CBCA 6809

DENIED: April 21, 2021 CBCA 6809 S & DF PROPERTIES, LLC, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Steve Forti, Managing Member of S & DF Properties, LLC, El Paso, TX, appearing for Appellant. Jay Bernstein, Office of General Counsel, General Services Administration, Washington, DC, counsel for Respondent. Before Board Judges BEARDSLEY, HYATT, and ZISCHKAU. BEARDSLEY, Board Judge. Appellant, S & DF Properties, LLC (S&DF), appealed a General Services Administration (GSA) contracting officer’s final decision, denying S&DF’s request for GSA’s portion of the difference between using the 2013 ($16,038) or 2016 ($19,325) real estate tax assessment as the tax base for leased office and related space. S&DF contends that the parties negotiated for the real estate tax base to be based on the 2013 tax assessment. GSA disagrees and asserts that the real estate tax base for this lease is the unadjusted real estate taxes for the first twelve-month period following full assessment of the property, which in this case would be the 2016 tax assessment. This appeal has been submitted on the record without a hearing pursuant to CBCA Rule 19 (48 CFR 6101.19 (2019)). CBCA 6809 2 Background This appeal arises from a lease between S&DF and GSA for 4440 square feet of office and related space in El Paso, Texas. The parties executed the lease on August 7, 2013. Lease section 2.07, “Real Estate Tax Adjustment,” provides for adjustments in the rent to account for “increases or decreases in Real Estate Taxes for the Property after the establishment of the Real Estate Tax Base.” Lease section 2.07.B defines the “Real Estate Tax Base” as follows: Real Estate Tax Base is the unadjusted Real Estate Taxes for the first full Tax Year following the commencement of the Lease term. If the Real Estate Taxes for that Tax Year are not based upon a Full Assessment of the Property, then the Real Estate Tax Base shall be the Unadjusted Real Estate Taxes for the Property for the first full Tax Year for which the Real Estate Taxes are based upon a Full Assessment. Such first full Tax Year may be hereinafter referred to as the Tax Base Year. Alternatively, the Real Estate Tax Base may be an amount negotiated by the parties that reflects an agreed upon base for a Fully Assessed value of the Property. The Property is deemed to be Fully Assessed (and Real Estate Taxes are deemed to be based on a Full Assessment) only when a Taxing Authority has, for the purpose of determining the Lessor’s liability for Real Estate Taxes, determined a value for the Property taking into account the value of all improvements contemplated for the Property pursuant to the Lease, and issued to the Lessor a tax bill or other notice of levy wherein the Real Estate Taxes for the full Tax Year are based upon such Full Assessment. At no time prior to issuance of such a bill or notice shall the Property be deemed Fully Assessed. Lease section 2.07.C provides that “[a]fter the Property is Fully Assessed,” GSA is responsible to pay its share of any increases, and to receive its share of any decreases, in the property’s real estate taxes, which is determined by “multiplying the Government’s Percentage of Occupancy by the difference between the current year Unadjusted Real Estate Taxes and the Real Estate Tax Base.” Lease section 1.13 established GSA’s percentage of occupancy at 46.25%. Lease amendment no. 1 increased the percentage of occupancy to 50%, or 4800 square feet. The lease does not contain any term or provision identifying a specific tax year or specific dollar amount to be used as the real estate tax base. Instead, section 1.14, “REAL ESTATE TAX BASE (JUN 2012),” was crossed out and the words “INTENTIONALLY CBCA 6809 3 DELETED” were written in. This section typically designates the dollar amount of the real estate tax base for the purpose of determining the real estate tax adjustment for a lease. Steve Forti, managing member of S&DF, testified via deposition that in 2013, when S&DF signed the lease, it was his understanding that the parties had agreed that 2012 was the tax base year for the purpose of adjusting the real estate taxes for the property. Mr.