Government Contracts Government Offset Lease Payments without Final Decision
Tuesday, August 18, 2020

Government Offset Lease Payments without Final Decision

By Government Contracts Editorial Staff

The Civilian Board of Contract Appeals granted an office space lessor partial summary judgment on government claims seeking reimbursement of property tax payments because the statute of limitations barred one of the claims. The government entered into the lease in 2002 and renewed it in 2012. After conducting an internal audit in 2012, the government advised the lessor it had improperly reimbursed certain local taxes under the initial lease. The contracting officer then issued a unilateral supplemental lease agreement withholding an amount equal to the contested taxes under the initial lease. Years later, in 2016, the government deducted payments under the renewal lease to satisfy the lessor’s alleged debt for additional taxes paid under the initial lease. In response to the contractor’s appeal alleging illegal setoff and breach of both leases, the government filed a complaint that requested the board to declare the government’s “setting amounts paid under [the initial lease] off on [the renewal lease]” and “withholding requested payments” on the initial lease was proper.

Only One Timely Claim. The government’s right to reimbursement for alleged overpayments of real estate taxes is a government claim subject to the Contract Disputes Act’s six-year statute of limitations (41 USC 7103(a)(4)(A)). Here, the government’s claim to recoup the overpayment accrued at the latest on November 15, 2012, when it first notified the lessor about the overpayment of taxes. Therefore, to be timely, the government had to submit a claim by November 15, 2018. The CO asserted a timely claim in December 2012 by withholding payment under the initial lease. The supplemental lease agreement and accompanying letter resolved both liability and damages. However, there was no evidence the CO issued a similar determination concerning the amount withheld under the renewal lease. The record only indicated that the government’s financial services division set off the payments under the renewal lease and that a government auditor confirmed the reason for the setoff. It was not enough that the setoff was the result of “some sort of decision” by “someone.” Since the government was out of time to claim the amount withheld under the renewal lease, the board awarded the lessor the amount withheld in 2016, plus CDA interest. (1000-1100 Wilson Owner, LLC v. GSA, CBCA, ¶96,075)

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