Milford's city manager expects the city solicitor to advise city council regarding a private commercial lease with Downtown Milford, Inc. that does not clearly include the allowance of residential tenants living in a city-owned building.

Downtown Milford, Inc. is still settling into its new office at 207 South Walnut St., as are its residential tenants, DMI Director Lee Nelson and his wife, Anne Jenkins, who are footing the property’s utility bill in lieu of rent payments regardless of a private commercial lease agreement between the city and DMI.

When the building was originally purchased with electric reserve funds in 2012 in the amount of $240,176 plus settlement costs, its intended use was to expand the property around City Hall, which possibly included demolishing the 1930s two-story house.

“[The city] bought it as a safe guard against never being able to expand on the campus,” said City Manager Richard Carmean. “It was never meant to be a rental property.”

Councilman S. Allen “Skip” Pikus, who serves as finance committee chairman, said he was concerned about the use of the property considering it was purchased with public funds.

“Where does the money from the reserves come from? We make a profit from electricity, and that’s still the public’s money,” Pikus said. “As a keeper of the dollars, I think it’s prudent to make sure things are done right.”

Since plans for the property were never finalized, the finance committee and city council were approached by DMI President Irv Ambrose in January with the proposal that the building be leased and used as the new headquarters for DMI.

According to meeting minutes from the Jan. 15 finance committee meeting, Ambrose mentioned that certain things needed to be done to the building to accommodate another use, which he was unable to discuss at the time.

The second use was the conversion of the home into not only office space, but also residential living space for DMI Executive Director Lee Nelson and his wife, local artist Anne Jenkins.

City Manager Richard Carmean was aware of the second use, and stated that other council members may also have been aware, but council never voted on any residential use of the city-owned building.

“There was never any discussion before council that the executive director would move in there,” Pikus said.

The lease agreement, which is available on the city’s web site, states that DMI is responsible for all utility bills, upkeep and repairs in lieu of rent payments. Ambrose said DMI pays $1 in rent per year to the city.

The utility bills for the property are not divided between the residential and office spaces and are being paid by Nelson and Jenkins, according to Ambrose.

“We’re kind of in flux right now, but obviously what we’re looking toward is them paying the utilities or most of it, which is technically not rent,” Ambrose said.

According to the lease agreement, DMI, as the tenant, is prohibited from subletting the premises.

The lease agreement also specifies that the premises “shall be used by and occupied by [DMI] as a community and business development organization and its related activities and for no other purpose.”

“From my perspective, to be paying utilities for the whole building, it’s not like they’re living there for free,” Ambrose said. “You could look at them as caretakers of the property. They’re there to respond to any requests after hours. Because of the language [of the lease] I had a bit of concern about that, and, well, that is part of your business-related activities. Their living there is covered in the lease.”

The city solicitor was unable to comment on the specific parameters of the lease agreement due to client confidentiality.

“It’s not valued by the landlord-tenant code, which makes it more of a straight agreement and contract between the parties,” explained City Solicitor David Rutt. “One may be government, one may be nonprofit, but they are businesses in a way.” The lease agreement is subject to Delaware state laws.

Although City Manager Richard Carmean said it was estimated that Nelson and Jenkins were paying about $600 per month for the second floor of the house to use as personal living quarters, neither Ambrose nor Nelson would offer a specific amount paid. Nelson said he “pays market-rate rent to DMI” during a phone interview this week. Jenkins said she will only have a private studio at the residence, and plans to sell her work through other galleries.

“As far as the legality of the lease and what they do with the property, the city solicitor would have to deal with that,” Carmean said.

“Rutt will give the council some final direction to go in. It might be that they simply need to call it what it is, a compensation to the director because they can’t pay him what he should be making, add it to the lease or tell them they’ve got to move out,” Carmean said. “The thing to do is clear it up.”