B-169617, JUL. 13, 1970

B-169617: Jul 13, 1970

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

INCIDENT TO TRANSFER TO NEW STATION IN THE PITTSBURGH AREA WAS CHARGED A "MECHANICS LIENS FEE" WHICH WAS INCLUDED IN THE PURCHASE OF A RECENTLY CONSTRUCTED HOUSE MAY BE REIMBURSED THE FEE SINCE IT IS IN THE FORM OF AN OWNER'S TITLE INSURANCE POLICY WHICH IS FOR THE PROTECTION OF THE LENDER AND REQUIRED IN THE STATE OF PENNSYLVANIA IN THE SALE AND PURCHASE OF REAL PROPERTY. WILBANKS: REFERENCE IS MADE TO YOUR LETTER OF APRIL 14. RONALD TROOP COVERING HIS TRANSFER FROM MINNEAPOLIS TO PITTSBURGH IS PROPER FOR REIMBURSEMENT. THE ITEM IN QUESTION IS LABELED "MECHANICS LIENS FEE" IN THE AMOUNT OF $89.50 AND WAS INCURRED IN THE PURCHASE OF A HOME IN THE PITTSBURGH AREA. WE NOW HAVE BEEN ADVISED BY THE FEDERAL HOUSING ADMINISTRATION INSURING OFFICE IN PITTSBURGH OF THE FOLLOWING: "1.

B-169617, JUL. 13, 1970

CIVIL PAY -- PURCHASE OF HOUSE INCIDENT TO TRANSFER -- "MECHANICS LIEN FEE" INSURANCE DECISION TO CERTIFYING OFFICER, DEPT. OF INTERIOR APPROVING CERTIFICATION OF A VOUCHER REPRESENTING PAYMENT OF A "MECHANICS LIENS FEE" INCLUDED IN THE PURCHASE PRICE OF A HOME IN THE PITTSBURGH AREA EMPLOYEES NEW STATION. EMPLOYEE WHO, INCIDENT TO TRANSFER TO NEW STATION IN THE PITTSBURGH AREA WAS CHARGED A "MECHANICS LIENS FEE" WHICH WAS INCLUDED IN THE PURCHASE OF A RECENTLY CONSTRUCTED HOUSE MAY BE REIMBURSED THE FEE SINCE IT IS IN THE FORM OF AN OWNER'S TITLE INSURANCE POLICY WHICH IS FOR THE PROTECTION OF THE LENDER AND REQUIRED IN THE STATE OF PENNSYLVANIA IN THE SALE AND PURCHASE OF REAL PROPERTY.

TO MRS. JEANNETTE B. WILBANKS:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 14, 1970, IN WHICH YOU REQUEST OUR DECISION AS TO WHETHER AN ITEM ON A VOUCHER SUBMITTED BY MR. RONALD TROOP COVERING HIS TRANSFER FROM MINNEAPOLIS TO PITTSBURGH IS PROPER FOR REIMBURSEMENT. THE ITEM IN QUESTION IS LABELED "MECHANICS LIENS FEE" IN THE AMOUNT OF $89.50 AND WAS INCURRED IN THE PURCHASE OF A HOME IN THE PITTSBURGH AREA.

WE NOW HAVE BEEN ADVISED BY THE FEDERAL HOUSING ADMINISTRATION INSURING OFFICE IN PITTSBURGH OF THE FOLLOWING:

"1. THE NATURE AND PURPOSE OF THE MECHANICS LIENS FEE IS TO PROTECT THE PURCHASER AGAINST ANY LIENS BEING FILED AGAINST THE PROPERTY BY SUB CONTRACTORS WHO MIGHT NOT BE PAID FOR LABOR AND MATERIAL FURNISHED THE CONTRACTOR. THE SUB-CONTRACTOR HAS 6 MONTHS AFTER COMPLETION OF THE JOB IN WHICH TO FILE HIS LIENS UNDER A PENNSYLVANIA STATUTE. IT IS THE LOCAL CUSTOM AND PRACTICE TO CHARGE SUCH A FEE AT CLOSING.

"2. THE FEE IS CUSTOMARILY PAID BY THE PURCHASER.

"3. IT IS RESTRICTED TO SALE AND PURCHASE OF HOMES UNDER CONSTRUCTION, NEW HOMES AS DISTINGUISHED FROM EXISTING DWELLINGS.

"4. (IT IS) COMPARABLE TO A TITLE INSURANCE POLICY."

SECTION 4.2D OF BUREAU OF THE BUDGET CIRCULAR NO. A-56 STATES, IN PERTINENT PART, AS FOLLOWS:

"IN CASES INVOLVING CONSTRUCTION OF A RESIDENCE, REIMBURSEMENT OF EXPENSES WOULD INCLUDE THOSE ITEMS OF EXPENSE WHICH ARE COMPARABLE TO EXPENSES THAT ARE REIMBURSABLE IN CONNECTION WITH THE PURCHASE OF EXISTING RESIDENCES AND WILL NOT INCLUDE EXPENSES WHICH RESULT FROM CONSTRUCTION."

IN INTERPRETING THE ABOVE REGULATION OUR PRIOR DECISIONS HAVE STATED, IN SUBSTANCE, THAT EXPENSES INCURRED IN THE CONSTRUCTION OF RESIDENCES WILL BE ALLOWED TO THE EXTENT TO WHICH THEY ARE COMPARABLE TO EXPENSES INCURRED IN THE PURCHASE OF AN EXISTING RESIDENCE. STATED MORE EXPLICITLY, NO EXPENSES ARE ALLOWABLE WHICH ARE PARTICULARLY RELATED TO THE CONSTRUCTION PROCESS. SEE B-168710, FEBRUARY 4, 1970; B-164938, AUGUST 26, 1968; B- 164452, JULY 2, 1968; AND B-164044, JUNE 7, 1968, COPIES HEREWITH.

WE ASSUME IN THIS CASE THAT THE HOUSE PURCHASED BY MR. TROOP WAS NOT CONSTRUCTED BY OR FOR HIM BUT WAS A NEW HOUSE RECENTLY CONSTRUCTED BY A BUILDER OR REALTOR AND WAS STILL SUBJECT TO THE SIX-MONTH PERIOD WITHIN WHICH A MECHANICS LIEN MAY BE FILED UNDER THE PENNSYLVANIA STATUTE.

WE HAVE OBTAINED ADDITIONAL INFORMATION FROM THE WASHINGTON OFFICE OF THE FEDERAL HOUSING ADMINISTRATION TO THE EFFECT THAT THE MECHANICS LIENS FEE HERE INVOLVED (APPARENTLY FOR SOME TYPE OF INSURANCE POLICY) IS FOR THE PROTECTION OF BOTH THE LENDER AND THE PURCHASER AND IS APPARENTLY REQUIRED BY LENDERS IN THE STATE OF PENNSYLVANIA IN THE SALE AND PURCHASE OF REAL PROPERTY. THEREFORE, IT APPEARS THAT THIS ADDITIONAL PROTECTION IS SIMILAR TO AN OWNER'S TITLE INSURANCE POLICY WHICH THE PURCHASER OBTAINS FOR THE PROTECTION OF THE LENDER. WE HAVE HELD THAT AS TO AN OWNER'S TITLE POLICY, SUCH COST IS REIMBURSABLE WHEN INCURRED BY THE PURCHASER FOR THE PROTECTION OF THE LENDER IF, IN THE AREA INVOLVED, IT IS CUSTOMARILY PAID FOR BY THE PURCHASER. SEE B 161459, PUBLISHED AT 46 COMP. GEN. 884 (1967); B-164541, JULY 10, 1968; B-163000, JANUARY 17, 1968; B-164867, SEPTEMBER 4, 1968; AND B-162511, OCTOBER 13, 1967, COPIES OF WHICH ARE ENCLOSED.

ON THE BASIS OF THE FOREGOING, THE MECHANICS LIENS FEE PAID BY MR. TROOP IS REIMBURSABLE.