A-43783, NOVEMBER 8, 1932, 12 COMP. GEN. 440

A-43783: Nov 8, 1932

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THE FACTS ARE FOR ADMINISTRATIVE COLLATION AND IN CASE OF DOUBT FOR SUBMISSION FOR DECISION AS TO WHETHER ON THE BASIS THEREOF THE APPROPRIATIONS MAY BE CHARGED WITH RENTAL. AS FOLLOWS: REFERENCE IS MADE TO PUBLIC NO. 212. SECTION 322 OF THIS ACT PROVIDES * * * AS FOLLOWS: "HEREAFTER NO APPROPRIATION SHALL BE OBLIGATED OR EXPENDED FOR THE RENT OF ANY BUILDING OR PART OF A BUILDING TO BE OCCUPIED FOR GOVERNMENT PURPOSES AT A RENTAL IN EXCESS OF THE PER ANNUM RATE OF 15 PERCENTUM OF THE FAIR MARKET VALUE OF THE RENTED PREMISES AT DATE OF THE LEASE UNDER WHICH THE PREMISES ARE TO BE OCCUPIED BY THE GOVERNMENT NOR FOR ALTERATIONS. EXCEPT WHEN RENEWALS THEREOF ARE MADE HEREAFTER. IT WILL BE APPRECIATED IF YOU WILL ADVISE THIS ADMINISTRATION AS TO WHAT EVIDENCE WILL BE REQUIRED BY YOUR OFFICE TO SHOW THAT THE RENTAL RATES SPECIFIED IN LEASES DO NOT EXCEED THE PERCENTAGE OF THE MARKET VALUE OF THE PROPERTY STIPULATED BY SECTION 322 OF THE ACT REFERRED TO ABOVE.

A-43783, NOVEMBER 8, 1932, 12 COMP. GEN. 440

ECONOMY ACT - LEASES UNDER SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, THE RENTAL PAID FOR PREMISES MAY NOT EXCEED 15 PERCENTUM OF THE FAIR MARKET VALUE OF THE PREMISES AT DATE OF THE LEASE AND NO GENERAL RULE MAY BE STATED AS TO THE EVIDENCE REQUIRED TO ESTABLISH THE FAIR MARKET VALUE, IT BEING RECOGNIZED THAT THE RENTAL VALUE OF PREMISES IN VARIOUS SECTIONS OF THE COUNTRY AND EVEN IN DIFFERENT SECTIONS OF THE SAME CITY DEPEND UPON A NUMBER OF FACTORS, INCLUDING THE VALUE OF THE PREMISES, LOCATION, FACILITIES FOR THE COMFORT AND CONVENIENCE OF TENANTS, CHARACTER OF BUILDING, ETC. THE FACTS ARE FOR ADMINISTRATIVE COLLATION AND IN CASE OF DOUBT FOR SUBMISSION FOR DECISION AS TO WHETHER ON THE BASIS THEREOF THE APPROPRIATIONS MAY BE CHARGED WITH RENTAL.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, NOVEMBER 8, 1932:

THERE HAS BEEN CONSIDERED YOUR LETTER OF AUGUST 1, 1932, AS FOLLOWS:

REFERENCE IS MADE TO PUBLIC NO. 212, 72D CONGRESS, H.R. 11267, AN ACT MAKING APPROPRIATIONS FOR THE LEGISLATIVE BRANCH OF THE GOVERNMENT FOR THE FISCAL YEAR ENDING JUNE 30, 1933, AND FOR OTHER PURPOSES.

SECTION 322 OF THIS ACT PROVIDES * * * AS FOLLOWS:

"HEREAFTER NO APPROPRIATION SHALL BE OBLIGATED OR EXPENDED FOR THE RENT OF ANY BUILDING OR PART OF A BUILDING TO BE OCCUPIED FOR GOVERNMENT PURPOSES AT A RENTAL IN EXCESS OF THE PER ANNUM RATE OF 15 PERCENTUM OF THE FAIR MARKET VALUE OF THE RENTED PREMISES AT DATE OF THE LEASE UNDER WHICH THE PREMISES ARE TO BE OCCUPIED BY THE GOVERNMENT NOR FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS OF THE RENTED PREMISES IN EXCESS OF 25 PERCENTUM OF THE AMOUNT OF THE RENT FOR THE FIRST YEAR OF THE RENTAL TERM, OR FOR THE RENTAL TERM IF LESS THAN ONE YEAR: PROVIDED THAT THE PROVISIONS OF THIS SECTION SHALL NOT APPLY TO LEASES HERETOFORE MADE, EXCEPT WHEN RENEWALS THEREOF ARE MADE HEREAFTER, NOR TO LEASES OF PREMISES IN FOREIGN COUNTRIES FOR THE FOREIGN SERVICES OF THE UNITED STATES.'

IT WILL BE APPRECIATED IF YOU WILL ADVISE THIS ADMINISTRATION AS TO WHAT EVIDENCE WILL BE REQUIRED BY YOUR OFFICE TO SHOW THAT THE RENTAL RATES SPECIFIED IN LEASES DO NOT EXCEED THE PERCENTAGE OF THE MARKET VALUE OF THE PROPERTY STIPULATED BY SECTION 322 OF THE ACT REFERRED TO ABOVE. ALSO WHAT METHOD SHOULD BE USED BY THE ADMINISTRATION TO ESTABLISH THE FAIR MARKET VALUE OF THE PROPERTY AND WHETHER APPRAISAL COSTS SHOULD BE BORNE BY THE LESSOR OR CHARGED TO THE APPROPRIATION PROVIDED FOR ADMINISTRATIVE EXPENSES.

YOU QUOTED A PART OF SECTION 322, BUT THERE HAS BEEN ADDED BY THIS OFFICE THE BALANCE OF THE SECTION. THIS SECTION ORIGINATED IN THE SENATE, AND IT WAS STATED IN SENATE REPORT NO. 756, 72ND CONGRESS, WITH RESPECT TO SAID SECTION, THAT:

UNDER APPROPRIATIONS SUCH AS THAT CONTAINED IN THE ACT OF FEBRUARY 23, 1931 (46 STAT. 1231), PROVIDING FOR RENT OF TEMPORARY QUARTERS AND ALTERATION OF SAME FOR THE ACCOMMODATION OF GOVERNMENT OFFICIALS, THE TREASURY DEPARTMENT, IN SOME CASES, UPON RECOMMENDATION OF THE HEAD OF OTHER DEPARTMENTS, OR OTHERWISE, HAS UNDERTAKEN TO MAKE EXTENSIVE ALTERATIONS IN BUILDINGS LEASED FOR SHORT PERIODS, PENDING THE CONSTRUCTION OF FEDERAL BUILDINGS. IT IS RECOGNIZED THAT SOME REPAIRS AND ALTERATIONS MAY BE NECESSARY TO A PRIVATE BUILDING LEASED FOR TEMPORARY USE BY THE GOVERNMENT, PENDING THE CONSTRUCTION OF A PUBLIC BUILDING, SO AS TO ADAPT THE PRIVATE BUILDING TO USE AND OCCUPATION FOR GOVERNMENT PURPOSES, BUT THERE SHOULD BE SOME LIMITATION TO THE AMOUNT WHICH MAY BE EXPENDED FOR SUCH PURPOSES. THE PROPOSED SECTION COVERS BOTH LIMITATIONS AND RESTRICTIONS AS TO RENTAL AND AS TO PERCENTAGES TO BE PAID FOR ALTERATIONS. THE REASON FOR THIS IS THAT IF THERE IS LIMITED ONLY THE AMOUNT TO BE EXPENDED FOR ALTERATION, THERE MAY BE INCLUDED AS RENT SUCH AMOUNTS AS MAY BE DESIRED FOR ALTERATIONS WITHOUT DETECTION.

THE TERMS OF SECTION 322, WHEN READ IN THE LIGHT OF THE ABOVE-QUOTED EXTRACT FROM THE SENATE REPORT ON THE BILL WITH RESPECT TO THE PROVISION, ARE CLEAR AND UNAMBIGUOUS, BUT YOUR LETTER IS UNDERSTOOD AS GOING TO THE AMOUNT AND CHARACTER OF THE EVIDENCE REQUIRED TO ESTABLISH LEASES AS BEING WITHIN THE TERMS OF SAID SECTION. NO GENERAL ANSWER CAN BE GIVEN WHICH WILL COVER RENTAL OF PREMISES IN VARIOUS SECTIONS OF THE UNITED STATES, OR EVEN IN VARIOUS SECTIONS OF THE SAME CITY, IT BEING RECOGNIZED THAT THE RENTAL VALUE HAS SOME RELATION TO THE MARKET VALUE AND A NUMBER OF OTHER FACTORS, INCLUDING LOCATION, CHARACTER OF BUILDING, FACILITIES FOR THE COMFORT AND CONVENIENCE OF TENANTS, ETC. THE VARIOUS ADMINISTRATIVE AGENCIES UNDER APPROPRIATIONS IN THE PAST HAD THE ADMINISTRATIVE RESPONSIBILITY FOR THE LEASING OF PREMISES, AND PRESUMPTIVELY THE RENTAL AGREED UPON HAD SOME RELATION TO THE FAIR MARKET VALUE OF THE PREMISES. THEY HAVE EQUAL RESPONSIBILITY UNDER EXISTING APPROPRIATIONS, WITH THE LIMITATIONS UNDER SECTION 322 OF THE ACT APPROVED JUNE 30, 1932, THAT IN NO INSTANCE MAY THE RENTAL PAID EXCEED 15 PERCENT OF THE FAIR MARKET VALUE OF THE PREMISES. THE FACTS MUST HAVE NECESSARILY EXISTED IN THE PAST ON WHICH ADMINISTRATIVE ACTION WAS TAKEN IN AGREEING UPON A RENTAL, AND IT IS NOW THE ADMINISTRATIVE RESPONSIBILITY TO SUBMIT FACTS THAT THE RENTAL DOES NOT EXCEED 15 PERCENTUM OF THE FAIR MARKET VALUE OF THE PREMISES.

PRESUMABLY THE FACTS CAN BE ASCERTAINED IN CONNECTION WITH OBTAINING PROPOSALS, OWNERS OR THOSE ACTING FOR THEM TO BE ADVISED OF THE REQUIREMENTS OF THE LAW AND REQUESTED TO MAKE SHOWING ACCORDINGLY, SUCH SHOWING TO BE CHECKED AND VERIFIED BY THOSE ACTING FOR THE UNITED STATES AND SUPPLEMENTED TO THE EXTENT NECESSARY TO ESTABLISH THE RENTAL TO BE WITHIN THE LIMIT FIXED BY LAW--- ALL TO BE FILED IN SUPPORT OF THE VALIDITY OF THE LEASE. WHERE THERE IS ROOM FOR DOUBT AND TO AVOID NECESSITY HERE OF QUESTIONING THE VALIDITY OF A LEASE AND THE USES OF PUBLIC MONEYS IN PAYING RENTAL THE FACTS SHOULD BE SUBMITTED FOR DECISION BY THIS OFFICE AS TO THE AVAILABILITY OF THE APPROPRIATION PROPOSED TO BE CHARGED, PRIOR TO LEASING.

THE ECONOMY LAW, ACT OF JUNE 30, 1932, IN WHICH THE PROVISION IN QUESTION APPEARS, DOES NOT CONTEMPLATE SUCH PROCEDURE IN ASCERTAINING AND ESTABLISHING THE "FAIR MARKET VALUE" OF PREMISES PROPOSED TO BE RENTED FOR PUBLIC USE AS TO OCCASION ANY EXTRA EXPENSE TO THE UNITED STATES IN SUCH CONNECTION. THE PROVISION OPERATES TO RESTRICT AND LIMIT THE USE OF PUBLIC MONEYS IN LEASING AND NOT TO ENLARGE EXPENDITURES.

YOUR QUESTIONS MUST BE ANSWERED ACCORDINGLY.

IT MAY BE SUGGESTED THAT ALL OFFICERS AND EMPLOYEES OF THE GOVERNMENT SHOULD COOPERATE IN THIS CONNECTION AND FREQUENTLY, NO DOUBT, THE ASSISTANCE OF THE UNITED STATES ATTORNEY, THE POSTMASTER, AND OTHER LOCAL OFFICIALS, MAY BE SECURED AND UTILIZED ADVANTAGEOUSLY.