B-782, FEBRUARY 24, 1939, 18 COMP. GEN. 675

B-782, FEBRUARY 24, 1939, 18 COMP. GEN. 675

LEASES - ALTERATIONS, REPAIRS, AND IMPROVEMENTS - METHOD OF MAKING AND MAKING OF ALTERATIONS, ETC., DURING OTHER THAN FIRST YEAR OF RENEWABLE LEASE SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, LIMITING THE AMOUNT WHICH MAY BE OBLIGATED OR EXPENDED FOR ALTERATIONS, IMPROVEMENTS, OR REPAIRS TO PREMISES LEASED BY THE GOVERNMENT, DOES NOT REQUIRE THAT ANY PARTICULAR METHOD BE EMPLOYED IN EFFECTING THE CHANGES, AND THERE IS NO LEGAL OBJECTION TO HAVING THE SAID CHANGES MADE BY THE GOVERNMENT AGENCIES, EITHER BY FORCE ACCOUNT OR BY CONTRACT, INSTEAD OF BY THE LESSOR, BUT WHERE THE LEASE PROVIDES THAT THE LESSOR MAY TERMINATE THE LEASE "UPON 30 DAYS' WRITTEN NOTICE," CONSIDERATION SHOULD BE GIVEN TO SAFEGUARDING AGAINST THE TERMINATION CONTINGENCY SO THAT THERE MAY NOT BE MADE PERMANENT IMPROVEMENTS FOR WHICH THE GOVERNMENT WILL RECEIVE LITTLE OR NO BENEFIT. SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 412, LIMITING THE AMOUNT WHICH MAY BE OBLIGATED OR EXPENDED FOR ALTERATIONS, IMPROVEMENTS, OR REPAIRS TO PREMISES LEASED BY THE GOVERNMENT TO NOT MORE THAN "25 PERCENTUM OF THE AMOUNT OF THE RENT FOR THE FIRST YEAR OF THE RENTAL TERM," DOES NOT PROHIBIT THE MAKING OF EXPENDITURES FOR SUCH CHANGES IN THE SECOND OR THIRD YEAR OF A RENEWABLE LEASE PROVIDED THE AGGREGATE OF THE EXPENDITURES FOR THE FIRST YEAR OF THE LEASE TERM AND THE SUBSEQUENT YEARS DOES NOT EXCEED 25 PERCENT OF THE RENTAL FOR THE FIRST YEAR.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, FEBRUARY 24, 1939:

YOUR LETTER OF JANUARY 17, 1939, IS AS FOLLOWS:

FOR THE PURPOSE OF HOUSING CERTAIN RECORDS OF THE ADJUTANT GENERAL'S OFFICE OF THE WAR DEPARTMENT AND ATTENDANT PERSONNEL, THE NATIONAL PARK SERVICE OF THIS DEPARTMENT ENTERED INTO A SUBLEASE WITH THE HECHT COMPANY ON JULY 22, 1935, FOR THE GOVERNMENT'S OCCUPANCY OF THE ENTIRE TWO-STORY BUILDING KNOWN AS 60 FLORIDA AVENUE, NORTHEAST, AND SITUATED ON LOT 805 IN SQUARE 3518 OF THE DISTRICT OF COLUMBIA, FOR THE TERM BEGINNING MAY 12, 1935, AND ENDING JUNE 30, 1936, AT AN ANNUAL RENTAL OF $10,000.08, WHICH AMOUNT IS WITHIN FIFTEEN PERCENT OF THE FAIR MARKET VALUE OR THE ASSESSED VALUE OF THE PREMISES AS ESTABLISHED BY THE ASSESSOR FOR THE DISTRICT OF COLUMBIA, WITH A PROVISION THAT THE INSTRUMENT COULD BE RENEWED ANNUALLY TO JUNE 30, 1938, AT THE SAME RENTAL RATE.

WHEN THE SUBLEASE REFERRED TO ABOVE EXPIRED ON JUNE 30, 1938, NO GOVERNMENT-OWNED SPACE WAS AVAILABLE FOR HOUSING THE ACTIVITIES OF THE ADJUTANT GENERAL'S OFFICE OF THE WAR DEPARTMENT HOUSED IN THAT BUILDING, AND, AFTER A CAREFUL SURVEY DISCLOSED THAT NO OTHER COMPARABLE SPACE WAS AVAILABLE FOR LEASING AT THE SAME OR A LOWER RENTAL, NEGOTIATIONS WERE CONDUCTED WITH THE OWNER OF THE PREMISES FOR A NEW LEASE AT THE SAME RENTAL RATE FOR A TERM BEGINNING JULY 1, 1938, AND ENDING JUNE 30, 1939, WITH THE OPTION THAT THE GOVERNMENT MAY RENEW THE INSTRUMENT TO JUNE 30, 1941, AT THE SAME RENTAL RATE.

THE ADJUTANT GENERAL'S OFFICE OF THE WAR DEPARTMENT, SINCE OCCUPYING THE PREMISES UNDER THE NEW LEASE AS OF JULY 1, 1938, HAS FOUND IT NECESSARY TO INCREASE THE PERSONNEL IN CHARGE OF THE FILES AND RECORDS TO THE EXTENT THAT THE PREMISES NOW REQUIRE CERTAIN ALTERATIONS, IMPROVEMENTS, AND REPAIRS WHICH ARE NECESSARY TO PLACE THE BUILDING IN CONDITION SUITABLE FOR THE PURPOSE FOR WHICH IT IS BEING USED AT THIS TIME. THESE ALTERATIONS, IMPROVEMENTS, AND REPAIRS WHEN COMPLETED MIGHT BE OF A PERMANENT CHARACTER. THE CHANGES ARE, HOWEVER, NECESSARY FOR THE ACCOMMODATION OF EMPLOYEES OF THE FEDERAL GOVERNMENT. IT IS ESTIMATED THAT THESE ALTERATIONS, IMPROVEMENTS, AND REPAIRS WILL COST APPROXIMATELY $2,000.00.

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

"HEREAFTER NO APPROPRIATION SHALL BE OBLIGATED OR EXPENDED * * * FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS OF THE RENTED PREMISES IN EXCESS OF TWENTY-FIVE 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 * * *.'

THERE IS SUBMITTED FOR YOUR CONSIDERATION THE QUESTION AS TO WHETHER THERE WILL BE ANY OBJECTION TO THE GOVERNMENT PERFORMING THE SAID ALTERATIONS, IMPROVEMENTS, AND REPAIRS BY FORCE ACCOUNT OR CONTRACT, OR WHETHER, BY YOUR INTERPRETATION OF THE ACT, THE WORK MUST BE PERFORMED BY THE OWNER AND A SUPPLEMENTAL AGREEMENT ENTERED INTO WHEREBY HE IS TO BE REIMBURSED BY THE GOVERNMENT IN MONTHLY PAYMENTS AND THE RENTAL AND REPAIR INSTALLMENTS STATED SEPARATELY UPON THE VOUCHER.

SHOULD THERE BE NO OBJECTION TO THE GOVERNMENT PERFORMING THE WORK, EITHER BY FORCE ACCOUNT OR CONTRACT, THERE IS ALSO SUBMITTED THE QUESTION THAT, SHOULD IT BE DETERMINED AFTER THE FIRST YEAR OF OCCUPANCY THAT IT WAS NECESSARY TO MAKE FURTHER IMPROVEMENTS IN THE PREMISES AMOUNTING TO $500.00, COULD SUCH IMPROVEMENTS BE MADE BY THE GOVERNMENT DURING SUBSEQUENT RENEWAL PERIODS OF THE LEASE, PROVIDING THE TOTAL COST OF ALTERATIONS, IMPROVEMENTS, OR REPAIRS, DURING THE TOTAL PERIOD OF THE LEASE AND ITS RENEWALS, DOES NOT EXCEED TWENTY FIVE PERCENT OF THE AMOUNT OF THE RENT FOR THE FIRST YEAR OF THE RENTAL TERM?

A COPY OF THE LEASE UNDER WHICH THE GOVERNMENT IS NOW OCCUPYING THE PREMISES IS ATTACHED.

AN EARLY DECISION WILL BE APPRECIATED.

THE LIMITATION APPEARING IN THAT PART OF SECTION 322 OF THE ECONOMY ACT OF JUNE 30, 1932, QUOTED IN YOUR LETTER, DOES NOT REQUIRE THAT ANY PARTICULAR METHOD BE EMPLOYED IN EFFECTING ,ALTERATIONS, IMPROVEMENTS, AND REPAIRS" NECESSARY TO FIT THE RENTED PREMISES FOR OCCUPANCY BY THE GOVERNMENT, SO THAT THERE WOULD APPEAR TO BE NO LEGAL OBJECTION TO HAVING SAID ALTERATIONS, IMPROVEMENTS, AND REPAIRS MADE BY FORCE ACCOUNT OR BY CONTRACT, INSTEAD OF BY THE LESSOR. IT IS NOTED, HOWEVER, IN THE PRESENT CASE, THAT PARAGRAPH 3 OF THE LEASE PROVIDES "THAT THE LESSOR OR THE LESSEE MAY TERMINATE THIS LEASE UPON 30 DAYS' WRITTEN NOTICE.' UNDER SUCH PROVISION IF THE WORK BE DONE BY THE GOVERNMENT AT A COST APPROXIMATING 20 PERCENTUM OF THE RENT FOR THE FIRST YEAR AND THE LEASE BE TERMINATED BY THE LESSOR BEFORE THE END OF THE YEAR, THERE MAY RESULT AN EXPENDITURE OF PUBLIC FUNDS FOR WHICH THE GOVERNMENT WILL RECEIVE LITTLE OR NO BENEFIT. IN THE CIRCUMSTANCES IT MAY BE ADVISABLE FROM AN ADMINISTRATIVE STANDPOINT TO PROVIDE AGAINST THE HAPPENING OF SUCH CONTINGENCY BEFORE ANY PERMANENT IMPROVEMENTS TO THE PREMISES NOT ABSOLUTELY ESSENTIAL TO THE GOVERNMENT'S OCCUPANCY ARE UNDERTAKEN.

AS TO YOUR SECOND QUESTION RELATING TO FURTHER IMPROVEMENTS AFTER THE FIRST YEAR, IT IS NOTED THAT WHILE THE TERM OF THE LEASE IS FOR 1 YEAR IT MAY BE EXTENDED BY RENEWALS TO JUNE 30, 1941. THE RENTAL TERM, THEREFORE, WITHIN THE MEANING OF SECTION 322, SUPRA, DOES NOT IN FACT EXPIRE UNTIL JUNE 30, 1941. IN VIEW OF THE FACT THAT SAID SECTION PROVIDES THAT THERE SHALL NOT BE OBLIGATED OR EXPENDED FOR ALTERATIONS, REPAIRS, AND IMPROVEMENTS ON RENTED PREMISES AN AMOUNT "IN EXCESS OF 25 PERCENTUM OF THE AMOUNT OF THE RENT FOR THE FIRST YEAR OF THE RENTAL TERM," IF AN AMOUNT EQUAL TO 25 PERCENTUM OF THE FIRST YEAR'S RENTAL IS EXPENDED DURING THE FIRST YEAR OF THE RENTAL TERM, THERE WOULD BE NO AUTHORITY TO EXPEND ANY FURTHER SUM FOR ALTERATIONS, IMPROVEMENTS, AND REPAIRS IN THE SECOND AND THIRD YEARS OF THE RENTAL TERM. ON THE OTHER HAND, IF THE AMOUNT EXPENDED DURING THE FIRST YEAR OF OCCUPANCY IS LESS THAN 25 PERCENTUM OF THE FIRST YEAR'S RENTAL, THERE WOULD APPEAR TO BE NO LEGAL OBJECTION TO MAKING FURTHER EXPENDITURES DURING THE SECOND OR THIRD YEAR OF OCCUPANCY UNDER RENEWALS, PROVIDED THE AGGREGATE EXPENDITURES FOR THE 3 YEARS WILL NOT EXCEED 25 PERCENTUM OF THE RENTAL FOR THE FIRST YEAR.