GSA's erroneous lease termination highlights challenges in federal property management
A recent incident reported by the Washington Business Journal highlights the complexities of federal leasing, as GSA attempted to terminate a lease at Shawnee Plaza in Annandale, Virginia, despite lacking the contractual right to do so. The property, owned by Tom Cafferty of Cafferty Commercial Real Estate Services, houses the US National Technical Information Service, which occupies 35,000 square feet and has been a tenant since 2009.
On 26 February 2025, Cafferty received an electronic notice from GSA stating the lease would terminate effective 30 September 2025. However, the lease, which began in 2009, specifies a "firm term" during which GSA cannot unilaterally terminate the agreement. In this case, the firm term extends until 2029, contradicting GSA's notice.
Understanding firm term leases
A firm term lease is a contractual agreement where the lessee commits to occupying the property for a predetermined period without the option for early termination. This arrangement provides stability for both parties: the lessor is assured of rental income, and the lessee secures the premises for the agreed duration. After the firm term, some leases transition into a "soft term," allowing for more flexible termination options with appropriate notice.
Resolution efforts
Following the termination notice, Cafferty sought clarification from GSA, reaching out to Public Buildings Service Commissioner Michael Peters but received no immediate response. By Monday, he engaged his attorney, Bob MacKichan of Holland & Knight LLP, to address the issue with GSA's general counsel. On Wednesday, GSA rescinded the termination via a brief email, confirming the lease remained in full force. Despite the resolution, Cafferty expressed frustration over the lack of direct communication and the time spent correcting the mistake.
Broader implications
This incident is not isolated. Holland & Knight reported that GSA has issued several autogenerated termination notices erroneously targeting leases still within their firm terms. Such mistakes can have significant financial implications for landlords, especially those with substantial loans dependent on assured rental income from federal tenants. Landlords receiving such notices are advised to consult legal counsel promptly to protect their interests.
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