Government adds requirements for owners and foreign businesses

Some federal tenants must now require their landlords to identify and disclose certain foreign landlords, under a new interim rule from the General Services Administration (GSA). The rule – which came into effect on June 30, 2021 – is another example of the U.S. government’s concern over foreign ownership and control, particularly with regard to national security. Bradley has written on many similar developments before.

The rule implements Sections 3 and 5 of the Secure Federal LEASEs Act of 2020. One of the latest bills passed under the Trump administration, the law responded to a report that found most federal tenants – including federal high security agencies – were oblivious to the stranger. ownership and control of their buildings. By implementing part of the law, the rule establishes for high security leased spaces (1) new disclosure requirements and (2) an additional rental language.

High security rented space

The definite act high security rented space to mean “space leased by a federal tenant which— (A) will be occupied by federal employees for non-military activities; and (B) has an installation security level of III, IV or V…. Basically, that covers buildings over 80,000 square feet, over 150 federal employees, and moderate to high public access. It is important to note that the law (and the rule) does not affect leases held by the Department of Defense (DOD) or the intelligence community. (These leases are subject to similar requirements, but under the National Defense Authorization Act for fiscal year 2018.)

New disclosure requirements

The rule implements four disclosure requirements:

  • Federal tenants for high-security leased spaces should require the landlord to identify and disclose whether the landlord – including a finance entity – is a foreigner before entering into a rental agreement, assignment of lease, lease extension. , novation of a lease, or the exercise of any option in a lease.

  • The landlord must provide this information when submitting proposals for the first time in response to a request for tenders issued by the tenant.

  • The landlord must re-provide this information each year.

  • The Federal Tenant must notify the Federal Tenant if such a disclosure is made and consult with the Tenant regarding security concerns.

The “immediate owner” and the “highest level owner” must be disclosed. the immediate owner is the entity with “direct control” of the offeror of a lease. the owner at the highest level is the entity that owns or controls either the immediate owner or the entities that control the immediate owner. In addition, the “beneficial owner” of any immediate or higher level owners must be disclosed. This includes both majority and minority interest holders in the immediate owner or the highest level owner. The rule also requires disclosure of foreign entities involved in financing the leased space.

Additional rental language

The rule implements a new GSAR representation (552.270-33) and a new GSAR clause (552.270-34). The new declaration complements the new disclosure requirements by requiring offerors to disclose whether an immediate owner, higher-level owner, or financing entity is foreign-controlled.

The new GSAR clause limits access to high security rented space. Specifically, a federal donor should not access space without prior approval from the US government, not even for operation or maintenance. The government can only allow access if “in accordance with the mission and responsibilities of the government”. This includes any access for a third party property management company. The clause also requires that written access procedures be included in the emergency plan for government occupants.

What this means for landlords, tenants and federal tenants

Since the law was passed at the end of last year, the parties concerned may already have been aware of the requirements now implemented and in effect. Federal donors should be prepared to identify and disclose any foreign property. Federal tenants should gather the required information and prepare written access procedures. Tenants of high security leased spaces should be prepared for possible operational and maintenance disruptions if foreign owners have done this on site and must now be excluded from access.

© 2021 Bradley Arant Boult Cummings LLPRevue nationale de droit, volume XI, number 196


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