Board of Contract Appeals General Services Administration Washington, D.C. 20405 ___________________________ DENIED: May 11, 1998 ____________________________ GSBCA 13929 ADELAIDE BLOMFIELD MANAGEMENT COMPANY, Appellant, v. GENERAL SERVICES ADMINISTRATION, Respondent. Darryl L. Thompson, Anchorage, AK, counsel for Appellant. M. Leah Wright, Office of General Counsel, General Services Administration, Auburn, WA, counsel for Respondent. Before Board Judges DANIELS (Chairman), BORWICK, and NEILL. BORWICK, Board Judge. Adelaide Blomfield Management Company (appellant or Ms. Blomfield) appeals the contracting officer's claim for rent reduction that the respondent, General Services Administration (GSA), maintains is due it under the Tax Adjustment clause of its lease with appellant. The lease was for premises at Ninth and Barrow Streets in Anchorage, Alaska, for housing of federal agencies. The parties do not dispute that for six of the seven years after the base year of the lease, the local real estate taxes decreased. Appellant disputes GSA's right to reduce rent after lease cancellation. Appellant argues that GSA delayed in making its claim, and it argues that the delay prejudiced appellant. We deny the appeal. The Tax Adjustment clause of the lease does not limit respondent's right to seek a reduction of rent only during the lease term. We find no unreasonable delay given the circumstances as described below. Appellant owes respondent $20,770.36 as a rental reduction. Findings of Fact 1. Regarding property taxes, the lease provided as follows: 31. TAX ADJUSTMENT GSA SHALL PAY ADDITIONAL RENT FOR ITS SHARE OF INCREASES IN REAL ESTATE TAXES OVER TAXES PAID FOR THE CALENDAR YEAR IN WHICH ITS LEASE COMMENCES (BASE YEAR). PAYMENT SHALL BE IN A LUMP SUM AND SHALL BECOME DUE ON THE FIRST WORKDAY OF THE MONTH FOLLOWING THE MONTH IN WHICH PAID TAX RECEIPTS FOR THE BASE YEAR AND THE CURRENT YEAR ARE PRESENTED, OR THE ANNIVERSARY DATE OF THE LEASE, WHICHEVER IS LATER. GSA WILL BE RESPONSIBLE FOR PAYMENT ONLY IF THE RECEIPTS ARE SUBMITTED WITHIN 60 DAYS OF THE DATE THE TAX PAYMENT IS DUE. IF NO FULL TAX ASSESSMENT IS MADE DURING THE CALENDAR YEAR IN WHICH THE GSA LEASE COMMENCES, THE BASE YEAR SHALL BE THE FIRST YEAR OF A FULL ASSESSMENT. GSA'S SHARE OF THE TAX INCREASE SHALL BE BASED ON THE RATIO OF THE SQUARE FEET OCCUPIED BY THE GOVERNMENT AGENCY TO THE TOTAL RENTABLE SQUARE FEET IN THE BUILDING. IF GSA'S LEASE TERMINATES BEFORE THE END OF THE CALENDAR YEAR, PAYMENT WILL BE BASED ON THE PERCENTAGE OF THE YEAR IN WHICH THE GOVERNMENT AGENCY OCCUPIED SPACE. THE PAYMENT SHALL NOT INCLUDE PENALTIES FOR NON PAYMENT OR DELAY IN PAYMENT. IF THERE IS ANY VARIANCE BETWEEN THE ASSESSED VALUE OF THE GOVERNMENT'S SPACE AND OTHER SPACE IN THE BUILDING, GSA MAY ADJUST THE BASIS FOR DETERMINING ITS SHARE OF THE TAX INCREASE. GSA MAY CONTEST THE TAX ASSESSMENT BY LEGAL PROCEEDINGS ON BEHALF OF THE GOVERNMENT AND THE LESSOR OR THE GOVERNMENT ALONE. IF THE GOVERNMENT IS PRECLUDED FROM TAKING LEGAL ACTION, THE LESSOR SHALL CONTEST THE ASSESSMENT UPON REASONABLE NOTICE BY GSA. GSA SHALL REIMBURSE THE LESSOR FOR ALL COSTS AND SHALL EXECUTE ALL DOCUMENTS REQUIRED FOR THE LEGAL PROCEEDINGS. THE LESSOR SHALL AGREE WITH THE ACCURACY OF THE DOCUMENTS. GSA SHALL RECEIVE ITS SHARE OF ANY TAX REFUND. IF GSA ELECTS TO CONTEST THE TAX ASSESSMENT, PAYMENT OF THE ADJUSTED RENT SHALL BECOME DUE ON THE FIRST WORKDAY OF THE MONTH FOLLOWING CONCLUSION OF THE APPEAL PROCEEDINGS. IN THE EVENT OF ANY DECREASES IN REAL ESTATE TAXES OCCURRING DURING THE TERM OF OCCUPANCY UNDER THE LEASE, THE RENTAL AMOUNT WILL BE REDUCED ACCORDINGLY. THE AMOUNT OF ANY SUCH REDUCTION WILL BE DETERMINED IN THE SAME MANNER AS INCREASES IN RENT PROVIDED UNDER THIS CLAUSE. Appeal File, Exhibit 3. 2. Before hearing, the parties entered a written stipulation, and at the hearing, the parties reached additional stipulations. Unless otherwise noted, the stipulation refers to the written stipulation signed by counsel on August 1 and August 4, 1997. The parties have stipulated to the following: 1. On February 18, 1985, the [respondent] awarded Lease No. GS-10B-05213 to [appellant] for 24,651 net square feet of office space at 201 East Ninth Avenue in Anchorage, Alaska. 2. The building at 201 East Ninth Avenue in Anchorage, Alaska was constructed in 1977 and leased by the State of Alaska until 1984. 3. The build out of the space [for the Federal Government] began on February 15, 1985 and ended on or about May 1, 1985. 4. In accordance with Alaska law, Alaska Statute [] 29.45.110, Full and True Value, property within the Municipality of Anchorage is assessed at its full and true value as of January 1 of the assessment year. Full and true value is the estimated price that the property would bring in an open market and under the then prevailing market conditions in a sale between a willing seller and a willing buyer both conversant with the property and the prevailing price levels. 5. In 1984, the Municipality of Anchorage assessed the property at $1,855,575, of which $654,400 was for land and $1,201,175 was for improvements. Appellant paid $18,388 in real estate taxes in 1984. 6. In 1985, the Municipality of Anchorage assessed the property at $2,186,20[0], of which $706,800 was for land and $1,479,400 was for improvements. Appellant paid $20,550 in real estate taxes in 1985. 7. In 1986, the Municipality of Anchorage assessed the property at $2,378,200, of which $1,146,300 was for land and $1,231,900 was for improvements. 8. Appellant appealed the 1986 assessment, alleging that the property had been leased to State, Federal and quasi government entities for the past ten years and that in the last two years lease rate had fallen from $1.85-$2.10 per square foot to $1.25-$1.38 per square foot. 9. Based on comparable land sales and the income approach, the Assessor lowered the valuations for 1986 to $1,957,200, of which $796,300 was for land and $1,160,900 was for improvements. Appellant paid [$19,928.21] in property taxes. 10. The mil[] rate increased from a 1985 rate of 9.40% to a 1986 rate of 10.182%. 11. In 1987, the Municipality of Anchorage assessed the property at $1,496,600 of which $716,700 was for land and $779,900 was for improvements. Appellant paid $20,039 in property taxes. 12. In 1988, the Municipality of Anchorage assessed the property at $1,083,000, of which $474,200 was for land and $608,800 was for improvements. Appellant paid $17,772 in property taxes. 13. In 1989, the Municipality of Anchorage assessed the property at $928,[2]00 of which $427,000 was for land and $501,200 was for improvements. Appellant paid taxes of $17,285. 14. In 1990, the total assessed value of the property was $928,300. Appellant paid taxes of $17,146. 15. In 1991, the total assessed value of the property was $908,400. Appellant paid taxes of $16,315. 16. In 1992, the total assessed value of the property was $774,900. Appellant paid taxes of $13,933. 17. In 1993, the total assessed value of the property was $918,200. Appellant paid taxes of $14,902. 18. The lease with [respondent] ended on September 17, 1993. 3. During the term of the lease, appellant's property manager did not advise the Government that the Municipality of Anchorage had changed appellant's property tax assessment or the property tax due for the property and its improvements. Appellant's property manager testified: Either I had the right or GSA had the right to appeal the Tax Assessor's numbers. I was never ever told that I had to give GSA any of those numbers. GSA could, just from the Federal Building, call up and get them themselves. . . . . I don't read [the tax assessment clause of the lease] at saying I need to send them anything every year. Unless I wantūif I want money, then I have to prove it up, you know and I have a certain time frame to do that. If they want money they have to prove it up. Transcript at 184, 186. 4. On September 17, 1993, respondent vacated the premises. On October 6, by notice of default and sale, the lender declared the loan secured by the property in default and announced a sale of the property to take place on January 7, 1994. On July 8, 1994, the default not having been cured, a trustee sold the property at a foreclosure sale to Prudential Insurance Company. Adelaide Blomfield Management Co. v. General Services Administration, GSBCA 13125, 95-2 BCA  27,865 (Finding 9). 5. On January 27, 1994, respondent's Assistant Commissioner for Real Property Development, Central Office, sent a general policy memorandum concerning real estate tax adjustments to all regional offices of GSA's Public Buildings Service (PBS). The Assistant Commissioner explained that in July of 1993, a PBS office had conducted a management control review (MCR) of leasing practices, including those involving real estate tax adjustments. The Assistant Commissioner advised in pertinent part: The MCR team found that, in most regions, the trigger mechanism for rent adjustment related to real estate taxes is the receipt of paid tax bills from the lessor. In situations where the lessor did not submit paid tax bills, the regions generally were not initiating action to obtain tax information. Since the Government may be entitled to a rent reduction because of a decrease in taxes, especially in markets where property assessments have been declining, the regions should carry out procedures to address situations when the lessor has not forwarded tax receipts. Appellant's Exhibit 1. 6. Region ten, the GSA region administering appellant's lease, had responsibility for five hundred leases. Transcript at 167. 7. In late March or early April of 1996, a GSA real estate specialist requested a contracting officer's review of appellant's lease to determine whether moneys were due from appellant under the lease. Transcript at 46. As a result, on April 5, 1996, GSA notified appellant that because real estate taxes had been declining during the lease term, appellant owed the government $52,198 for overpayment in taxes. Stipulation  19; Appeal File, Exhibit 9. 8. On July 23, 1996, the contracting officer issued his decision initiating a Government claim of $52,198 plus interest, for overpayment of real estate taxes for the lease. This claim assumes a base year of 1986 and a base tax amount of $24,210. The second assumption is in error. The parties agree that $19,928.21 is the proper figure for property taxes paid in 1986. See supra note 2; Transcript at 127-28. 9. The calculation for the adjustment the Government alleges is due, using the correct property taxes paid for the base year, follows: Year Paid Difference 1986 $19,928.21 1987 20,039.00 $110.79 1988 17,772.00 -2,156.21 1989 17,285.00 -2,643.21 1990 17,146.00 -2,782.21 1991 16,315.00 -3,613.21 1992 13,933.00 -5,995.21 1993 14,902.00 -3,580.31 Total difference $-20,770.36 Appellant's Exhibit 4. 10. Appellant filed a timely appeal to this Board, alleging that the base year for calculating the tax adjustment should have been 1985, not 1986, and further challenging the Government's interpretation and application of the Tax Adjustment clause and GSA's right to seek a refund years after the lease had ended. At the hearing on the merits, appellant dropped its challenge to GSA's use of 1986 as the base year. Transcript at 128-29. 11. Appellant's property manager testified as to the harm to appellant caused by GSA's delay in initiating its claim: How did [the delay] prejudice me? Well, first of all, if GSA would have asked it to me [sic] at that time for the money, since I had a building with income coming in, that had a positive cash flow, after I made the mortgage payment and paid all the expenses, it would have been very easy for my mother to pay that bill. Now that she has no building with no income coming in and has no Adelaide Blomfield Management Company any more, she doesn't have the money to pay that, so it extremely prejudices her. . . . Transcript at 200 (testimony of John Blomfield, appellant's son). Discussion As refined at the hearing, appellant's argument is that respondent has no right to recover under the Tax Adjustment clause of the lease because, since the lease expired and the Government no longer pays rent to appellant, it has no rent to reduce. This argument has a superficial appeal, but, for the reasons explained below, is unpersuasive. The Tax Adjustment clause of this lease is a mutual price adjustment clause. Its first purpose is to permit the lessor to obtain from the Government compensation for any increase in local real estate taxes. See Kimbrell v. Fischer, 15 F.3d 175, 177 (Fed. Cir. 1994). When the landlord seeks the additional payment from the Government, the clause requires the landlord to act within the specified time: "GSA will be responsible for payment only if the receipts are submitted within 60 days of the date the tax payment is due." Finding 1. We have construed the landlord's compliance with a similar time limit in an earlier version of the Tax Adjustment clause to be a condition of the landlord's recovery for such increases. See Riggs National Bank of Washington, D.C. v. General Services Administration, GSBCA 14061, 97-1 BCA  28,920; Universal Development Corp. v. General Services Administration, GSBCA 12138(11520)-REIN, et al., 93-3 BCA  26,100. A strict application of the time limit is warranted because the landlord, not the Government, is in the best position to know of any increase in the real estate taxes on the landlord's property, and the landlord possesses an economic incentive to act quickly to assert its rights. The Tax Adjustment clause has a second adjustment provision- -this provision essentially provides that the Government may reduce rent when real estate taxes decrease: "In the event of any decreases in real estate taxes occurring during the term of occupancy under the lease, the rental amount will be reduced accordingly." Finding 1. This clause does not expressly contain a period within which the Government must act, and the facts of this very case illustrate the reason. A landlord has no economic incentive to provide to the Government tax information that would lead to decreased rental payments; appellant's property manager testified in essence that he would not assist the Government in providing information that would decrease respondent's rent. Finding 3. Appellant provided no tax receipts to the Government during the lease term, id., a common enough circumstance nationwide that GSA's central office flagged the problem for management review. Finding 5. In American Western Corp. v. United States, 730 F.2d 1486 (Fed. Cir. 1984), the contractor made an argument similar to the argument appellant makes here--that under the Economic Price Adjustment clause of a Federal supply contract, the Government could not claim a contract price reduction after completion of the contract. The Court refused to read a time limit into the clause when it did not contain an express time limit for asserting the price adjustment, but only provided that the price adjustment would be based on the price indices for the third, sixth, and ninth succeeding months of the contract period. The Court held that the contract referenced the indexes to determine the amount of adjustment. Without a time limit, courts would imply only a reasonable time. American Western, 730 F.2d at 1488. We construe the Government's rights under the Tax Adjustment clause in the same way. Given deliberate omission of a time frame for government reduction of rent in the Tax Adjustment clause, we will not read a time limit into the clause's phrase "rental amount will be reduced accordingly." That phrase is inserted to describe what the Government may reduceūthe rent paid--and was not inserted to impose a time limit. Was the delay unreasonable? As noted above, respondent did not obtain the necessary information from appellant during the lease term. It took GSA two years, six months and three weeks from the end of the lease term to give appellant notice of the Government claim, Findings 4, 7, a period that may indicate some bureaucratic lassitude. That time, however, was spent in a management review of leasing practices in a GSA region responsible for five hundred leases. Finding 6. We cannot conclude the delay was unreasonable under those circumstances. Appellant argues that the claim is barred by laches and that it has been prejudiced. To prove laches, the party asserting it must show that the party bringing the claim inexcusably delayed in doing so for an unreasonable length of time from the time the party knew of the claim and that the delay operated to the prejudice or injury of the party against whom the claim is asserted. A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992) (en banc); Cornetta v. United States, 851 F.2d 1372 (Fed. Cir. 1988) (en banc); P.A.L. Systems Co., GSBCA 10858, 91-3 BCA  24,259. There are two kinds of prejudice for lachesūdefense prejudice, where the delay makes the litigation more difficult than if suit had been brought earlier, and liability prejudice, where the delay increases the litigant's liability. Swan Wooster Engineering, Inc., AGBCA 89-203-1, 94-1 BCA  26,287, at 130,767. For the reasons noted above, appellant has not shown unreasonable and inexcusable delay by the Government. Appellant has not shown defense prejudice arising from any delay. Appellant has not shown that any GSA delay in initiating the claim hindered the presentation of its case. Appellant claims liability prejudice because GSA made its claim when appellant no longer owns the building and lacks cash flow to make paying any award in favor of the Government easy. Finding 11. Here, appellant's liability was fixed by events unconnected to the delay--the local taxing authority's yearly assessment of the property taxes and the passing of each year of the lease term. Appellant argues that the delay makes it harder for appellant to pay the Government claim. Finding 11. While examining prejudice in another, but related context, the Court stated that "inconvenience does not equal prejudice." American Western, 730 F.2d at 1489. We think that statement is equally applicable to the liability prejudice necessary to sustain the laches defense. Appellant has at most shown inconvenience; it has not shown prejudice as that term is defined. Absent a showing of prejudice, we have allowed the Government to collect a defective pricing claim against a dissolved corporation. See P.A. L. Systems Co. Finally, appellant argues that if it owes the Government $20,770.36 for decreases in property taxes over the lease term, it should be able to offset that amount by $110.79 arising from the increase in property taxes. Appellant did not submit a request for a rent increase within the sixty days prescribed by the Tax Adjustment clause, and may not seek the benefit of that clause now. Decision The appeal is DENIED. Appellant owes respondent $20,770.36. __________________________ ANTHONY S. BORWICK Board Judge We concur: __________________________ __________________________ STEPHEN M. DANIELS EDWIN B. NEILL Board Judge Board Judge