B-168159, NOV. 5, 1969

B-168159: Nov 5, 1969

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AS LEASE APPARENTLY PROVIDES THAT IF POST OFFICE BUILDING AND LAND DESIGNATED FOR POST OFFICE USE ARE NOT SEPARATELY ASSESSED BY TAXING AUTHORITIES TAX ESCALATION CLAUSE WILL NOT BE OPERATIVE. IF POST OFFICE BUILDING AND LAND DESIGNATED FOR EXCLUSIVE POST OFFICE USE ARE ASSESSED SEPARATELY. JR.: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 15. AS FOLLOWS (QUOTING FROM YOUR LETTER): "-THIS TAX ESCALATION CLAUSE SHALL BE OPERATIVE ONLY IF THE POST OFFICE BUILDING AND LAND DESIGNATED FOR EXCLUSIVE POST OFFICE USE ARE SEPARATELY ASSESSED BY TAXING AUTHORITIES.-" YOU ADVISE THAT THERE HAS BEEN CONSIDERABLE DIFFICULTY BETWEEN THE LESSOR AND THE DEPARTMENT WITH RESPECT TO THE INTERPRETATION OF THE TAX ESCALATION CLAUSE.

B-168159, NOV. 5, 1969

POST OFFICE DEPARTMENT--LEASES--TAX ESCALATION CLAUSE--OPERATION DIFFICULTY BETWEEN LESSOR AND POST OFFICE DEPT. REGARDING INTERPRETATION OF LEASE TAX ESCALATION CLAUSE PRESENTS NO BASIS FOR GAO ACTION, AS LEASE APPARENTLY PROVIDES THAT IF POST OFFICE BUILDING AND LAND DESIGNATED FOR POST OFFICE USE ARE NOT SEPARATELY ASSESSED BY TAXING AUTHORITIES TAX ESCALATION CLAUSE WILL NOT BE OPERATIVE; IF POST OFFICE BUILDING AND LAND DESIGNATED FOR EXCLUSIVE POST OFFICE USE ARE ASSESSED SEPARATELY, TAX ESCALATION CLAUSE IN LEASE WOULD BECOME OPERATIVE AND LESSOR WOULD BE ENTITLED TO WHATEVER BENEFITS SUCH CLAUSE PROVIDES; AND ASSESSING OF PROPERTY INVOLVED APPEARS TO BE SOLELY WITHIN JURISDICTION OF BOROUGH ASSESSING AUTHORITIES IN ACCORDANCE WITH NEW JERSEY LAW.

TO MR. JOHN J. BERRY, JR.:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 15, 1969, CONCERNING A PROBLEM WHICH HAS ARISEN IN CONNECTION WITH A LEASE YOUR CLIENT ENTERED INTO WITH THE POST OFFICE DEPARTMENT ON JUNE 10, 1960.

YOU STATE THAT THE LEASE CONTAINS A TAX ESCALATION CLAUSE READING, IN PART, AS FOLLOWS (QUOTING FROM YOUR LETTER):

"-THIS TAX ESCALATION CLAUSE SHALL BE OPERATIVE ONLY IF THE POST OFFICE BUILDING AND LAND DESIGNATED FOR EXCLUSIVE POST OFFICE USE ARE SEPARATELY ASSESSED BY TAXING AUTHORITIES.-"

YOU ADVISE THAT THERE HAS BEEN CONSIDERABLE DIFFICULTY BETWEEN THE LESSOR AND THE DEPARTMENT WITH RESPECT TO THE INTERPRETATION OF THE TAX ESCALATION CLAUSE, AND THAT YOU FIND IT CONSIDERABLY INVOLVED. YOU REFER TO ARRANGEMENTS VIS-A-VIS THE POST OFFICE DEPARTMENT, THE LESSOR AND THE ASSESSING AUTHORITIES OF HOPATCONG BOROUGH WHICH HAVE CREATED A PROBLEM, AS A RESULT OF WHICH MR. PRATT HAS LOST CONSIDERABLE MONEY. APPARENTLY IT HAS NOT BEEN POSSIBLE FOR YOUR CLIENT TO REACH AGREEMENT WITH REPRESENTATIVES OF THE POST OFFICE FROM PHILADELPHIA; AND IT HAS BEEN SUGGESTED THAT YOU CONSULT THE COMPTROLLER GENERAL IN ORDER TO ARRIVE AT A SOLUTION.

YOU STATE THAT YOUR ANALYSIS OF YOUR CLIENT'S PROBLEM INDICATES THAT SOME FEDERAL AUTHORITY MUST SEND A REPRESENTATIVE TO HOPATCONG TO AUDIT AND ANALYZE THE TAX SITUATION WITH RESPECT TO THE RENTAL OF THIS PROPERTY, IN ORDER THAT AN EQUITABLE SOLUTION MAY BE RESOLVED.

THE QUOTED PORTION OF TAX ESCALATION CLAUSE, AS WE READ IT, APPEARS TO BE CLEAR AND UNAMBIGUOUS. IT PROVIDES THAT THE CLAUSE SHALL BE OPERATIVE ONLY IF THE POST OFFICE BUILDING AND LAND DESIGNATED FOR EXCLUSIVE POST OFFICE USE ARE SEPARATELY ASSESSED BY TAXING AUTHORITIES. THAT IS TO SAY IF THE POST OFFICE BUILDING AND LAND DESIGNATED FOR POST OFFICE USE ARE NOT SEPARATELY ASSESSED BY TAXING AUTHORITIES, THE TAX ESCALATION CLAUSE WOULD NOT BE OPERATIVE.

MOREOVER, WE HAVE BEEN INFORMALLY ADVISED BY A REPRESENTATIVE OF THE POST OFFICE DEPARTMENT THAT IF THE BOROUGH OF HOPATCONG SEPARATELY ASSESSES THE POST OFFICE BUILDING AND LAND DESIGNATED FOR EXCLUSIVE POST OFFICE USE, THE TAX ESCALATION CLAUSE IN THE LEASE WOULD BECOME OPERATIVE AND THE LESSOR WOULD BE ENTITLED TO WHATEVER BENEFITS MAY BE PROVIDED BY SUCH CLAUSE.

WHILE IT IS NOT SPECIFICALLY STATED IN YOUR LETTER, SINCE YOU INDICATE THAT THE ASSESSING AUTHORITIES OF HOPATCONG BOROUGH HAVE BEEN INVOLVED IN THE MATTER, WE ASSUME THAT THE PROPERTY LEASED FROM YOUR CLIENT BY THE POST OFFICE DEPARTMENT FOR EXCLUSIVE POST OFFICE USE IS NOT SEPARATELY ASSESSED. IF THIS BE THE CASE THERE WOULD BE NO BASIS OR AUTHORITY FOR DECLARING OPERATIVE THE TAX ESCALATION CLAUSE IN THE LEASE. MOREOVER, THE ASSESSING OF THE PROPERTY INVOLVED WOULD APPEAR TO BE A MATTER SOLELY WITHIN THE JURISDICTION OF THE "ASSESSING AUTHORITIES OF HOPATCONG BOROUGH" IN ACCORDANCE WITH NEW JERSEY LAW.

IN LIGHT OF THE FOREGOING THERE WOULD APPEAR TO BE NO BASIS FOR THIS OFFICE TO TAKE ANY ACTION IN THE MATTER.