Government Authority to Acquire Leasehold Interests in Real Property Under the Declaration of Taking Act ( 1978 )

May 9, 1978
78-23 MEMORANDUM OPINION FOR THE
ASSISTANT ATTORNEY GENERAL, LAND
AND NATURAL RESOURCES DIVISION
Eminent Domain— Leaseholds— Rentals—
Economy Act Limitation (40 U.S.C.§ 278(a))
This responds to your request for our opinion on whether the United States is
authorized to acquire leasehold interests in real property by proceedings under
the Declaration of Taking Act, 40 U .S.C . § 258(a), where the estimated fair,
annual rent exceeds the limitation provided by § 322 of the Economy Act, 40
U .S.C . § 278(a). The General Services A dm inistration (GSA) has requested the
advance opinion of the Com ptroller General on this question in connection with
a proposed taking.
Section 322 of the Economy Act, 40 U .S .C . § 278(a), provides in pertinent
part:
After June 30, 1932, no appropriation shall be obligated or ex­
pended for the rent o f any building or part o f a building to be
occupied for Governm ent purposes at a rental in excess of the per
annum rate of 15 per centum o f the fair market value o f the rented
premises at date o f the lease under which the premises are to be
occupied by the Government . . . .
GSA states that its estimate o f the fair rental value o f the space to be leased is
greater than 15 percent o f its fair market value. Plainly, GSA could not enter
into a voluntary lease. The question, then, is whether there is a permissible
alternative route bypassing the 15 percent limitation. We think not.
Under the Declaration o f Taking Act, the Government files a declaration of
taking which includes an estimate o f the fair value o f the property involved, and
it deposits that sum in court. It acquires title when the declaration is filed, and is
irrevocably committed to pay judicially fixed just compensation. See 40
U .S.C . § 258(a).1 As you know, the Federal courts consistently have held that
the measure of just compensation for taking a leasehold interest is its fair rental
'See also 74 Cong. Rec. 779 (1931).
96
value. See, e.g ., Kimball Laundry Co. v. United States, 338 U .S. 1, 7 (1949);
John Hancock M utual Life Ins. Co. v. United States, 155 F. (2d) 977, 978 (1st
Cir. 1946); United States v. 883.89 Acres o f Land, E tc., Sebastian Co., A rk.,
314 F. Supp. 238 (W .D . Ark. 1970), a f f d , 442 F. (2d) 262 (1971). To file a
declaration of taking for a leasehold with fair rental value of more than 15
percent of the market value of the premises would thus, in effect, obligate the
United States to pay rent at that level.
Section 3 of the Declaration o f Taking Act, 40 U .S.C . § 258(c), provides:
Action under section 1 of this Act [40 U .S.C . § 258(a)] irrevocably
committing the United States to the payment of the ultimate award
shall not be taken unless the chief o f the executive department or
agency or bureau o f the Government empowered to acquire the land
shall be o f the opinion that the ultimate award probably will be within
any limits prescribed by Congress on the price to be paid.
In addition to its plain language, the legislative history of the section
conclusively demonstrates that its purpose is to prohibit an agency from using
§ 258(a) to obligate funds in excess o f any statutory limit. The Act originated
from a condemnation statute for the District o f Columbia which lacked such a
provision. The Department o f Justice proposed § 258(c) after experience with
the local statute showed that condemnation proceedings initiated at the request
of agencies could bypass statutory limits on expenditures. See H. Rept. 2086,
71st Cong., 3d sess., at 2. During the debate Representative LaGuardia ex­
plained the section’s purpose as follows:
1 think section 3, which the gentleman has some misgivings about, is
for the very purpose o f preventing abuses and undue expenditures,
which the gentleman seeks to avoid. It states that before you can avail
yourself o f the benefit o f this law, a responsible agency head must
certify that the land in question will not cost, even in condemnation,
beyond the amount authorized by C ongress.2 [Emphasis added.]
In short, 40 U .S.C . § 258(c) forbids an agency to initiate proceedings under 40
U.S.C. § 258(a) when it knows or believes that the result will be to require
payment of more than Congress has authorized.
GSA relies primarily upon a statement in 22 Comp. Gen. 1112, 1114-15
(1942), that § 322 of the Economy Act does not, and cannot, limit an ow ner’s
constitutional right to receive just compensation for property taken by the
Government. From this, it concludes that any leasehold may be acquired under
the Declaration of Taking Act without regard to the limitation provided by
§ 322. However, this reading of the Com ptroller G eneral’s decision is overly
broad.
The proceeding discussed in that decision was brought under § 201 of Title
II, Second W ar Powers Act, 56 Stat. 177. Under that section, after the
Government filed the condemnation petition, “ immediate possession may be
taken and the property may be occupied, used, and improved for the purposes
274 Cong. Rec. 778 (1931).
97
of this Act, notwithstanding any other law .” This language, said the Comptrol­
ler General, ‘‘negatives the idea that it was intended to be subject to the
restrictions of § 322 o f the Economy A c t.” 22 Comp. Gen. 1112, 1115. Thus,
the Comptroller General held that Congress did not intend that § 322 limit the
amount of compensation for a condemned leasehold.
In contrast, 40 U .S.C . § 258(c) does, in our opinion, incorporate § 322 of the
Economy Act. It does so, however, not as a limit on the compensation received
by the owner, but as a restriction on the G overnm ent’s authority to take the
property in the first instance. Once a declaration o f taking has been filed, 40
U .S.C . § 258(a) com mits the Government to pay whatever sum the court finds
to be just com pensation. Furtherm ore, the legislative history of the Declaration
of Taking Act shows that Congress understood that a property ow ner’s constitu­
tional right to just com pensation was not limited by the statute.3 On the other
hand, Congress also intended to protect its own constitutional power to control
the expenditure of appropriated funds. It reconciled the two by forbidding the
Government to incur liability for just compensation when it appeared that
statutory limits on expenditure would be exceeded. Since 40 U .S.C . § 258(c)
limits authority to take, and not the amount o f compensation paid after taking,
it is not inconsistent with the portion o f the Comptroller G eneral’s decision on
which GSA relies.
To summ arize, it is our opinion that 40 U .S.C . § 258(c) incorporates the
restriction on the payment o f rent contained in § 322 of the Economy Act and
prohibits the Governm ent from filing a declaration of taking when it knows that
just compensation would exceed that limit. While the Comptroller General’s
decision limits the effect o f § 322 on the G overnm ent’s duty to pay just
com pensation, it does not purport to affect the power of Congress to prevent the
Government from incurring that obligation in the first instance.
L eon U lm an
Deputy Assistant Attorney General
Office o f Legal Counsel
'74 Cong. Rec. 779(1931).
98