At the start of the summer, the federal government found itself on the brink of losing more than 176,000 square feet of office space in downtown Washington, just blocks from the White House. The government's lease was set to expire in mid-June. When the U.S. General Services Administration failed to reach an agreement with the property owner to extend the lease, the government turned to the power of eminent domain — filing suit in Washington federal district court to seize the building's leasehold interest.
There was no long court fight, however. Less than a week after the U.S. Justice Department filed suit, the lease dispute ended. In a court filing, Justice Department lawyers said the government reached an agreement with the building's owner to extend the lease for three years.
The case — rare in the annals of Washington litigation — illustrated the power of the federal government when it comes to being a tenant, attorneys in Washington who handle eminent domain actions said. The threat of an eminent domain suit hangs over landlord-tenant tiffs whenever the government is involved, the attorneys said, but it's rare to see one actually filed — and resolved just days later.
"The government has a very large-gauge weapon here that the average tenant does not," said Roger Marzulla, a name partner at Marzulla Law in Washington. "The government can simply say, 'Fine, if you won't accept our terms, we'll just condemn it.' "
The Justice Department referred questions about the case to the General Services Administration, which declined to discuss the litigation in any detail. In an email, GSA spokesman Dan Cruz said the agency decided to try to seize the office building after both sides "were unable to agree to terms for a fair market value extension of that lease."
"GSA goes to great lengths to negotiate with lessors on terms of leases," Cruz said. "Declarations of takings are rare and filed only when the government cannot secure a fair market rate after extended attempts to negotiate in good faith on a government lease."
The property owner, S.C. Herman & Associates, declined to comment.
Marzulla, who in the 1980s led a Justice Department division that brought eminent domain suits, said he thought the case represented an "abuse of the condemnation power.""I understand from the agency's perspective: I need it, here's an easy route to get it," Marzulla said. "The job of the Justice Department…is to say, 'No, this is not an appropriate place for you to be exercising eminent domain.' "
$42 PER SQUARE FOOT
According to General Services Admini­stration records, the government originally leased the downtown Washington building, at 15th and L streets Northwest, in June 1993.
As of this year, the government was paying $5.3 million annually to rent the building, whose tenants are all federal government agencies. Under the lease extension agreement reached last month, the government ended up paying $42 per square foot, or around $7.4 million annually.
Under federal law, the government can take private property for official, public-benefit purposes. David Freishtat, of counsel to Shulman Rogers Gandal Pordy & Ecker in Potomac, Md., said courts have determined that this power includes seizing leasehold interests. Federal government eminent domain actions in general are uncommon in Washington. Court records showed only two other such cases filed during the past decade. In the most recent case, filed in March, the government wanted land for a road to a U.S. Department of Homeland Security facility. Freishtat said the government most often uses eminent domain actions to take land for roads and other infrastructure projects. Only a small percentage of cases involve the taking of a building, he said.
Holland & Knight partner Richard Duvall said that when the government seeks to condemn a leased property, it's usually because the government can't leave the space when it is supposed to — perhaps because of the complexity of the process, poor planning or both. "The government doesn't start off wanting to hold over or wanting to condemn," said Duvall, who leads Holland & Knight's national government contracts practice.
Eminent domain, he said, was a "blunt instrument" that should only be used as a last resort once the government exhausted other "reasonable options."
Zoe Tillman can be contacted at email@example.com.