Commercial Real Estate Transactions with Federal Government Tenants - Lexis Practice Advisor® guidance overview - Novations and transfer of government leases

Sep 16, 2026

Uploaded by Terk

Practical guidance for attorneys covering the purchase and sale of real property leased to U.S. government tenants, including the heightened duties that flow from government money, statutory limits, and contract requirements. The material explains the novation framework, starting with the prohibition on transferring government contracts without approval, then detailing how discretion is exercised through the lease contracting officer under the FAR. It also addresses how FAR Part 42.12 connects to lease transfers and what a novation entails.

LanguageEnglish

CategoryPresentations

FormatPDF

Pages11

Reading Time4 min

AccessFree to download

Overview of Novations

Prohibition on Transfer of Contracts

Government Contracts Law / The FAR

Application to Leases

What Is a Novation?

Practical guidance at Lexis Practice Advisor® Lexis Practice Advisor® offers beginning-to-end practical guidance to support attorneys’work in specific legal practice areas. Grounded in the real-world experience of expert practitioner-authors, our guidance ranges from practice notes and legal analysis to checklists and annotated forms. In addition, Lexis Practice Advisor provides everything you need to advise clientsand draft your work product in 16 different practice areas. Robert C.MacKichan Jr. Commercial Real Estate Transactions with Federal Government Tenants by Gordon Griffin and Robert C. MacKichan, Jr., Holland & Knight LLP For first time landlords of property leased to the U.S. government (more commonly referred to by the courts and boards as “lessors”), and even for experienced lessors, the process of buying or selling a property leased to U.S. government tenants can be daunting. Government money comes with strings, and assigning government leases in connection with the sale of a property requires a significant amount of extra preparation and research. Federal agency tenants can be very attractive to lessors. They can agree to extended lease terms up to 20 years, they pay their rent in a timely fashion (if in arrears), and they are backed by the full faith and credit of the U.S. government. The only other investment that can make that claim is a U.S. Treasury bill, but the cap rates on properties leased to the U.S. government tend to far exceed thereturns on Treasury bills. But government tenants do present unique challenges. When it comes time to buy or sell a property with a government tenant, there are a number of statutes, regulations, and contract provisions that govern U.S. General Services Administration (GSA) leases (as discussed further below), which require additional consideration. These government-specific requirements have implications at all stages of the purchase and sale process and are addressed in this practice note. To navigate the purchase and sale process, this practice note discusses the statutory and regulatory framework governing the transfer and assignment of government leases, then examines the lease provisions, and concludes with a discussion of considerations for purchase and sale agreements. Overview of Novations Prohibition on Transfer of Contracts The process for transferring a government contract or lease (as the Federal Circuit held in Forman v. United States, 767 F. 2d 875, 879 (Fed. Cir. 1985), U.S. government leases are government contracts) stems from a statutory prohibition on the transfer of government contracts. Pursuant to 41 U.S.C. § 6305(a), a party to a contract with the federal government cannot transfer the contract to another party without government approval. This blanket prohibition provides the government with discretion to approve or deny the transfer of any government contract or lease. Specifically, this discretion falls to a lease contracting officer (LCO), who has the final authority to approve or deny transfer of a government lease and recognition of a purchaser as a successor in interest lessor. The Federal Acquisition Regulation (FAR) defines a “contracting officer” as “a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings.” 48 C.F.R. § 2.101. Throughout this practice note,“lease contracting officer,” “LCO,” “contracting officer,”and “CO” are used interchangeably. Government Contracts Law / The FAR The statutory restrictions on the transfer of government contracts and leases have been implemented through the FAR. The FAR, at Part 42. 12, mirrors the blanket prohibition on the transfer of contracts in the statute, while providing the government with the discretion to approve such transfers when appropriate: (a) 41 U.S.C. 6305 prohibits transfer of Government contracts from the contractor to a third party. The Government may, when in its interest, recognize a third

FAQs

Why does transferring a government-leased property require extra preparation?

Government funding comes with conditions, and assignment of government leases triggers statutes, regulations, and contract provisions. These government-specific requirements add additional research and planning across the transaction stages.

What is the legal baseline for transferring a government contract or lease?

A statutory prohibition prevents transferring a contract with the federal government without government approval. Approval is exercised through a contracting officer, referred to in this context as the lease contracting officer (LCO).

How does FAR Part 42.12 relate to real estate lease transfers?

FAR restrictions are implemented through FAR Part 42.12, which mirrors the statutory transfer prohibition while allowing approval when in the government’s interest. Although not designed for real estate leasehold procurement, the General Services Acquisition Manual states that FAR 42.12 applies when ownership or the lessor’s legal name changes.

Sep 16, 2026

Uploaded by Terk