Pricing Policy: Cancelable vs. Non-Cancelable Occupancy Agreements

March 28, 2017

March 28, 2017

KANSAS CITY, MO -- What’s the difference between cancelable and non-cancelable Occupancy Agreements (OAs) ?

Space is always considered "cancelable" unless it meets non-cancelable exceptions. Non-cancelable space is characterized by the low probability of the government finding a "backfill tenant" due to specific qualities of the space. Factors include:

• a remote, or not easily accessible, location;
• special-purpose use, or build-out, necessitating significant capital outlays to retrofit for a more conventional use;
• unusual terms;
• lack of realistic federal need for the space, other than the requesting agency; or,
• any other factors that would significantly impair PBS's ability to backfill the space.

PBS real estate specialists review each space assignment and use these criteria to designate space as cancelable or non-cancelable. The fee for leased assignments is reduced to five percent for OAs designated as non-cancelable. (Tenant agencies may not volunteer to designate their space as non-cancelable to receive the reduced fee. The decision must be made at the beginning of a leasing action.)

Non-cancelable OAs must be indicated as such in the first draft, and at the beginning of the occupancy term. Once space has been designated (or not designated) as non-cancelable, it cannot be changed until the term is completed. For a subsequent terms, a PBS specialist will review current market conditions and space qualities before determining if the type of OA will continue.

U.S. Postal Service-Controlled Space

PBS negotiates Tenancy Agreements (TAs) for space in properties controlled by the U.S. Postal Service. A "TA" is considered to be a lease; therefore, PBS prices USPS-controlled space as it prices leased space: as a pass-through of the rental charge assessed by the lessor.

The PBS fee for USPS-controlled space is reduced to four percent because USPS bears the risk of vacancy, and there is no formal contract. Fees collected are used to cover the cost of issuing an OA, negotiating for the acquisition of the space, and the preparation of the TA with USPS. For non-cancelable assignments in USPS space, the fee remains four percent. 

See the GSA Pricing Desk Guide [PDF - 1 MB], Chapter 7 - United States Postal Service Pricing for more information on pricing in USPS space.