Tuesday, August 24, 2010

The "Out Clause" in state building leases

The August 16, 2010 edition of Banker & Tradesman has a front page story about the Massachusetts Land Court terminating its lease with the owner of the building in which the court has been housed for the past several years. Located at 226 Causeway Street in Boston, just a short walk from the BankNorth Garden, the former Stop & Shop bakery building was renovated specifically for the Land Court. According to Banker & Tradesman, there are still 3 years left on the lease with $9 million in rental payments due, but the lease also contains a "subject to appropriations" clause that allows the tenant to terminate the lease if the legislature fails to appropriate sufficient funds to pay the rent. That's the clause the court is exercising.

Earlier in this decade, DCAM (the Department of Capital Asset Management), the state agency that owns all state buildings, developed a model that would ease DCAM out of the building ownership business, essentially privatizing that function. The thinking was that by housing state agencies in privately owned buildings and paying annual rent, it would be more efficient than the long term cost of building, maintaining and repairing state-owned structures. I even spent time working with a DCAM task force that explored ways to shrink the footprint of registries of deeds by moving from paper to electronic records. (For instance, by ceasing the production of record books and taking existing books out of service, this office has gone from needing 17,000 square feet of space to only 10,000 sf). Fortunately for us, it turns out, we were not designated to move into new quarters. The registries that did - Worcester, Fitchburg, Lawrence and Salem - all gained beautiful new facilities but also acquired large annual rental payments. When the financial crisis hit a few years ago and everyone's budgets were slashed, those rental payments loomed large. So now I believe the state has shifted its thinking back to housing state agencies in buildings owned by the state. That's why whenever someone asks "where will the Middlesex North Registry move to when the new courthouse is built?" I answer that I don't think we'll be going anywhere.

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