B-177328, MAR 2, 1973

B-177328: Mar 2, 1973

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THE $432 CLAIMED AS AN "INITIAL SERVICE CHARGE" IS IN THE NATURE OF A 1 PERCENT POINT OR INTEREST AND AS SUCH IS NOT REIMBURSABLE UNDER OMB CIRCULAR NO. ALTHOUGH THE RESIDENCE IS LOCATED ON LAND HELD UNDER A LONG TERM LEASE. ADDITIONAL EXPENSES TOTALING $332.85 ARE REIMBURSABLE IN ADDITION TO THE PRIOR PAYMENT. AKANA WAS AUTHORIZED A PERMANENT CHANGE OF STATION FROM GUAM. TO PURCHASE A DWELLING FROM WALTER STROBEL AND HIS WIFE AND SINCE IT WAS ANTICIPATED THAT THERE WOULD BE A DELAY IN SETTLEMENT DUE TO THE SECURING OF MORTGAGE FINANCING. STROBEL'S INTEREST IN A LEASE ON THE LAND ON WHICH THE DWELLING WAS SITUATED. AKANA WAS REQUIRED TO RENEGOTIATE THE LEASE WITH THE LESSOR. ORIGINALLY THE LEASE APPARENTLY WAS FOR A PERIOD OF 51 YEARS BEGINNING IN NOVEMBER 1943.

B-177328, MAR 2, 1973

CIVILIAN EMPLOYEE - PURCHASE OF RESIDENCE - REIMBURSABLE EXPENSES DECISION REGARDING THE CLAIM OF FRANCIS K. AKANA, AN EMPLOYEE OF THE FEDERAL AVIATION ADMINISTRATION, FOR CERTAIN REAL ESTATE EXPENSES INCIDENT TO A CHANGE OF STATION FROM GUAM TO HONOLULU, HAWAII. GAO AGREES THAT THE PRIOR $172.80 PAYMENT AND THE $764.85 CLAIMED SHOULD BE TREATED AS ONE TRANSACTION. THE $432 CLAIMED AS AN "INITIAL SERVICE CHARGE" IS IN THE NATURE OF A 1 PERCENT POINT OR INTEREST AND AS SUCH IS NOT REIMBURSABLE UNDER OMB CIRCULAR NO. A-56. ALTHOUGH THE RESIDENCE IS LOCATED ON LAND HELD UNDER A LONG TERM LEASE, THE COMP. GEN. BELIEVES THE TRANSACTION CONSTITUTES THE PURCHASE OF A HOME AT THE NEW OFFICIAL STATION WITHIN THE TERMS OF 5 U.S.C. 5724AA)(4) AND THE IMPLEMENTING REGULATIONS. COMPARE B-174644, APRIL 20, 1972. ADDITIONAL EXPENSES TOTALING $332.85 ARE REIMBURSABLE IN ADDITION TO THE PRIOR PAYMENT.

TO MR. ROBERT J. SCHULLERY:

WE REFER FURTHER TO YOUR LETTER OF OCTOBER 26, 1972, WHICH TRANSMITTED FOR AN ADVANCE DECISION A VOUCHER BY MR. FRANCIS K. AKANA WHEREIN HE CLAIMS CERTAIN REAL ESTATE EXPENSES INCIDENT TO A CHANGE OF DUTY STATION DURING 1971 AS AN EMPLOYEE OF YOUR AGENCY.

YOU STATE MR. AKANA WAS AUTHORIZED A PERMANENT CHANGE OF STATION FROM GUAM, M.I., TO HONOLULU, HAWAII, BY TRAVEL ORDERS DATED APRIL 8, 1971, AND HE REPORTED FOR DUTY AT HIS NEW STATION ON APRIL 23, 1971.

IT APPEARS THAT MR. AKANA AND HIS WIFE ENTERED INTO A CONTRACT ON SEPTEMBER 8, 1971, TO PURCHASE A DWELLING FROM WALTER STROBEL AND HIS WIFE AND SINCE IT WAS ANTICIPATED THAT THERE WOULD BE A DELAY IN SETTLEMENT DUE TO THE SECURING OF MORTGAGE FINANCING, THEY EXECUTED AN AGREEMENT OF SALE ON SEPTEMBER 20, 1971. THE AGREEMENT OF SALE CONTAINS A PROVISION THAT THE PURCHASER, MR. AKANA, WOULD BUY FOR $5,000 MR. STROBEL'S INTEREST IN A LEASE ON THE LAND ON WHICH THE DWELLING WAS SITUATED. YOU STATE THAT APPARENTLY TO OBTAIN FINANCING MR. AKANA WAS REQUIRED TO RENEGOTIATE THE LEASE WITH THE LESSOR, THE PFLUEGER-CASSIDAY ESTATE. ORIGINALLY THE LEASE APPARENTLY WAS FOR A PERIOD OF 51 YEARS BEGINNING IN NOVEMBER 1943, WITH A LEVEL ANNUAL RENTAL FOR THE FIRST 25 YEARS. THE RENEGOTIATION OF THE LEASE EFFECTIVE JUNE 1, 1972, EXTENDED THE ANNUAL RENTAL PERIOD TO APRIL 30, 1997, AND INCREASED THE ANNUAL RENTAL FROM $250 TO $1,043 WITH THE ANNUAL RENTAL SUBJECT TO REVISION BEGINNING MAY 1, 1997. THE MORTGAGE LOAN ON THE REAL ESTATE WHICH WAS APPLIED FOR IN APRIL 1972 WAS APPROVED AND CONTRACT WAS SETTLED ON JUNE 1, 1972.

YOU STATE YOUR AGENCY EXERCISED ITS PREROGATIVE UNDER SECTION 4.1E OF OFFICE OF MANAGEMENT (OMB) CIRCULAR NO. A-56 (REVISED EFFECTIVE SEPTEMBER 1, 1971) TO EXTEND THE ONE-YEAR PERIOD FOR SETTLEMENT.

YOU POINT OUT THAT MR. AKANA HAS BEEN REIMBURSED FOR CERTAIN EXPENSES IN THE AMOUNT OF $172.80 APPARENTLY INCIDENT TO EXECUTION OF THE AGREEMENT OF SALE. THE VOUCHER NOW SUBMITTED IN THE AMOUNT OF $764.85 IS STATED TO BE A SUPPLEMENT TO THE VOUCHER OF APRIL 12, 1972, SUPPORTING THE PAYMENT OF $172.80. YOU EXPRESS DOUBT AS TO THE PROPRIETY OF CERTIFYING MR. AKANA'S CURRENT CLAIM FOR THE FOLLOWING REASONS: (1) THE $172.80 PAYMENT AND THE $764.85 SHOULD BE TREATED AS ONE TRANSACTION, I.E., REAL ESTATE EXPENSES INCURRED IN THE PURCHASE OF A RESIDENCE; (2) THE $432 - PART OF THE $764.85 CLAIMED - FOR "INITIAL SERVICE CHARGE" APPEARS TO BE A ONE PERCENT "POINT" CHARGE WHICH IS A FINANCE CHARGE AND THUS NOT REIMBURSABLE UNDER THE APPLICABLE REGULATIONS; AND (3) THE PURCHASE OF THE RESIDENCE INVOLVES THE LEASING OF THE LAND ON WHICH THE RESIDENCE IS LOCATED AND, THEREFORE, THE EXPENSES CLAIMED MUST IN PART RELATE TO THE NEGOTIATION OF THE LAND LEASE.

THE $172.80 PREVIOUSLY PAID ACCORDING TO THE BUYER'S CLOSING STATEMENT DATED SEPTEMBER 22, 1971 - APPARENTLY RELATED TO THE AGREEMENT OF SALE EXECUTED SEPTEMBER 20, 1971 - REPRESENTS ITEMS IDENTIFIED AS:

COSTS

DRAWING $ 46.80

RECORDING 14.00

NOTARY 3.00

ESCROW FEE 84.00

CONTINUATION OF SEARCH 25.00

SUBTOTAL $172.80

THE VOUCHER CLAIMING $764.85 ITEMIZES THE SUBAMOUNTS AS FOLLOWS:

LEGAL AND RELATED COSTS $107.20

LENDER'S APPRAISAL FEE 50.00

CREDIT REPORT 10.00

MORTGAGE TITLE POLICY 130.00

ESCROW AGENT'S FEE 25.00

SALES OR TRANSFER TAXES 8.65

ACKNOWLEDGMENTS 2.00

INITIAL SERVICE CHARGE 432.00

THE BUYER'S CLOSING STATEMENTS DATED JUNE 1, 1972, AND APPARENTLY RELATED PRIMARILY TO SETTLEMENT OF THE LOAN AND THE PROCESSING OF THE LEASE LISTS THE ABOVE AMOUNT OF $107.20 CLAIMED AS LEGAL EXPENSES TO BE:

COSTS

DRAWING - AMENDMENT AND EXTENSION

OF LEASE - $31.20

RECORDING 28.00

NOTARY 3.00

MORTGAGE PAPERS 45.00

SECTION 4.2, PARAGRAPHS C AND D OF OMB CIRCULAR NO. A-56 READS:

"C. LEGAL AND RELATED COSTS. TO THE EXTENT SUCH COSTS HAVE NOT BEEN INCLUDED IN BROKERS' OR SIMILAR SERVICES FOR WHICH REIMBURSEMENT IS CLAIMED UNDER OTHER CATEGORIES, THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE AND PURCHASE OF RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR IF CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION, TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY CHARGED IN THE LOCALITY OF THE RESIDENCE; COSTS OF (1) SEARCHING TITLE, PREPARING ABSTRACT, AND LEGAL FEES FOR A TITLE OPINION, OR (2) WHERE CUSTOMARILY FURNISHED BY THE SELLER, THE COST OF A TITLE INSURANCE POLICY; COSTS OF PREPARING CONVEYANCES, OTHER INSTRUMENTS, AND CONTRACTS; RELATED NOTARY FEES AND RECORDING FEES; COSTS OF MAKING SURVEYS, PREPARING DRAWINGS OR PLATS WHEN REQUIRED FOR LEGAL OR FINANCING PURPOSES; AND SIMILAR EXPENSES. COSTS OF LITIGATION ARE NOT REIMBURSABLE.

"D. MISCELLANEOUS COSTS. THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE AND PURCHASE OF RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR IF THEY ARE CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION, TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE: FHA OR VA FEE FOR LOAN APPLICATION; COSTS OF PREPARING CREDIT REPORTS; MORTGAGE AND TRANSFER TAXES; STATE REVENUE STAMPS; AND SIMILAR FEES AND CHARGES. A CHARGE MADE FOR PREPAYMENT OF A MORTGAGE OR OTHER SECURITY INSTRUMENT IN CONNECTION WITH THE SALE OF A RESIDENCE AT THE OLD OFFICIAL STATION IS REIMBURSABLE TO THE EXTENT THE TERMS IN THE MORTGAGE OR OTHER SECURITY INSTRUMENT PROVIDE FOR SUCH COST. THIS PREPAYMENT PENALTY IS ALSO REIMBURSABLE WHEN THE MORTGAGE OR OTHER SECURITY INSTRUMENT DOES NOT SPECIFICALLY PROVIDE FOR PREPAYMENT, PROVIDED SUCH PENALTY IS CUSTOMARILY CHARGED BY THE LENDER BUT IN THAT CASE THE REIMBURSEMENT MAY NOT EXCEED 3 MONTHS PREVAILING INTEREST ON THE LOAN BALANCE. THE COST OF A MORTGAGE TITLE POLICY PAID FOR BY THE EMPLOYEE ON A RESIDENCE PURCHASED BY HIM IS REIMBURSABLE BUT COSTS OF OTHER TYPES OF INSURANCE PAID FOR BY HIM, SUCH AS AN OWNER'S TITLE POLICY, A 'RECORD TITLE' POLICY, MORTGAGE INSURANCE, AND INSURANCE AGAINST DAMAGE OR LOSS OF PROPERTY, ARE NOT REIMBURSABLE ITEMS OF EXPENSE. INTEREST ON LOANS, POINTS, AND MORTGAGE DISCOUNTS ARE NOT REIMBURSABLE. NOTWITHSTANDING THE ABOVE, NO FEE, COST, CHARGE, OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, AND REGULATION Z ISSUED PURSUANT THERETO BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. PROPERTY TAXES AND OPERATING OR MAINTENANCE COSTS ALSO ARE NOT REIMBURSABLE.

"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."

WE CONCUR WITH YOUR POSITION THAT THE $172.80 PAYMENT AND THE $764.85 CLAIMED SHOULD BE TREATED AS ONE TRANSACTION. ADDITIONALLY WE CONCUR THAT THE $432 CLAIMED AS AN "INITIAL SERVICE CHARGE" IS IN THE NATURE OF 1 PERCENT POINT OR INTEREST AND AS SUCH IS NOT REIMBURSABLE UNDER THE REGULATIONS.

WITH RESPECT TO THE SITUATION OF THE RESIDENCE BEING LOCATED ON LAND HELD UNDER A LONG TERM LEASE, WE BELIEVE THAT THE TRANSACTION CONSTITUTES THE PURCHASE OF A HOME AT THE NEW OFFICIAL STATION WITHIN THE TERMS OF 5 U.S.C. 5724AA)(4) AND THE IMPLEMENTING REGULATIONS SET FORTH IN CIRCULAR NO. A-56. COMPARE B-174644, APRIL 20, 1972, AND DECISIONS CITED THEREIN.

IN SUMMARY WE BELIEVE THE FOLLOWING ITEMS TOTALING $332.85 - IN ADDITION TO THE PREVIOUSLY PAID AMOUNT OF $172.80 - ARE REIMBURSABLE EXPENSES UNDER THE LAW AND REGULATIONS:

DRAWING - AMENDMENT AND EXTENSION OF LEASE $ 31.20

RECORDING 28.00

NOTARY 3.00

MORTGAGE PAPERS 45.00

LENDER'S APPRAISAL FEE 50.00

CREDIT REPORT 10.00

MORTGAGE TITLE POLICY 130.00

ESCROW FEE 25.00

ACKNOWLEDGMENTS 2.00

CONVEYANCE TAX ON AMENDMENT AND

EXTENSION OF LEASE 8.65

THE VOUCHER WHICH IS RETURNED HEREWITH MAY BE CERTIFIED FOR PAYMENT ONLY IN ACCORDANCE WITH THIS DECISION.