Request by Navy for Interpretation of Lease Agreement

The Department of Navy requested a decision on the correctness of rental payments made by the Naval Support Activity, Naples, Italy. Specifically, lease agreement language was investigated which controlled the amount of increase or decrease in yearly rental adjustments. The lease provided that, upon yearly renewal, the rental charges would be adjusted according to the increase or decrease of the cost of living index as published by the Instituto Italiano di Statistica (ISTAT). Neither the general index nor the specific index was beyond the scope of the leases' rental adjustment provision. There was no legal objection to the payment of the voucher indicating rental increase, if otherwise proper, based on the 12 percent increase in the overall cost-of-living index because the parties to the lease appear to have agreed to be bound by that index. However, the Navy should attempt to modify the lease agreement so that for future extensions, rental adjustments will be based on the more relevant specific rental and housing cost of living index published by ISTAT. Furthermore, payment may be made in advance, in accordance with local custom.