8/3/2019 Be Careful and Diligent When Leasing Your Real Estate to the Government

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Title:

Be Careful and Diligent When Leasing Your Real Estate to the Government

Word Count:

467

Summary:

Beware of the very unique contract terms used in GSA lease contracts to avoid headaches.

Keywords:

building lease government GSA contract lessor

Article Body:

The general services administration (GSA) leases more than 150 million square feet of space from private

building owners in over 2000 communities. This makes them an extremely important player in the real

estate community. Because of the unique terms and conditions contained in government releases, buyers of

office buildings where the government is already a tenant basis the learning curve.

The number of potential conflicts between building owner and government tenant increase as the square

footage under lease increases. Some investors assume wrongly that entering into lease agreement with the

government is the same as a standard commercial lease.

The examples below the list rate some of the many unique terms and conditions in government leases back

and have a big financial impact:

They use a standard tax escalation clauses stating that the amount of any increase in taxes about the first

fully assessed year will be paid in a lump sum payment. Yet buried in the contract is a clause that requires

the lessor to submit the tax escalation claim within 60 days of the tax payment date. If they miss the

deadline, the lessor forfeits the entire escalation.

When they want to make alterations to a space, the GSA may ask building owners to sign a waiter of

restoration clause, stating that when the lease ends, it wont be required to restore the space to its original

condition. Some owners think that by refusing to sign the waiver, they stop any alterations. But in a

standard lease, there is a clause that allows alterations to take place. The protections for owners lie in the

fact that, by refusing to sign the waiver, they may be able to force a restoration when the government tenant

moves out. Keeping good records is critical for this.

Conflicts occasionally occur, and when they do, theres another interesting clause that comes into play. The

day contract disputes that clause outlines procedures to follow its owners have a disagreement with the

8/3/2019 Be Careful and Diligent When Leasing Your Real Estate to the Government

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government they cant resolve through negotiations. It allows of building owners to submit a claim against

the government by simply writing a letter to the government contracting officer outlining the basis for the

claim and the amount. The government contracting officer can then either negotiate, pay the client, or issue

a denial of claim. The denial of clay is in the form of a final decision which is misleading because the

decision is not final. If the owner doesnt agree with what the contract in officer decides he can appeal to a

board of contract appeals which renders unbiased decisions. This is all done simply by mailing a letter.

Ultimately, there could things and bad things associated with government leases. To avoid any unpleasant

surprises, owner should do their homework and understand their options in the event of conflicts.

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