CBCA Holds That GSA Is Financially Responsible For Certain "Real Estate" Taxes

• Published date: 20 December 2022
• Subject Matter: Government, Public Sector, Real Estate and Construction, Tax, Government Contracts, Procurement & PPP, Real Estate, Landlord & Tenant - Leases, Property Taxes
• Law Firm: Holland & Knight
• Author: Mr Gordon Griffin, Robert MacKichan Jr., Jeremy D. Burkhart and Richard Ariel

Highlights

• A number of developments in 2022 will impact federal leasing The Civilian Board of Contract Appeals (CBCA) has issued a landmark decision on what constitutes a reimbursable real estate tax, the White House has issued guidance that will impact lessor obligations, and the U.S. General Services Administration (GSA) has issued a sweeping overhaul of its compliance clauses.
• This Holland & Knight alert provides an analysis of several developments and explains how each will impact landlords to federal government agencies.

A number of developments in 2022 will impact federal leasing: The Civilian Board of Contract Appeals (CBCA) has issued a landmark decision on what constitutes a reimbursable real estate tax, the White House has issued guidance that will impact lessor obligations, and the U.S. General Services Administration (GSA) has issued a sweeping overhaul of its compliance clauses.

This Holland & Knight alert provides an analysis of each of the following developments and explains how each will impact landlords to federal government agencies. The key takeaways are as follows:

• Allowable taxes for real estate tax adjustments. The CBCA has issued a ruling that clarifies the definition of "Real Estate Taxes" to include transportation and sanitation taxes, which will expand landlords' entitlement to tax adjustments under GSA leases.
• Changes to security requirements for GSA lease novation and for software. The GSA continues to increase its oversight on security for its landlords, and now requires an inquiry into security and personnel access to leased space in order to approve novation requests. Additionally, the GSA intends to implement a requirement of the new Office of Management and Budget (OMB) Memo 22-18, "Enhancing the Security of the Software Supply Chain," and may require GSA landlords to make attestations concerning building software when submitting proposals.
• New general clauses. The GSA implements most of its compliance obligations through the various iterations of its GSA Form 3517, the "General Clauses." This fall, the General Clauses underwent their most substantial revision in years resulting in a number of new compliance obligations for GSA landlords.

Tax Adjustments: Real Estate Taxes and Special Assessments

GSA leases - and most other government leases as well - allow the landlord to recoup any real estate taxes levied against the leased property in excess of an established real estate tax base, which can be either negotiated or based upon a full assessment of the property. Each year, landlords can request an...