A-82209, JANUARY 11, 1937, 16 COMP. GEN. 644

A-82209: Jan 11, 1937

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IMPROVEMENTS - MONTHLY INSTALLMENT PAYMENTS STATUTORY LIMITATIONS - MAINTENANCE SERVICE THERE IS NO OBJECTION TO INCLUSION IN A LEASE OF A STIPULATION FOR PAYMENT OF A SUM NOT IN EXCESS OF 25 PERCENT OF THE BASIC ANNUAL RENTAL FOR THE FIRST YEAR OF THE RENTAL TERM IN CONSIDERATION FOR ALTERATIONS. WHICH WOULD NOT HAVE BEEN MADE OTHERWISE. PROVIDED THE BASIC RENTAL STIPULATED IN THE LEASE DOES NOT EXCEED 15 PERCENT OF THE FAIR MARKET VALUE OF THE PROPERTY AT THE DATE OF THE LEASE AND EVIDENCE TO ESTABLISH THESE FACTS IS FILED WITH THE LEASE. IF THE RENTAL PERIOD IS LESS THAN ONE YEAR. THERE IS FOR ADMINISTRATIVE CONSIDERATION WHETHER SUCH MAINTENANCE MAY NOT BE MORE ECONOMICALLY FURNISHED BY THE NATIONAL PARK SERVICE OR BY THE USING ESTABLISHMENT.

A-82209, JANUARY 11, 1937, 16 COMP. GEN. 644

LEASES - RENT, REPAIRS, AND IMPROVEMENTS - MONTHLY INSTALLMENT PAYMENTS STATUTORY LIMITATIONS - MAINTENANCE SERVICE THERE IS NO OBJECTION TO INCLUSION IN A LEASE OF A STIPULATION FOR PAYMENT OF A SUM NOT IN EXCESS OF 25 PERCENT OF THE BASIC ANNUAL RENTAL FOR THE FIRST YEAR OF THE RENTAL TERM IN CONSIDERATION FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS MADE BY THE LESSOR, IF THE ACTUAL COST THEREOF TO FIT THE PREMISES FOR THE GOVERNMENT'S USE, AND WHICH WOULD NOT HAVE BEEN MADE OTHERWISE, EQUALS OR EXCEEDS 25 PERCENT OF THE BASIC ANNUAL RENTAL, PROVIDED THE BASIC RENTAL STIPULATED IN THE LEASE DOES NOT EXCEED 15 PERCENT OF THE FAIR MARKET VALUE OF THE PROPERTY AT THE DATE OF THE LEASE AND EVIDENCE TO ESTABLISH THESE FACTS IS FILED WITH THE LEASE, BUT THE ALTERATION AND IMPROVEMENT INSTALLMENTS SHOULD BE STATED SEPARATELY ON THE VOUCHERS, AND, IF THE RENTAL PERIOD IS LESS THAN ONE YEAR, SUCH INSTALLMENT PAYMENTS MAY NOT EXCEED 25 PERCENT OF THE TOTAL RENT FOR THE LESSER PERIOD INVOLVED WITH NO AMOUNT TO BE INCLUDED FOR THIS PURPOSE IN A RENEWAL LEASE. WHERE, IN CONNECTION WITH THE LEASE OF A BUILDING, THE BIDDER AGREES TO FURNISH COMPLETE MAINTENANCE, INCLUDING HEAT, ELECTRIC CURRENT, WATER, JANITOR AND ELEVATOR SERVICE, AT ADDITIONAL COST, THERE IS FOR ADMINISTRATIVE CONSIDERATION WHETHER SUCH MAINTENANCE MAY NOT BE MORE ECONOMICALLY FURNISHED BY THE NATIONAL PARK SERVICE OR BY THE USING ESTABLISHMENT, THE COST IN EITHER EVENT TO BE BORNE BY THE APPROPRIATION AVAILABLE FOR PAYMENT OF THE RENT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, JANUARY 11, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF DECEMBER 7, 1936, AS FOLLOWS:

THE BUREAU OF INTERNAL REVENUE, TREASURY DEPARTMENT, HAS REQUESTED A MINIMUM OF 75,000 SQUARE FEET NET SPACE FOR THE SOCIAL SECURITY AUDIT UNIT OF THAT BOARD, WITH THE STIPULATION THAT AT LEAST 40 PERCENT SHOULD BE AVAILABLE BY FEBRUARY 1 AND THE BALANCE BY APRIL 1, 1937. THERE BEING NO SPACE AVAILABLE, THE BUREAU OF INTERNAL REVENUE REQUESTED THE NATIONAL PARK SERVICE TO CONSIDER A PROPOSAL MADE BY A PRIVATE OWNER FOR THE CONVERSION OF A BUILDING, UNDER CONSTRUCTION, TO MEET ITS REQUIREMENTS.

THE PROPOSED SPACE APPEARED TO BE SATISFACTORY IN ALL RESPECTS, BUT TO AVOID THE ACCEPTANCE OF THE PROPOSAL WITHOUT COMPETITION, THE NATIONAL PARK SERVICE, IN COOPERATION WITH THE TREASURY DEPARTMENT, PREPARED AND ISSUED GENERAL CONDITIONS AND A REQUEST FOR BIDS WHICH WERE SUBMITTED TO NUMEROUS OWNERS OR THEIR AGENTS, INCLUDING THE FIRST PROPONENT. ONLY ONE BID WAS RECEIVED, AND THERE IS ATTACHED THE INVITATION FOR BIDS ISSUED BY THE NATIONAL PARK SERVICE AND A SIGNED COPY OF THE PROPOSAL.

IN CONSIDERATION FOR ALTERATIONS AND IMPROVEMENTS AND REPAIRS NECESSARY TO THE BUILDING NOW UNDER CONSTRUCTION TO MEET THE REQUIREMENTS OF THE GOVERNMENT, IT IS PROPOSED TO INCLUDE IN THE LEASE A STATEMENT THAT THE GOVERNMENT WILL PAY TO THE LESSOR A SUM NOT IN EXCESS OF 25 PERCENT OF THE BASIC ANNUAL RENTAL FOR THE FIRST YEAR OF THE RENTAL TERM. IT IS ALSO PROPOSED, AND TENTATIVELY ACCEPTED BY THE PROPONENT, TO DRAW THE LEASE FOR THE PERIOD OF ONE YEAR FROM THE DATE OF OCCUPANCY WITH THE PROVISION THAT THE PAYMENT FOR RENT AND IMPROVEMENTS FOR THE PERIOD AFTER/JUNE 30, 1937, WILL BE SUBJECT TO FUNDS BEING MADE AVAILABLE BY THE CONGRESS.

THE QUESTION IS SUBMITTED WHETHER, UNDER THE ABOVE-MENTIONED PROPOSAL, THIS DEPARTMENT IS ACTING WITHIN THE LAW AND WITHOUT PREJUDICE TO THE INTEREST OF THE GOVERNMENT IN OBLIGATING THE PAYMENT OF 25 PERCENT OF THE ANNUAL RENTAL FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS, IN VIEW OF THE FACT THAT OBLIGATIONS FOR IMPROVEMENTS WILL BE LIQUIDATED ONLY TO THE EXTENT OF ONE-TWELFTH OF THE FULL AMOUNT MONTHLY AND WILL NOT EXTEND BEYOND JUNE 30, 1937, UNLESS FUNDS ARE AVAILABLE.

SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, PROVIDES:

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.

THE PROVISIONS IN THE STATUTE LAST ABOVE QUOTED RESTRICTING APPROPRIATED MONEYS FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS OF RENTED PREMISES TO 25 PERCENTUM OF THE AMOUNT OF THE RENT FOR THE FIRST YEAR OF THE RENTAL TERM, OR FOR THE RENTAL TERM IF LESS THAN 1 YEAR, RELATES TO SUCH ALTERATIONS, IMPROVEMENTS, AND REPAIRS AS ARE ACTUALLY MADE TO FIT PREMISES FOR OCCUPANCY BY THE GOVERNMENT AND REQUIRES A SHOWING OF AN ACTUAL EXPENDITURE THEREFOR BY THE LESSOR AND THE SUBMISSION TO THIS OFFICE OF SATISFACTORY EVIDENCE THAT SUCH ALTERATIONS, IMPROVEMENTS, AND REPAIRS WOULD NOT HAVE BEEN MADE EXCEPT FOR LEASING TO THE GOVERNMENT. IN OTHER WORDS, A STATEMENT SUCH AS REFERRED TO IN THE THIRD PARAGRAPH OF YOUR LETTER PROVIDING THAT THE GOVERNMENT WILL PAY THE LESSOR A SUM NOT IN EXCESS OF 25 PERCENT OF THE BASIC RENTAL FOR THE FIRST YEAR OF THE RENTAL TERM MAY NOT BE MADE A PART OF THE LEASE FOR THE PURPOSE OF CIRCUMVENTING THAT PROVISION OF THE ACT RESTRICTING RENTAL PAYMENTS TO 15 PERCENT OF THE FAIR MARKET VALUE AT DATE OF THE LEASE.

HOWEVER, IF THE LEASE IS TO BE FOR AT LEAST 1 YEAR--- SUBJECT TO THE AVAILABILITY OF APPROPRIATIONS AFTER JUNE 30, 1937--- AND IF IT CAN BE ESTABLISHED THAT THE NET RENTAL PROPOSED TO BE STIPULATED IN THE LEASE DOES NOT EXCEED 15 PERCENT OF THE FAIR MARKET VALUE OF THE PROPERTY AT DATE OF THE LEASE, THAT IS, THAT THE FAIR MARKET VALUE EQUALS OR EXCEEDS $588,547.20, ALSO, THAT THE ACTUAL COST OF THE ALTERATIONS OR IMPROVEMENTS WHICH THE LESSOR IS REQUIRED TO MAKE TO FIT THE PREMISES FOR THE GOVERNMENT'S USE AND WHICH WOULD NOT HAVE BEEN MADE EXCEPT FOR THE LEASING TO THE GOVERNMENT EQUALS OR EXCEEDS $22,070.52, THE ACCEPTANCE OF THE PROPOSAL SUBJECT TO THE ABOVE QUALIFICATIONS WOULD NOT CONTRAVENE THE LAW. IN THE EVENT SUCH A LEASE IS NEGOTIATED, EVIDENCE TO ESTABLISH THE FACTS ABOVE INDICATED SHOULD BE FILED IN THIS OFFICE WITH THE LEASE AND THE ALTERATION OR IMPROVEMENT INSTALLMENTS SHOULD BE STATED SEPARATELY FROM THE RENTAL ON THE MONTHLY VOUCHERS. SEE DECISION TO YOU OF MARCH 12, 1936, 15 COMP. GEN. 787.

WHILE IT IS STATED IN THE LETTER QUOTED ABOVE THAT IT IS PROPOSED AND TENTATIVELY ACCEPTED BY THE BIDDER TO DRAW THE LEASE FOR A PERIOD OF 1 YEAR FROM DATE OF OCCUPANCY WITH PROVISION THAT THE PAYMENT FOR RENT AND IMPROVEMENTS FOR THE PERIOD SUBSEQUENT TO JUNE 30, 1937, WILL BE SUBJECT TO FUNDS BEING MADE AVAILABLE, THERE IS NOTED UNDER THE "STATEMENT PAGE 2," ATTACHED TO THE SUBMITTED BID, A STATEMENT AS FOLLOWS:

A LEASE IS REQUESTED FOR A PERIOD ENDING JUNE 30, 1937, FROM THE DATE OF OCCUPANCY BY THE GOVERNMENT WITH AN AGREEMENT BY THE GOVERNMENT TO RENEW FOR ONE MORE YEAR IF AND WHEN AN APPROPRIATION IS PASSED BY CONGRESS TO COVER THIS EXPENDITURE. FROM JUNE 30, 1938, WE WILL GRANT THE GOVERNMENT THE PRIVILEGE OF RENEWALS ON AN ANNUAL BASIS.

IF THE LEASE SHOULD BE DRAWN IN ACCORDANCE WITH THE FOREGOING STATEMENT, THE RENTAL TERM BEING LESS THAN 1 YEAR, INSTEAD OF BEING DRAWN FOR 1 YEAR FROM DATE OF OCCUPANCY, THEN, UNDER THE PROVISIONS OF SECTION 322 OF THE ECONOMY ACT ANY PROVISION FOR PAYMENTS FOR ALTERATIONS OR IMPROVEMENTS MUST BE RESTRICTED TO AN AGGREGATE OF NOT TO EXCEED 25 PERCENT OF THE TOTAL AMOUNT OF THE RENT FOR THE PERIOD FROM DATE OF OCCUPANCY TO JUNE 30, 1937, AND NO AMOUNT FOR ALTERATIONS OR IMPROVEMENTS COULD BE INCLUDED IN ANY RENEWAL OF THE LEASE.

THERE IS NOTED, ALSO, THAT UNDER THE BID SUBMITTED THE BIDDER AGREES TO FURNISH COMPLETE MAINTENANCE OF THE BUILDING, INCLUDING HEAT, ELECTRIC CURRENT, WATER, JANITOR SERVICE, AND ELEVATOR SERVICE, AT A MONTHLY RATE OF $3,168.54, AND IN THIS CONNECTION THERE WOULD APPEAR FOR ADMINISTRATIVE CONSIDERATION WHETHER THESE MAINTENANCE SERVICES MIGHT NOT BE MORE ECONOMICALLY PERFORMED BY THE NATIONAL PARK SERVICE, OR BY THE ESTABLISHMENT FOR WHICH THE BUILDING IS TO BE RENTED, THE COST THEREOF, IN EITHER EVENT, TO BE BORNE BY THE APPROPRIATION AVAILABLE FOR PAYMENT OF THE RENT.