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fered to new purchasers. Thus, the base price for the product in city Y is the highest price charged by C to the purchasers in city X in a substantial number of transactions during the freeze base period.

The provisions of § 300.409 which are applicable to new products and new services do not apply under these facts because the product was offered for sale by the seller during the preceding year. 6 CFR 300.409, 36 F.R. 25386 (December 30, 1971).

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3451, Feb. 16, 1972]

[Price Commission Ruling 1972-52] CONTINUING RIGHT OF OCCUPANCY

NOT A "TRANSACTION"

Facts. In February 1971, a lease was executed for the rental of a residence in a multiunit apartment complex for a term of 1 year commencing March 1, 1971. For purposes of executing a new lease with respect to the residence or the renewal of the existing lease, the lessor must determine "base rent" under the rent stabilization regulations governing rent charged after December 28, 1971. The lessor is desirous of charging a base rent determined by § 301.203(b), i.e., an "average transaction" rent calculated under § 301.206. He finds that a slight rental increase would be justified if an "average transaction" rent may be charged. The lessee, or prospective lessee, contends that § 301.202(b) is determinative of base rent, under which base rent would be the most recent monthly rent chaged during the period beginning on May 16, 1971 and ending on August 14, 1971. If so, the base rent, in this particular case, would constitute the same monthly rent the lessee has been paying under the terms of the lease.

Issue. When a residence becomes occupied during the period prescribed by § 301.203 (b) pursuant to the execution of a 1-year lease and no new transaction occurs with respect to the residence during the period prescribed by § 301.202(b) but the lessee contines to exercise his right of occupancy during the latter period, is base rent determined by § 301.203 (b) of § 301.202(b)?

Ruling. The regulations provide that a residence or other real property becomes occupied at the time a transaction in

volving the residence or property occurs. Economic Stabilization Regulations 6 CFR 301.8(b), 36 F.R. 25386 (Dec. 30, 1971), A "transaction", as defined by Economic Stabilization Regulations 6 CFR 301.2, 36 F.R. 25386 (Dec. 30, 1971), is considered to occur at the time and place a lease or covenant to lease is executed by the parties. The lease of the subject residence was executed during the period prescribed by § 301.203(b) of the regulations (the period before May 15, 1971), and therefore, the residence "became occupied" during the period of time. It did not again become occupied during the period prescribed by § 301.202(b) of the regulations (the period beginning on May 16, 1971, and ending on Aug. 14, 1971) since no new transaction occurred within that period. During the period beginning on May 16, 1971, and ending on August 14, 1971, the lessee simply continued to exercise his right of occupancy acquired by the transaction prior to May 15, 1971. The base rent of the residence, therefore, is the "average transaction" rent provided for in § 301.203(b). Had the residence "become occupied" during the period beginning on May 16, 1971, and ending on August 14, 1971, by virtue of a "transaction" having occurred within that period with respect to the residence, base rent would be determined pursuant to § 301.202(b) since that section would appear first in the sequence under which the residence qualifies. Section 301.201 (c) of the regulations provides that if a residence or other real property qualifies under more than one section of §§ 301.202 through 301.205, the section appearing first in the sequence under which the residence or other real property qualifies controls.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3752, Feb. 16, 1972]

[Price Commission Ruling 1971-53] POLLUTION CONTROL EXPENDITURES ARE ALLOWABLE COSTS

Facts. Company A is manufacturer. Recently promulgated regulations of the Federal, State, and local governments require Company A to undertake substantial capital expenditures to meet relevant clean water and clean air standards.

Issue. May pollution control expenditures be treated as allowable costs for

the purpose of increasing prices under the Economic Stabilization Regulations? Ruling. Yes. An allowable cost is defined by Economic Stabilization Regulations, 6 CFR 300.5, 36 F.R. 23974 (December 16, 1971) as any direct or indirect cost, unless disallowed by the Price Commission. A manufacturer may therefore charge a price in excess of the base price to reflect these costs, reduced to reflect any productivity gains, to the extent that the increased price does not result in an increase in its profit margin over that which prevailed during the base period.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3452, Feb. 16, 1972]

[Price Commission Ruling 1972-54]

MONTH-TO-MONTH TENANT HAS NEW TRANSACTION EACH MONTH

Facts. X owns an apartment building containing several residential units. On December 1, 1971, he leased one of these units to Y on a month-to-month basis. At that time X charged Y a base rent determined under 6 CFR Part 300 (Economic Stabilization Regulations, 6 CFR 300, 36 F.R. 23974 (December 16, 1971)) as the highest price charged with respect to substantially identical units during the period from July 16, 1971 through August 14, 1971 (the "freeze base period"). Y continued in possession of the unit on January 1, 1972, but contends that the monthly rentail charged after December 28, 1971 exceeds 2.5 percent of the base rent computed under the rent stabilization regulations effective on December 29, 1971 (Economic Stabilization Regulations, 6 CFR Part 301, 36 F.R. 25386 (December 30, 1971)) consequently, the rent should be "rolled back" to conform to Part 301. X contends that Part 301 is not applicable in that Y's occupancy began before the effective date of that part and that his compliance with Part 301 would only be required when he enters into a new lease agreement with Y calling for a rental increase or leases the unit to a new occupant.

Issue. Does a month-to-month tenant's exercise of his right of occupancy for

a

new monthly term subsequent to December 28, 1971, constitute a "transaction" subject to the requirements of Part 301?

Ruling. Yes. While § 301.1 provides that Part 301 is applicable to "increases"

in rents to be paid for any residence which occur after December 28, 1971, other provisions of those regulations make it clear that no person may charge a monthly rent exceeding base rent to be determined under Subpart C, with respect to any transaction after December 28, 1971, except as otherwise provided by that part (§§ 301.101 and 301.102). Further § 301.102(a) provides that when a residence becomes occupied after December 28, 1971, a monthly rent must conform to that section.

Under Part 301 a residence "becomes occupied" at the time when a transaction involving that residence or other real property occurs (§ 301.8(b), see Example 1 under that section). A "transaction" is considered to occur at the time and place a lease or covenant to lease is executed by the parties, created by implication, or when an implied contract of Occupancy comes into being (§ 301.2). Because of Y's continued rental of the residence on January 1, 1972, under the prior lease agreement on month-tomonth terms the residence "becomes occupied" under § 301.8 (a) and (b) since, on that date, a new covenant to lease is created by implication or by an implied contract of occupancy. This new covenant constitutes a "transaction" after December 28, 1971, which is governed by Part 301.

This ruling has been approved by the General Counsel of the Price Comimssion.

[37 F.R. 3452, Feb. 16, 1972]

[Price Commission Ruling 1972-55]

ALLOCATION OF CAPITAL
IMPROVEMENT COSTS

Facts. A lessor owns an apartment building containing 10 units. Five units have picture windows on the west side of the building and the remaining five units have picture windows on the east side of the building. After August 15, 1971, the lessor installs awnings on the west side picture windows which are particularly affected by the glare of the afternoon sun. Lessor seeks to allocate the cost of the improvement to all of the units under the capital improvement provisions of the new rent regulations.

Issue. May the lessor allocate the cost of a capital improvement of an apartment building or complex to all rental units of that apartment building or complex?

Ruling. A lessor may charge a monthly rent in excess of the base rent for a residence or other real property which has been benefited by a capital improvement made after August 15, 1971. Economic Stabilization Regulations 6 CFR 301.103 (a), 36 F.R. 25386 (Dec. 30, 1971). A "residence" is defined by the regulations as a "unit of housing normally occupied as a dwelling place." (Economic Stabilization Regulations 6 CFR 301.2, 36 F.R. 25386 (Dec. 30, 1971).) The apartment building, therefore, consists of 10 residences.

The allowability of the cost of a capital improvement to the monthly rent of a residence depends upon whether that residence benefited from the improvement. Since the awnings benefited only five of the residences in the apartment building, the cost of the improvement may be allocated only to the monthly rent of those units.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3452, Feb. 16, 1972]

[Price Commission Ruling 1972–56] CAPITAL IMPROVEMENTS BEFORE

DECEMBER 29, 1971

Facts. After August 15, 1971, but before December 29, 1971, a lessor made certain capital improvements to a residence which was leased on month-tomonth terms. The monthly rent prior to December 29, 1971, was not increased to reflect the cost of the improvements because they were not "substantial" under Economic Stabilization Regulations effective prior to December 29 (6 CFR 300.409(d)); thus, an increase in rent based upon the cost of the improvements was not allowable under those regulations. The lessor proposes to increase the monthly rent for the residence based upon those improvements under the regulations effective after December 28, 1971 (6 CFR 301.103).

Issue. May the cost of a capital improvement made after August 15, 1971, but before December 29, 1971, justify an increase in monthly rent under § 301.103 of the regulations when such increase was not allowable under Economic Stabilization Regulations in effect at the time the improvement was made?

Ruling. The regulations provide that a monthly rent in excess of base rent may be charged for a residence or other real

property benefited by a capital improvement made after August 15, 1971. Economic Stabilization Regulations 6 CFR 301.103 (a), 36 F.R. 25386 (Dec. 30, 1971). That the increase reflecting the cost of the improvement may have been prohibited by regulations in effect at the time the improvement was made is immaterial. The allowable increase in monthly rent over base rent of 11⁄2 percent of the cost of the improvement would not be allowable, however, if such increase would be less than $1 per month (except in those cases in which a substantial capital improvement has been made which directly benefits all residences in a building or complex taken as a whole). Economic Stabilization Regulations 6 CFR 301.103(b), 36 F.R. 25386 (Dec. 30, 1971).

This ruling has been approved by the General Counsel of the Price Commission. [37 F.R. 3453, Feb. 16, 1972]

[Price Commission Ruling 1972-57] MOTEL UNITS AS RESIDENCES Facts. X owns a motel containing 10 units. Three of the units are customarily rented by the month to students at a local college during the school year. Y, a student, rented one of the three units for $100 a month on August 20, 1971. Y spent school holidays and some weekends at his parents' home which was 60 miles away, but lived in the motel unit while attending classes at the college. Upon return to school after the Christmas holidays, Y was informed by X on January 3, 1972, that rent of the unit would be increased to $125 a month effective February 1, 1972.

Issue. Is the rate for the motel unit rented by Y subject to the provisions of the regulations which govern increases in rent to be paid for any "residence" which occur after December 28, 1971?

Ruling. A "residence" is defined in the regulations as "a unit of housing normally occupied as a dwelling place." A unit of housing need not be a principal residence to come within the term, and whether or not property is used as a residence depends upon the facts and circumstances of each case. A hotel or motel-type housing unit may be a "residence" if it is "the principal place of abode of nontransient occupants." Economic Stabilization Regulations 6 CFR 301.2, 36 F.R. 25836 (Dec. 30, 1971).

Y used the unit as his "principal place of abode," although he spent weekends

and holidays with his parents at his principal residence 60 miles away. Since Y rented the unit by the month while attending a local college, he was not a transient occupant. Therefore, the increase in rent of the unit must conform to the requirements of Part 301.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3453, Feb. 16, 1972]

[Price Commission Ruling 1972-58] CAPITAL IMPROVEMENTS INSTALLED BUT NOT FUNCTIONAL BEFORE AUG. 15, 1971

Facts. Before August 15, 1971, a lessor purchased a central air-conditioner for his building. The air-conditioner was installed and operative after August 15, 1971. In a notification which conforms to the requirements of the rent regulations lessor proposes to increase the monthly rent of each residence benefited by the capital improvement by not more than 12 percent of the cost of the capital improvement allocable to such residences. Issue. Are the residences benefited by a capital improvement "made after August 15, 1971"?

Ruling. Although the central air-conditioner was purchased before August 15, 1971, it did not become operative or function before that date; i.e., the residences were not benefited by the capital improvement until after August 15, 1971. Under these facts the capital improvement is considered to have been made after August 15, 1971. Lessor may, therefore, increase the monthly rent of the benefited residences by not more than 12 percent of the part of the cost of the improvement allocable to each such residence. Economic Stabilization Regulations 6 CFR 301.103, 36 F.R. 25386 (December 30, 1971).

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3454, Feb. 16, 1972]

[Price Commission Ruling 1972-59] BASE RENT RATHER THAN CURRENT RENT TO BE USED FOR FUTURE INCREASES

Facts. X entered into an agreement with Y for the lease of X's unit of residential housing to Y commencing February 1, 1972. Y agreed to pay a monthly rent of $205 which included a base rent

properly computed under Subpart C of Part 301 (Economic Stabilization Regulations, 6 CFR Part 301, 36 F.R. 25386 (December 30, 1971)), plus a 21⁄2 percent allowable rent increase over the base rent for the 12-month period beginning on February 1 (§ 301.102(a)(1)). On January 1, 1973, X delivered to Y a notification of rental increase to $210.13 per month effective February 1, 1973, in the form and manner prescribed by § 301.502. The increase is based upon the allowable increase of 22 percent with respect to the 12-month period beginning February 1, 1973; however, the amount of the proposed increase is 22 percent of the total rent currently charged.

Issue. Whether an allowable rent increase under § 301.102(a) (1) is computed as 22 percent of the current rent (where the current rent includes base rent plus an allowable increase of 21⁄2 percent of base rent for a previous 12month period) or whether an allowable increase under that section is computed as 22 percent of base rent only.

Ruling. X may charge only $210 per month beginning February 1, 1973. An allowable rent increase under § 301.102 (a) (1) is 22 percent of the base rent for the residence or other real property with respect to each 12-month period beginning after December 28, 1971. The base rent of a residence or other real property, as determined by Subpart C of Part 301, is not subject to change but remains the same irrespective of allowable rent adjustments under Subpart B or changes in ownership or management (see § 301.201(a)). The 22 percent increase allowed in 1973 rent is thus limited to 22 percent of $200 (which is the base rent), or $5 per month, and may not be computed so as to include 22 percent of increases previously allowed to be added to the base rent.

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3454, Feb. 16, 1972]

[Price Commission Ruling 1972-60]

POSTING ITEM PRICES

Facts. A drugstore has more than one price for particular items it sells. For instance, the 6-oz. bottle of X shampoo sells for 28 cents while the 12-oz. bottle of the same shampoo sells for 48 cents. Thus, a person who buys the 12-oz. size pays less per ounce.

Issue. Must the drugstore post its various quantity prices for the single product? Is each separate quantity price a separate item under 6 CFR 300.13(b), 36 F.R. 23974 (December 16, 1971) ?

Ruling. A drugstore must post its base prices for the 40 items which had the largest dollar sales volume during that year, or those items which accounted for at least 50 percent of its total dollar sales during that year, whichever is less (§ 300.13(b)). Thus, if a retailer has more than one price for an item, he must post all such "prices". On the other hand, the regulation refers to the posting of 40 "item" prices and not 40 prices for items. It is clear, therefore, that all quantity prices must be posted by the drugstore for the 40 largest selling items during its base period.

This ruling has been approved by the General Counsel's Office of the Price Commission.

[37 F.R. 3454, Feb. 16, 1972]

[Price Commission Ruling 1972-61] FUNERAL DIRECTORS AS SERVICE ORGANIZATIONS AND RETAILERS

Facts. A is a funeral director who provides various funeral services and related products to his customers. A customarily uses different methods in determining his prices, depending upon the type of service provided. If a customer chooses a "standard service", A provides a certain casket and other items plus his professional services and the use of his facilities for an established price. If customers wish to differ from the "standard service", those services or items which they prefer will be provided; such items and their prices are then separately itemized on A's bill. Since the costs of A's services are the dominant portion of this overall costs, he may be a "service organization" within the Economic Stabilization Regulations; however, since A also separately sells caskets and other burial items, he may also fit within the definition of a "retailer" provided by the regulations.

Issue. Is A a "service organization” or a "retailer" within the Economic Stabilization Regulations?

Ruling. A may be either a "service organization" or a "retailer" under the Economic Stabilization Regulations, depending upon the circumstances surrounding its transactions.

To the extent that A provides a package of specified merchandise and services

at an established price, in which the merchandise comprises an insubstantial portion of A's costs and is sold incidentally to the performance of A's professional services, A will be considered a "service organization" under the definition provided by the Economic Stabilization Regulations, 6 CFR 300.5, 36 F.R. 23974 (December 16, 1971) and will thus be governed by § 300.14 of the Regulations in such transactions. Economic Stabilization Regulations 6 CFR 300.14 36 F.R. 23974 (December 16, 1971).

However, when the sale of one of more items of merchandise are separately negotiated upon between A and his customers, A is a "retailer" to the extent of such separately negotiated merchandise sales, and is thus regulated by § 300.13 of the regulations. Economic Stabilization Regulations 6 CFR 300.13, 36 F.R. 23974 (December 16, 1971).

This ruling has been approved by the General Counsel of the Price Commission.

[37 F.R. 3454, Feb. 16, 1972]

[Price Commission Ruling 1972-62] LANDLORD'S RECORDS AS TO BASE PRICES

Facts. A landlord has notified a tenant that his rent will be increased when his lease expires.

Issue. How can the tenant determine what the landlord may charge under the Economic Stabilization regulations?

Ruling. A landlord may charge no more than the "base price" for a rental unit. Economic Stabilization Regulations 6 CFR 300.11, 36 F.R. 21792 (November 13, 1971). Generally, the base price is the rental stipulated for the unit or a substantially identical unit at least 10 percent of the leases executed during the period July 16-August 14, 1971. Economic Stabilization Regulations 6 CFR 300.507 (b), 36 F.R. 21792 (November 13, 1971). A landlord must keep records and make them available at the request of any tenant, or representative of the Price Commission (including the Internal Revenue Service). Economic Stabilization Regulations 6 CFR 300.15, 36 F.R. 23974 (December 16, 1971). Upon the request of any tenant, or prospective tenant, the landlord must make available records which reflect:

(1) The base price for each rental unit; and,

(2) The reason for any difference between the base price and the maximum

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