Enhanced use lease
Encyclopedia
In the United States
Enhanced Use Lease (EUL) is a method for funding construction
or renovations on military
property by allowing a private developer to lease
underutilized property, with rent paid by the developer in the form of cash or in-kind services. Currently, EULs are used by the Department of Defense and the Veterans Administration. Temporary authority has also been granted to the General Services Agency and the National Aeronatics and Space Administration. EUL authority is derived from Congress and is specific to each agency (e.g. 10 USC 2667 for the DoD). The information below is specific to DoD EULs.
Granted a ground lease (the term may vary by agency or project), the developer is able to make improvements to the property which can be leased at market rents to any interested tenants. Under EUL, the U.S. government retains control over the leased property, the EUL developer (lessee) retaines a lease interest only.
Since the agency can issue enhanced use leases only on land that is unneeded, the improvements must not be directly tied to any programmatic requirements of the installation.
The advantages to the developer include prime secure convenient locations on military installations, and the opportunity to provide sole-source services and products in lieu of rent for the ground lease.
The advantages to the federal agency include the possibility of fast-tracking alterations, repairs or new construction so that the improved space becomes available for lease. In-kind considerations or cash to no less than the fair market value of the property is provided in return by the developer.
The enhanced use lease is becoming a very popular tool to accommodate realignment of military functions under Base Realignment and Closure
(BRAC). Military installations are legally bound, but not necessarily funded, to accommodate BRAC-mandated realignments of functions.
The use of EULs has mushroomed with the expanded authority of Title 10 USC, Section 2667, of the National Defense Authorization Act
. It remains to be seen whether this form of privatization will create increased financial, security or environmental risks. Legal complications that have emerged include how EUL-encumbered property will be treated when an installation is targeted for closure under BRAC (example, Building 40 at Walter Reed
).
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
Enhanced Use Lease (EUL) is a method for funding construction
Construction
In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking...
or renovations on military
Military
A military is an organization authorized by its greater society to use lethal force, usually including use of weapons, in defending its country by combating actual or perceived threats. The military may have additional functions of use to its greater society, such as advancing a political agenda e.g...
property by allowing a private developer to lease
Lease
A lease is a contractual arrangement calling for the lessee to pay the lessor for use of an asset. A rental agreement is a lease in which the asset is tangible property...
underutilized property, with rent paid by the developer in the form of cash or in-kind services. Currently, EULs are used by the Department of Defense and the Veterans Administration. Temporary authority has also been granted to the General Services Agency and the National Aeronatics and Space Administration. EUL authority is derived from Congress and is specific to each agency (e.g. 10 USC 2667 for the DoD). The information below is specific to DoD EULs.
Granted a ground lease (the term may vary by agency or project), the developer is able to make improvements to the property which can be leased at market rents to any interested tenants. Under EUL, the U.S. government retains control over the leased property, the EUL developer (lessee) retaines a lease interest only.
Since the agency can issue enhanced use leases only on land that is unneeded, the improvements must not be directly tied to any programmatic requirements of the installation.
The advantages to the developer include prime secure convenient locations on military installations, and the opportunity to provide sole-source services and products in lieu of rent for the ground lease.
The advantages to the federal agency include the possibility of fast-tracking alterations, repairs or new construction so that the improved space becomes available for lease. In-kind considerations or cash to no less than the fair market value of the property is provided in return by the developer.
The enhanced use lease is becoming a very popular tool to accommodate realignment of military functions under Base Realignment and Closure
Base Realignment and Closure
Base Realignment and Closure is a process of the United States federal government directed at the administration and operation of the Armed Forces, used by the United States Department of Defense and Congress to close excess military installations and realign the total asset inventory to reduce...
(BRAC). Military installations are legally bound, but not necessarily funded, to accommodate BRAC-mandated realignments of functions.
The use of EULs has mushroomed with the expanded authority of Title 10 USC, Section 2667, of the National Defense Authorization Act
National Defense Authorization Act
The National Defense Authorization Act is the name of a United States federal law that has been enacted for each of the past 48 fiscal years to specify the budget and expenditures of the United States Department of Defense.-See also:...
. It remains to be seen whether this form of privatization will create increased financial, security or environmental risks. Legal complications that have emerged include how EUL-encumbered property will be treated when an installation is targeted for closure under BRAC (example, Building 40 at Walter Reed
Walter Reed Army Medical Center
The Walter Reed Army Medical Center was the United States Army's flagship medical center until 2011. Located on 113 acres in Washington, D.C., it served more than 150,000 active and retired personnel from all branches of the military...
).
External links
- Authorities Regarding Enhanced Use Leases (GAO)
- Enhanced Use Leasing (U.S. Army)