. There shall not be any holding over by Lessee or any assignee or subtenant beyond the expiration or sooner termination of the term of this lease; if nevertheless there be any holding over by Lessee or any assignee or subtenant, such shall give rise to a tenancy at the sufferance of Lessor upon the same terms and conditions as are provided for herein with a rental for the period of such holding over proportionate to the monthly installment of rent last paid by Lessee during the term of this lease. ARTICLE XII. Subordination Section 12.01: Lessee agrees that this lease shall be subject and subordinate to any mortgage or mortgages now on said premises or that any owner of said premises may hereafter at any time elect to place on said premises, and to all advances already made or that may hereafter be made on account of said mortgages, to the full extent of the principle sums secured thereby and in interest thereon. Lessee agrees on request to hereafter execute any paper or papers that counsel for the Lessor may reasonably deem necessary to accomplish that end. In the event Lessor shall default in the payment of any such mortgage, Lessee may make any rental payments then due hereunder directly to the mortgagee to correct and remedy such default and to maintain such mortgage payments current. ARTICLE XIII. } Entire Agreement Herein: Changes or Waivers Section 13.01: This lease shall be deemed to include the entire agreement between the Parties hereto and no waiver of any right, agreement or condition hereof and no modification hereof shall be binding upon either of the parties hereto unless in writing and signed by the party to be charged therewith. ARTICLE XIV. Headines Section 14.01: The headings as to contents of particular articles and sections herein are inserted only for convenience and are in no way to be construed as part of this lease or as a limitation on the scope of the particular articles or sections to which they refer. ARTICLE XV. Partial Invalidity Section 15.01: Partial Invalidity. In the event any provision of this lease or any part thereof shall be determined by any court of competent jurisdiction to be invalid, void, or 0 otherwise unenforceable, the remaining provisions hereunder or parts thereof, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, it being understood that such remaining provisions shall be construed in a manner most clearly approximating the intention of the parties with respect to the invalid, void or unenforceable provision or part thereof. ARTICLE XVI. Notices, Payments Section 16.01: Notices. Any and all notices, requests or demands required hereunder shall be in writing and shall be delivered in person or sent by United States registered or certified mail (return receipt requested), to the respective parties at the following addresses, or at such other address that either party may designate in writing: Lessor: BALSCO P.O. Box 134 Kalispell, Montana 59903-0134 Lessee: CITY OF KALISPELL City Hall Kalispell, Montana 59901 Mice served by mail shall be deemed complete when deposited in the United Sates Post Office. Any change of address shall not be effective unless served upon the parties in the same manner as the notice referred to herein. Section 16.02: Payments. All payments required to be made hereunder shall be made at the appropriate address hereinabove set forth or to such other address as either of the parties may from time to time specify. ARTICLE XVII. Binding Effect; Successors and Assigns Section 17.01: This lease shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and authorized assigns. IN WITNESS WHEREOF, the parties hereto have executed this lease the day and year first above written. 10 BA CO By: By: Its Partners "LESSOR" CITY OF KALISPELL J By: Attest: By: i� w Its: "LESSEE" 11