Commercial lease to federal gov’t

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Silver Bullet
Posts: 148
Joined: Tue Sep 26, 2017 1:18 am

Commercial lease to federal gov’t

Post by Silver Bullet » Tue Oct 30, 2018 2:09 pm

I have a piece of commercial property that a federal agency has approached us to lease short term (less than a year). GSA is involved and I’m trying to become educated on how to structure a short term tenant like this, in hopes that they’ll stay long term. Good news is that they need it now and we’re flexible with the space, so if we can come to terms , should be a win-win.

Does anyone have experience with these negotiations or can you point me to a website so I can brush up on dealing with them?

Thanks.

shunkman
Posts: 63
Joined: Mon Feb 26, 2018 9:59 pm

Re: Commercial lease to federal gov’t

Post by shunkman » Tue Oct 30, 2018 4:23 pm

I worked for a federal agency for 35 years with 25 years of those years in facilities planning, acquisition, and management. Most likely you will be required to sign a lease that was prepared by the GSA. Usually these GSA leases are written to protect the government, and NOT the landlord. I strongly suggest that you have your attorney review the lease before you sign. The GSA can be a great tenant but only if the lease terms are equitable. Negotiating the actual lease rate is the easy part. It is the dozens of GSA lease clauses that you have to be cautious about.

Topic Author
Silver Bullet
Posts: 148
Joined: Tue Sep 26, 2017 1:18 am

Re: Commercial lease to federal gov’t

Post by Silver Bullet » Tue Oct 30, 2018 4:37 pm

Thanks - that's very helpful!
Any specific "gotchas"or areas where you think there's flexibility to negotiate?
I guess more specifically, does GSA negotiate these or do they submit them and it's a "take it or leave it"?
I'm happy to discuss via pm, phone or email if you don't feel comfortable posting these things here.

shunkman
Posts: 63
Joined: Mon Feb 26, 2018 9:59 pm

Re: Commercial lease to federal gov’t

Post by shunkman » Tue Oct 30, 2018 5:06 pm

Typically the lease rate is negotiable but the government will rarely pay more than the fair market rate. You can expect that the GSA will negotiate this in good faith. Depending on the annual lease rate the GSA may obtain a formal appraisal but for smaller leases this is usually not required.

Below are a few examples of lease clauses that many landlords seemed to have difficulty with:

Maintenance responsibility
Termination clauses
Renewal options
Purchase options
Tax payments
Environmental

Sometimes GSA leases will be simplified if they are only for short-term occupancy.

User avatar
dm200
Posts: 22260
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

Re: Commercial lease to federal gov’t

Post by dm200 » Tue Oct 30, 2018 5:07 pm

I think I might engage someone with experience in federal contracts to assist you.

Topic Author
Silver Bullet
Posts: 148
Joined: Tue Sep 26, 2017 1:18 am

Re: Commercial lease to federal gov’t

Post by Silver Bullet » Tue Oct 30, 2018 5:09 pm

dm200 wrote:
Tue Oct 30, 2018 5:07 pm
I think I might engage someone with experience in federal contracts to assist you.
That’s what I’m doing. See above post. :sharebeer

Topic Author
Silver Bullet
Posts: 148
Joined: Tue Sep 26, 2017 1:18 am

Re: Commercial lease to federal gov’t

Post by Silver Bullet » Tue Oct 30, 2018 6:03 pm

shunkman wrote:
Tue Oct 30, 2018 5:06 pm

Maintenance responsibility (full service)
Termination clauses (already stated and agreeable)
Renewal options (already stated, but I’d like to give them a more favorable rate for extended lease)
Purchase options (hasn’t been brought up. Does GSA typically want a purchase option?)
Tax payments. (Included in rent)
Environmental (non-issue, so I’m ok indemnifying them)

Sometimes GSA leases will be simplified if they are only for short-term occupancy. (This is definitely short term, but the way they’re talking amongst themselves and on the phone with colleagues, they will probably stay long term)
Freestanding building
Quick access to the interstate
Evacuation area
Ample parking
Close to police sub-station

Any other qualifiers/disqualifiers they may want?

shunkman
Posts: 63
Joined: Mon Feb 26, 2018 9:59 pm

Re: Commercial lease to federal gov’t

Post by shunkman » Thu Nov 01, 2018 8:13 am

Silver Bullet wrote:
Tue Oct 30, 2018 6:03 pm
Purchase options (hasn’t been brought up. Does GSA typically want a purchase option?)

Response: Occasionally such as when it is a new construction project with a long-term lease.

Any other qualifiers/disqualifiers they may want?

Response: Besides environmental concerns, including flooding plain restrictions, location and meeting parking requirements were big for us. Sometimes lack of truck/dock access was an obstacle too.

Post Reply