A-47236, MARCH 15, 1933, 12 COMP. GEN. 546

A-47236: Mar 15, 1933

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ARE APPLICABLE GENERALLY TO THE CONSIDERATION FOR THE USE OF THE LEASED PREMISES EXCLUSIVE OF THE VALUE OF ANY SPECIAL SERVICES SUCH AS HEAT. THIS DEPARTMENT IS ASSUMING THAT THE TERM "RENTAL" AS USED IN THE THIRD LINE THEREOF DOES NOT INCLUDE THE COST OF SUCH SERVICE ITEMS AS HEAT. THIS INTERPRETATION IS ESSENTIAL BECAUSE OTHERWISE IT WOULD BE IMPOSSIBLE TO RENT QUARTERS IN A GREAT MANY SMALL TOWNS IN WHICH FIELD OFFICES ARE LOCATED. THERE ARE A NUMBER OF OTHER CASES IN THE SAME BUREAU WHERE THE VALUE OF THE SERVICE ITEMS ALONE IS ONLY SLIGHTLY UNDER THE 15 PERCENT LIMITATION. THE TOTAL OF THE SERVICE ITEMS WILL USUALLY REPRESENT AN APPRECIABLE PERCENTAGE OF THE VALUE OF THE BUILDING IN CASES WHERE THE VALUE OF THE PREMISES OCCUPIED IS LOW AND ALL OF THE CUSTOMARY SERVICE ITEMS ARE INCLUDED IN THE RENTAL AGREEMENT.

A-47236, MARCH 15, 1933, 12 COMP. GEN. 546

ECONOMY ACT - LEASES - RENTAL THE RESTRICTIONS AS TO RENTAL PAYMENTS UNDER SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, ARE APPLICABLE GENERALLY TO THE CONSIDERATION FOR THE USE OF THE LEASED PREMISES EXCLUSIVE OF THE VALUE OF ANY SPECIAL SERVICES SUCH AS HEAT, LIGHT, AND JANITOR SERVICES, WHICH MAY BE FURNISHED UNDER THE LEASE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, MARCH 15, 1933:

THERE HAS BEEN RECEIVED YOUR LETTER OF FEBRUARY 4, 1933, AS FOLLOWS:

IN APPLYING SECTION 322 OF THE ECONOMY ACT TO RENTAL AGREEMENTS, THIS DEPARTMENT IS ASSUMING THAT THE TERM "RENTAL" AS USED IN THE THIRD LINE THEREOF DOES NOT INCLUDE THE COST OF SUCH SERVICE ITEMS AS HEAT, LIGHT, WATER, JANITOR SERVICE, ETC. THIS INTERPRETATION IS ESSENTIAL BECAUSE OTHERWISE IT WOULD BE IMPOSSIBLE TO RENT QUARTERS IN A GREAT MANY SMALL TOWNS IN WHICH FIELD OFFICES ARE LOCATED. FOR INSTANCE, THE VALUE OF THE LIGHT, HEAT, WATER, AND JANITOR SERVICE FURNISHED BY THE OWNER OF THE BUILDING WHICH THE FOREST SERVICE OCCUPIES IN PARK FALLS, WISCONSIN (WITHOUT INCLUDING ANY RENTAL FOR THE BUILDING ITSELF) EXCEEDS 15 PERCENT OF THE MARKET VALUE OF THE PREMISES OCCUPIED. THERE ARE A NUMBER OF OTHER CASES IN THE SAME BUREAU WHERE THE VALUE OF THE SERVICE ITEMS ALONE IS ONLY SLIGHTLY UNDER THE 15 PERCENT LIMITATION. THE TOTAL OF THE SERVICE ITEMS WILL USUALLY REPRESENT AN APPRECIABLE PERCENTAGE OF THE VALUE OF THE BUILDING IN CASES WHERE THE VALUE OF THE PREMISES OCCUPIED IS LOW AND ALL OF THE CUSTOMARY SERVICE ITEMS ARE INCLUDED IN THE RENTAL AGREEMENT. THIS IS ESPECIALLY TRUE WHERE LOCAL DEPRESSION HAS REDUCED MARKET VALUES FAR BELOW THE COST OF CONSTRUCTION; OBVIOUSLY THE COST OF SERVICES UNDER SUCH CIRCUMSTANCES IS NOT CORRESPONDINGLY LOWER.

IT IS ASSUMED THAT SOME EVIDENCE OF THE SERVICE VALUE INCLUDED IN A LEASE WILL BE REQUIRED AND I SHOULD BE GLAD TO KNOW WHAT FORM THIS SHOULD TAKE. IT IS SUGGESTED THAT THE LEASE OR RENEWAL MAY STATE SEPARATELY THE RENT FOR THE BUILDING AND THE CHARGE FOR SUCH STATED SERVICES AS ARE TO BE FURNISHED BY THE LESSOR, OR THAT A CERTIFICATE MAY BE SUBMITTED BY THE OWNER AS TO THE VALUE OF THE SERVICES INCLUDED IN THE RENTAL. EITHER OF THESE WOULD BE PREFERABLE TO EXECUTING A LEASE FOR THE PREMISES AND A SEPARATE CONTRACT FOR FURNISHING THE RELATED SERVICES.

SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, PROVIDES THAT AFTER THE EFFECTIVE DATE OF SAID ACT 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.'

THE TERM "RENTAL" IS GENERALLY UNDERSTOOD TO REFER TO THE CONSIDERATION FOR THE USE OF THE LAND, OR BUILDINGS OR PORTIONS OF BUILDINGS. SEE CITY OF PROVIDENCE V. PAYNE, 134 A. 276, 282, 47 R.I. 444; GUILD V. SAMPSON, 122 N.E. 712, 714, 232 MASS. 509. IN THE ABSENCE OF A PROVISION IN THE LEASE EXPRESSLY SO PROVIDING THE RENT DOES NOT GENERALLY ENTITLE THE LESSEE TO ANYTHING MORE THAN THE BARE USE OF THE PREMISES, AND IT IS SUCH RENTAL, THAT IS, THE CONSIDERATION FOR THE BARE USE OF THE PREMISES, TO WHICH SECTION 322 OF THE ECONOMY ACT IS APPLICABLE.

IN MODERN PRACTICE, HOWEVER, PARTICULARLY WITH REFERENCE TO PORTIONS OF BUILDINGS, THE LESSEE FINDS IT DESIRABLE TO COMBINE WITH THE RENTAL AGREEMENT AN AGREEMENT FOR OTHER SERVICES, SUCH AS HEAT, LIGHT, JANITOR SERVICES, ETC.

IN PARAGRAPH 6 OF THE STANDARD FORM OF GOVERNMENT LEASE SPACE IS PROVIDED FOR THE ENUMERATION OF SUCH SERVICES AS PART OF THE RENTAL CONSIDERATION. IN ORDER TO SEPARATE THE RENTAL PROPER FROM THE VALUE OF OTHER SERVICES, WHICH SEPARATION BECOMES NECESSARY IN VIEW OF SAID SECTION 322 OF THE ECONOMY ACT, THE VALUE OF SUCH SERVICES AS DISTINGUISHED FROM RENTAL OF THE PREMISES SHOULD BE SPECIFIED IN THE LEASE, AND THERE SHOULD BE SUBMITTED FOR FILING WITH THE LEASE A SHOWING AS TO THE REASONABLE VALUE OF SUCH SERVICES. IT IS NOT NECESSARY OR DESIRABLE THAT A SEPARATE CONTRACT BE EXECUTED FOR THE RELATED SERVICES. IT IS PRIMARILY FOR THE ADMINISTRATIVE OFFICE TO ASCERTAIN IN EACH CASE THE FAIR VALUE OF THE SERVICES IN ORDER THAT SUCH VALUES SHOULD NOT BE EXCESSIVELY STATED IN THE LEASE, THEREBY INCLUDING A PORTION OF THE RENTAL CONSIDERATION FOR THE PURPOSE OF DEFEATING THE PROPER APPLICATION OF SECTION 322 OF THE ECONOMY ACT. WHERE THE LEASE COVERS ONLY A PORTION OF THE BUILDING IT SHOULD BE ACCOMPANIED BY EVIDENCE OF THE COST OF SUCH SERVICE FOR THE ENTIRE BUILDING AND THE VALUE OF THE SERVICES TO BE FURNISHED UNDER THE LEASE SHOULD NOT EXCEED THEIR PROPER PROPORTION OF THE TOTAL COST OF SUCH SERVICES. EACH CASE, HOWEVER, WILL BE FOR CONSIDERATION UPON THE FACTS THEREOF, IT APPEARING IMPRACTICABLE AT THIS TIME TO STATE A RULE TO GOVERN ALL CASES.