General Services Administration, DOGE Terminating Hundreds of Federal Real Estate Leases

Pillsbury partner Andrew J. Weiner told Law360 that there are a couple of ways the federal government could extract itself from the leases.

The federal government does not necessarily have to terminate a lease to stop paying at least some portion of the rent, he explained. If the federal agency tenant vacates the space, it can receive a rent reduction from the landlord. "They may have to pay some rent, but not the full rent," he said. The rent reduction generally would reflect savings on the landlord’s operating expenses for the vacant space.

Another avenue available to the federal government is alleging the landlord is in default. "If a significant tenant in a building does that, that's a very bad place for the landlord to be, even if the landlord is right," said Weiner.

In a Law360 article on the same subject authored by Weiner and Pillsbury partners Matt Carter and Michael Rizzo of the firm’s Government Contracts and Disputes practice, they note that “given DOGE's mandate to trim the budget of waste and the Trump administration's desire to stop paying for unoccupied buildings, prudent GSA lessors should be ready for the government to attempt to characterize as material even the most trivial failures to satisfy lease obligations.”

To protect against this, they recommend that “lessors double down on their familiarity with their lease obligations, actively monitor their compliance and act promptly upon receipt of a cure notice.”

If the federal government itself defaults, a whole different set of issues would have to be analyzed.

To read the Law360 article quoting Weiner, click here. To read the Law360 bylined article click here (both are paywalled).