House Democrats say they have been told by a federal agency that President-elect Donald Trump must sell his stake in a luxury Washington hotel.
The agency, the General Services Administration, says it has made no final determination.
The Democrats, part of the House Oversight Committee, had demanded to know what the GSA planned to do about the hotel, which Trump opened in a renovated historic post office and leases from the government.
Trump's lawyers and transition team are scrambling to resolve the conflict issues surrounding the hotel before Trump takes office.
The lease, signed by Trump two years before he launched his campaign, says that no elected official can be party to the agreement. Because Trump will oversee the GSA as president, his election puts him in the extraordinary position of being both landlord and tenant.
Representative Elijah Cummings of Maryland, the top Democrat on the committee, said the Democrats were told last week by a GSA deputy commissioner that "Mr. Trump must divest himself not only of managerial control, but of all ownership interest as well."
He said Democrats had been assured that the GSA will consider Trump in breach of the lease the moment he is sworn in on January 20.
The GSA said later Wednesday that it had no official position on the matter.
"We can make no definitive statement at this time about what would constitute a breach of the agreement, and to do so now would be premature," the agency said in a statement. It said it would make no determination until Trump has assumed office.
Cummings said in response to the GSA statement that Democrats know any lease breach is "officially viewed as a 'hypothetical issue'" until the inauguration.
Cummings issued a statement saying "the simple fact is that GSA informed our staffs that they interpret this lease provision as prohibiting any elected official from having any ownership interest in the lease, and we stand 100% behind our letter."
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One source familiar with the discussions told CNN that Democrats "are cherry picking" an errant comment from the briefing, noting that representatives of Trump's organization have been working with GSA since the election to determine an arrangement to resolve the issue.
"The reality is it remains in everyone's best interest -- the government's and the Trump organization's -- to resolve any potential conflicts in advance of January 20," the source said. "Reaching a 'breach' scenario just isn't something that will happen."
The exact language in the lease is: "No member or delegate to Congress or elected official of the Government of the United States ... shall be admitted to any share of part of this Lease."
Trump's ownership of the hotel, blocks from the White House, is already raising concerns that foreign governments and American business leaders will seek to curry favor with the new president by booking rooms and holding events there.
On December 7, the Embassy of Bahrain hosted a reception at the hotel to mark a national holiday.
The embassy later put out a statement saying that the hotel simply provided "an exceptional hall" at a reasonable cost.
Trump initially planned to lay out how he will separate himself from his multiple business interests this week, but the work of building his Cabinet and figuring out detailed legal issues on the D.C. hotel and his other business interests are taking more time.
Jason Miller, a Trump spokesman, told reporters the matter would be addressed at a press conference the president-elect promises to hold in January. Trump, who has not held a press conference since July, promised one for this week but postponed it.
A legal dispute over a breach of the lease would probably go before the U.S. Civilian Board of Contract Appeals, an administrative tribunal independent from the GSA.
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The hotel is a prominent example of the unprecedented potential for conflicts between Trump's business holdings around the world and his responsibility as president.
The president-elect has said he will turn over managerial responsibility to his two adult sons, Donald Jr. and Eric, but he has given no indication that he will sell his stake in any property.
Experts on government ethics have said that selling everything, and putting the money in the hands of a trustee who can manage it without Trump's knowledge, is the only way to be sure that personal profit motive is not coloring his decisions about U.S. policy.
Related: How Trump could violate his own hotel lease
Trump's daughter Ivanka was the GSA's main contact during negotations on the lease for the Washington hotel, according to the Democrats.
"In other words," the Democrats said in a press release, "Ms. Trump is all of the following -- the President-elect's daughter, a top presidential transition team official, a lessee under the contract the GSA oversees, and the primary contact for GSA on the lease. The conflicts of interest are obvious."
The GSA commissioner also said that Trump's transition team has not been in touch with the GSA about the conflict, the Democrats said.
Trump said on Twitter this week that Donald Trump Jr. and Eric Trump will manage the family business, along with other executives.
That would present a "profound challenge," said Norman Eisen, a visiting fellow at the Brookings Institution who led government ethics initiatives for President Barack Obama during his first term.
"The kids are used as a vehicle, a conduit to influence the parents all over the world," he said at a forum convened Wednesday by House Democrats. "This is why we have to go to the simple solution right away: Donald Trump needs to make a clean break, not just on operations, but on interest. He needs to turn it all over to a trustee."
Eisen and other experts on government ethics have said Trump, unless he divests, could violate the Emoluments Clause of the Constitution, which bars the president from accepting payments from foreign governments.
One way Trump could be challenged, Eisen said, is that competing hotels could bring a court case arguing that foreign money flowing to the Trump hotel from embassies puts them at a competitive disadvantage.
--CNN's Manu Raju contributed to this story.
