B-165146, SEPT. 16, 1968

B-165146: Sep 16, 1968

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WHICH WAS FORWARDED TO THIS OFFICE ON AUGUST 26. THE RESIDENCE IN QUESTION IS BEING PURCHASED BY THE EMPLOYEE UNDER AN AGREEMENT OF SALE ENTITLED "LAND INSTALLMENT CONTRACT" AND THE BUYER WILL NOT OBTAIN TITLE TO THE PREMISES UNTIL SOME FUTURE DATE. THE PRIMARY QUESTION IS WHETHER SUCH CONTRACTUAL ARRANGEMENT CONSTITUTES THE PURCHASE OF A RESIDENCE WITHIN THE MEANING OF 5 U.S.C. 5724A (A) (4) AND IMPLEMENTING REGULATIONS CONTAINED IN SECTION 4 OF BUREAU OF THE BUDGET CIRCULAR NO. IT IS OUR OPINION THAT THE CASE IS NOT MATERIALLY DIFFERENT FROM THAT DECIDED BY OUR OFFICE ON FEBRUARY 28. THAT IS TO SAY. THAT NOTWITHSTANDING THE FACT THAT LEGAL TITLE WAS NOT TRANSFERRED AT THE TIME OF THE EXECUTION OF THE CONTRACT OF SALE THE EFFECT OF SUCH CONTRACT WAS TO TRANSFER EQUITABLE OWNERSHIP OF THE PROPERTY TO THE BUYER.

B-165146, SEPT. 16, 1968

TO MAJOR J. E. INGLES:

WE REFER TO YOUR MEMORANDUM OF AUGUST 2, 1968, PERTAINING TO THE CLAIM OF ALBERT O. BIRD, JR., WHICH WAS FORWARDED TO THIS OFFICE ON AUGUST 26, 1968, BY FIRST INDORSEMENT OF THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE. YOUR MEMORANDUM REQUESTS A DECISION CONCERNING THE PROPRIETY OF THE PAYMENT OF CERTAIN REAL ESTATE EXPENSES INCIDENT TO THE PURCHASE OF A RESIDENCE BY AN EMPLOYEE OF THE NATIONAL SECURITY AGENCY UPON HIS TRANSFER FROM WASHINGTON, D.C., TO FORT GEORGE G. MEADE. THE RESIDENCE IN QUESTION IS BEING PURCHASED BY THE EMPLOYEE UNDER AN AGREEMENT OF SALE ENTITLED "LAND INSTALLMENT CONTRACT" AND THE BUYER WILL NOT OBTAIN TITLE TO THE PREMISES UNTIL SOME FUTURE DATE.

THE PRIMARY QUESTION IS WHETHER SUCH CONTRACTUAL ARRANGEMENT CONSTITUTES THE PURCHASE OF A RESIDENCE WITHIN THE MEANING OF 5 U.S.C. 5724A (A) (4) AND IMPLEMENTING REGULATIONS CONTAINED IN SECTION 4 OF BUREAU OF THE BUDGET CIRCULAR NO. A-56, REVISED OCTOBER 12, 1966.

UNDER THE TERMS OF THE CONTRACT, TITLE TO THE PROPERTY WOULD REMAIN IN THE SELLER UNTIL SUCH TIME AS THE BUYER PAYS THE FULL PURCHASE PRICE OF THE PROPERTY OR UNTIL, IN ACCORDANCE WITH THE TERMS OF THE CONTRACT, THE SELLER EXECUTES AND DELIVERS A DEED TO THE PURCHASER AND THE PURCHASER EXECUTES THE NECESSARY NOTES AND MORTGAGES TO SECURE PAYMENT OF THE FULL PURCHASE PRICE OF THE PROPERTY.

WHILE THE CONTRACT OF SALE DOES NOT ACTUALLY CONVEY LEGAL TITLE TO THE BUYER, IT DOES OPERATE TO TRANSFER THE BENEFICIAL USE AND ENJOYMENT OF THE PROPERTY TO THE BUYER ALTHOUGH THE SELLER RESERVED A LIMITED RIGHT TO MORTGAGE SUCH PROPERTY DURING THE PERIOD OF THE CONTRACT PROVIDED SUCH MORTGAGE "SHALL BE SATISFIED AND RELEASED" PRIOR TO CONVEYING LEGAL TITLE TO THE BUYER.

IT IS OUR OPINION THAT THE CASE IS NOT MATERIALLY DIFFERENT FROM THAT DECIDED BY OUR OFFICE ON FEBRUARY 28, 1967, B-160799, 46 COMP. GEN. 677. THAT IS TO SAY, THAT NOTWITHSTANDING THE FACT THAT LEGAL TITLE WAS NOT TRANSFERRED AT THE TIME OF THE EXECUTION OF THE CONTRACT OF SALE THE EFFECT OF SUCH CONTRACT WAS TO TRANSFER EQUITABLE OWNERSHIP OF THE PROPERTY TO THE BUYER, THE LEGAL TITLE BEING WITHHELD BY THE SELLER FOR THE PRIMARY PURPOSE OF GUARANTEEING PAYMENT OF THE FULL PURCHASE PRICE OF THE PROPERTY. THEREFORE, IT REASONABLY MAY BE CONCLUDED FOR PURPOSES OF PAYMENT OF REAL ESTATE EXPENSES UNDER THE ABOVE-CITED LAW AND REGULATIONS, THAT THE PURCHASE OF THE PROPERTY WAS EFFECTED UNDER THE CONTRACT OF SALE.

THE ITEM FOR MORTGAGE TITLE INSURANCE EXPENSE IN THE AMOUNT OF $127.75 DOES NOT APPEAR TO BE REIMBURSABLE UPON THE PRESENT RECORD SINCE, AS WE UNDERSTAND THE FACTS AS PRESENTED, THE PURCHASER OF THE PROPERTY HAS NOT EXECUTED ANY MORTGAGE. APPARENTLY, THERE WAS A $25,000 MORTGAGE ON THE PROPERTY THAT WAS EXECUTED BY THE SELLER BUT THE PURCHASER OF THE PROPERTY DID NOT ASSUME SUCH MORTGAGE BUT MERELY AGREED WITH THE SELLER THAT HE WOULD MAKE THE SELLER'S PAYMENT UNDER SUCH MORTGAGE. THAT IS TO SAY, THE LEGAL OBLIGATION UNDER THE MORTGAGE WAS THAT OF THE SELLER AND NOT THE BUYER AND THAT ANY MORTGAGE INSURANCE WOULD APPEAR TO HAVE BEEN PAID BY THE SELLER WHEN OBTAINING SUCH MORTGAGE RATHER THAN THE PURCHASER. THUS, ON THE PRESENT RECORD THERE DOES NOT APPEAR TO BE ANY BASIS FOR REIMBURSING THE EMPLOYEE (PURCHASER) FOR ANY PART OF THE $127.75 ITEM CLAIMED AS A MORTGAGE TITLE POLICY COST. CONSEQUENTLY, THE VOUCHER WHICH IS RETURNED HEREWITH MAY BE PAID AN AMOUNT NOT IN EXCESS OF $453.30.