B-137279, SEPTEMBER 19, 1958, 38 COMP. GEN. 227

B-137279, SEPTEMBER 19, 1958, 38 COMP. GEN. 227

LEASES - POST OFFICE DEPARTMENT - PURCHASE OPTIONS - LAND ACQUISITION PROHIBITION THE INCLUSION OF PURCHASE OPTIONS IN LEASES EXECUTED UNDER THE LONG TERM COMMERCIAL LEASING PROGRAM OF THE POST OFFICE DEPARTMENT WOULD NOT BE CONTRARY TO 41 U.S.C. 14, WHICH REQUIRES SPECIFIC STATUTORY AUTHORITY FOR THE ACQUISITION OF LAND, PROVIDED THAT THE OPTION IS NOT EXERCISED IN THE ABSENCE OF EXPRESS STATUTORY AUTHORITY FOR THE PURCHASE OF LAND AND UNTIL APPROPRIATIONS ARE SPECIFICALLY MADE AVAILABLE FOR PROPERTY ACQUISITIONS.

TO THE POSTMASTER GENERAL, SEPTEMBER 19, 1958:

REFERENCE IS MADE TO LETTER OF SEPTEMBER 2, 1958, FROM THE ACTING POSTMASTER GENERAL, REQUESTING OUR OPINION WHETHER PURCHASE OPTIONS IN FAVOR OF THE GOVERNMENT SUCH AS SET FORTH IN ENCLOSURE "A" MAY BE INCLUDED IN POST OFFICE DEPARTMENT LEASES INCIDENT TO THE DEPARTMENT'S LONG-TERM COMMERCIAL LEASING PROGRAM UNDER SECTIONS 11-14, 476, 577, AND 903 OF TITLE 39, UNITED STATES CODE.

IT IS STATED THAT SEVERAL HUNDRED LEASES ARE ENTERED INTO EVERY YEAR UNDER THE ABOVE STATUTORY PROVISIONS INVOLVING NEW CONSTRUCTION AND EXISTING QUARTERS; THAT SUCH LEASES INVOLVE MILLIONS OF DOLLARS A YEAR IN RENTALS; THAT IN VIEW OF THE UNCERTAINTY OF THE REAL ESTATE PRICES PREVAILING MANY YEARS FROM NOW, IT MAY PROVE ADVANTAGEOUS TO THE GOVERNMENT TO PURCHASE THE PROPERTY AT THE EXPIRATION OF THE LEASE TERM; AND THAT, THEREFORE, YOU HAVE DETERMINED THAT IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO PROVIDE AN OPPORTUNITY TO PURCHASE THE LEASED PROPERTY AT THE END OF THE LEASE TERM IF AT THAT TIME SUCH PURCHASE SHOULD BE CONSIDERED TO BE ADVANTAGEOUS TO THE GOVERNMENT. IT IS EXPLAINED THAT SUCH PURCHASE OPPORTUNITY COULD BEST BE CREATED AND PRESERVED BY INCLUDING OPTIONS TO PURCHASE THE PROPERTY, AT THE END OF THE LEASE TERMS OR ANY RENEWAL TERMS, IN THOSE LEASES WHERE IT NOW APPEARS THAT SUCH OPTIONS TO PURCHASE THE PROPERTY, AT THE END OF THE LEASE TERMS OR ANY RENEWAL TERMS, IN THOSE LEASES WHERE IT NOW APPEARS THAT SUCH OPTIONS MIGHT BE ADVANTAGEOUS; THAT GENERALLY THE PURCHASE OPTIONS WOULD BE IN THE LANGUAGE OF ENCLOSURE " A; " AND THAT IT IS REALIZED THAT IF AT SOME FUTURE TIME IT SHOULD BECOME ADVANTAGEOUS FOR THE GOVERNMENT TO EXERCISE ANY PURCHASE OPTIONS IT WOULD FIRST BE NECESSARY TO OBTAIN APPROPRIATE AUTHORIZATION AND APPROPRIATIONS FROM THE CONGRESS TO EFFECTUATE THE PURCHASE.

THE PURCHASE OPTION AS CONTAINED IN ENCLOSURE "A" PROVIDES AS FOLLOWS:

IN CONSIDERATION OF THE AWARD OF THIS LEASE CONTRACT, THE GOVERNMENT SHALL HAVE THE OPTION TO PURCHASE THE FEE SIMPLE TITLE TO THE LEASED PREMISES, INCLUDING THE UNDERLYING LAND, AT THE FOLLOWING RESPECTIVE TIMES AND PRICES:

CHART AT END OF THE BASIC LEASE TERM------------------------------- $---- ----AT END OF THE FIRST RENEWAL TERM---------------------------- - $------ -- AT END OF THE SECOND RENEWAL TERM------------------------ ---- $------- - AT END OF THE THIRD RENEWAL TERM---------------------- ------- $-------- IN ACCORDANCE WITH ANY APPLICABLE FEDERAL STATUTES IN EFFECT NOW OR HEREAFTER WHILE THIS LEASE IS IN EFFECT; PROVIDED, HOWEVER, THAT THE GOVERNMENT SHALL GIVE THE LESSOR NOTICE OF ELECTION TO PURCHASE AT LEAST ONE YEAR IN ADVANCE OF THE RESPECTIVE TIMES SET OUT NEXT ABOVE.

SECTION 8 (1) OF THE POST OFFICE DEPARTMENT FINANCIAL CONTROL ACT OF 1950, 39 U.S.C. 794 (F), PROVIDES AS FOLLOWS:

IN THE PERFORMANCE OF, AND WITH RESPECT TO, THE FUNCTIONS, POWERS, AND DUTIES VESTED IN HIM, THE POSTMASTER GENERAL MAY---

(1) ENTER INTO SUCH LEASES OF REAL PROPERTY AS MAY BE NECESSARY IN THE CONDUCT OF THE AFFAIRS OF THE DEPARTMENT ON SUCH TERMS AS HE MAY DEEM APPROPRIATE, WITHOUT REGARD TO THE PROVISIONS OF ANY LAW, EXCEPT THOSE PROVISIONS OF LAW SPECIFICALLY APPLICABLE TO THE DEPARTMENT; * * *

SECTION 3736, REVISED STATUTES (41 U.S.C. 14), PROVIDES THAT NO LAND SHALL BE PURCHASED ON ACCOUNT OF THE UNITED STATES, EXCEPT UNDER A LAW AUTHORIZING SUCH PURCHASE. WE CONCUR WITH THE DEPARTMENT'S VIEW THAT OPTIONS TO PURCHASE DO NOT CONSTITUTE THE PURCHASE OF LAND OR ANY INTEREST IN LAND IN CONTRAVENTION OF SECTION 3736, REVISED STATUTES. 36 COMP. GEN. 48.

THEREFORE, AND SINCE IT IS STATED THAT YOU HAVE DETERMINED IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO CREATE THE OPPORTUNITY TO BUY THE PROPERTY AT THE END OF THE LEASE TERMS IF IT IS CONSIDERED ADVANTAGEOUS TO THE GOVERNMENT, WE PERCEIVE NO LEGAL OBJECTION TO INCLUDING THE PROPOSED PURCHASE OPTIONS IN THE DEPARTMENT'S LEASES. IT IS UNDERSTOOD, OF COURSE, IN VIEW OF SECTION 3736, REVISED STATUTES (41 U.S.C. 14), THAT NO OPTION MAY BE EXERCISED IN THE ABSENCE OF EXPRESS STATUTORY AUTHORITY AUTHORIZING PURCHASE OF THE LAND, AND APPROPRIATIONS AVAILABLE THEREFOR.

SINCE THE INCLUSION OF SUCH OPTIONS CONCEIVABLY COULD RESULT IN INCREASED RENTALS IN EXORBITANT OR UNJUSTIFIED AMOUNTS IN CERTAIN SITUATIONS, THERE IS SUGGESTED FOR ADMINISTRATIVE CONSIDERATION THE QUESTION WHETHER IN THE SOLICITATION OF BIDS THERE SHOULD NOT APPROPRIATELY BE INCLUDED A REQUIREMENT FOR ALTERNATIVE BIDS, FOR LEASES WITH AND WITHOUT THE PURCHASE OPTIONS, TO FACILITATE THE DETERMINATION WHETHER THE INCLUSION OF A PURCHASE OPTION IN EACH SITUATION IS IN THE BEST INTERESTS OF THE UNITED STATES.