B-179482, MAR 21, 1974

B-179482: Mar 21, 1974

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LEGAL SERVICES DESCRIBED APPEARED TO BE PRIMARILY ADVISORY AND AS SUCH ARE FOR DISALLOWANCE. TITLE INSURANCE IS FOR DISALLOWANCE EXCEPT WHERE PAID BY SELLER AND IS IN LIEW OF EXPENSE OF TITLE SEARCH. YOU STATE THE ITEMS HAVE BEEN DISALLOWED ADMINISTRATIVELY ON THE FINDING OF THE CHIEF. THAT MANY OF THE LEGAL SERVICES WERE FOR SERVICES NORMALLY PERFORMED BY THE BROKER - WHO RECEIVED A 6 PERCENT COMMISSION WHICH HAS BEEN REIMBURSED - AND THAT A TITLE INSURANCE POLICY AT THE FORMER DUTY STATION - ALBANY. NEW YORK - IS PAID FOR CUSTOMARILY BY THE PURCHASER. ENCLOSED WITH THE RECLAIM VOUCHER IS A LETTER FROM MRS. FEIT ARE CONTRARY TO THE PROVISION OF FEDERAL PROPERTY MANAGEMENT REGULATIONS 101-7-2-6.2(C) SINCE LEGAL SERVICES SHOULD HAVE BEEN COVERED IN WHOLE OR IN PART BY THE BROKER'S COMMISSION AND THE COST OF THE TITLE INSURANCE POLICY SHOULD HAVE BEEN PAID BY THE PURCHASER.

B-179482, MAR 21, 1974

INCIDENT TO CHANGE OF DUTY STATION EMPLOYEE (DECEASED) CLAIMED EXPENSES OF $1,200 FOR LEGAL SERVICE AND $291 FOR A TITLE INSURANCE POLICY IN SALE OF RESIDENCE AT PRIOR DUTY STATION. LEGAL SERVICES DESCRIBED APPEARED TO BE PRIMARILY ADVISORY AND AS SUCH ARE FOR DISALLOWANCE. SUCH ATTORNEY TIME, HOWEVER, THAT COULD BE SPECIFICALLY IDENTIFIED TO CONTRACT AND DEED PREPARATION WOULD BE FOR ALLOWANCE. TITLE INSURANCE IS FOR DISALLOWANCE EXCEPT WHERE PAID BY SELLER AND IS IN LIEW OF EXPENSE OF TITLE SEARCH.

TO MR. JOSEPH A. PAGLIASOTTI:

WE REFER FURTHER TO YOUR LETTER OF AUGUST 14, 1973, REFERENCE MBM-ADM FIN, WHEREIN YOU SUBMITTED FOR ADVANCE DECISION A VOUCHER IN THE AMOUNT OF $1,491 FROM MRS. BETTY JEAN WINSTON, SURVIVING SPOUSE OF JOHN M. WINSTON, REQUESTING REIMBURSEMENT FOR LEGAL SERVICES AND A TITLE INSURANCE POLICY AS REAL ESTATE EXPENSES INCIDENT TO A CHANGE OF OFFICIAL DUTY STATION FOR MR. WINSTON AS AN EMPLOYEE OF THE DEPARTMENT OF THE INTERIOR DURING 1972.

THE ITEMS CLAIMED REPRESENT EXPENSES OF $1,200 FOR LEGAL SERVICE AND $291 FOR A TITLE INSURANCE POLICY INCURRED BY MR. AND MRS. WINSTON IN THE SALE OF THEIR FORMER RESIDENCE AT THE PRIOR DUTY STATION. YOU STATE THE ITEMS HAVE BEEN DISALLOWED ADMINISTRATIVELY ON THE FINDING OF THE CHIEF, EASTERN ADMINISTRATIVE OFFICE, BUREAU OF MINES, THAT MANY OF THE LEGAL SERVICES WERE FOR SERVICES NORMALLY PERFORMED BY THE BROKER - WHO RECEIVED A 6 PERCENT COMMISSION WHICH HAS BEEN REIMBURSED - AND THAT A TITLE INSURANCE POLICY AT THE FORMER DUTY STATION - ALBANY, NEW YORK - IS PAID FOR CUSTOMARILY BY THE PURCHASER. ENCLOSED WITH THE RECLAIM VOUCHER IS A LETTER FROM MRS. WINSTON'S ATTORNEY, MR. MICHAEL A. FEIT, DATED MAY 1, 1973, WHICH SETS FORTH HIS EXPLANATION OF THE CLAIM. YOU BELIEVE THE REASONS STATED BY MR. FEIT ARE CONTRARY TO THE PROVISION OF FEDERAL PROPERTY MANAGEMENT REGULATIONS 101-7-2-6.2(C) SINCE LEGAL SERVICES SHOULD HAVE BEEN COVERED IN WHOLE OR IN PART BY THE BROKER'S COMMISSION AND THE COST OF THE TITLE INSURANCE POLICY SHOULD HAVE BEEN PAID BY THE PURCHASER.

IN LETTER OF MARCH 26, 1973, MR. FEIT CONCERNING THE ITEMS CLAIMED STATED:

"291.00 - TITLE INSURANCE WAS REQUIRED BECAUSE OF DESCRIPTION IN DEED. PURCHASER WOULD NOT CONSUMMATE DEAL WITHOUT."

"1,200.00 - FEE FOR LEGAL SERVICES PERFORMED BY FEIT, SCHLENKER AND KATZ. THIS COVERED EXTENSIVE EFFORTS BY ATTORNEYS FROM AUGUST THROUGH NOVEMBER, IN EXCESS OF FIFTY HOURS OF OFFICE TIME. IN ADDITION, TELEPHONE AND PERSONAL CONFERENCES WITH PURCHASER, PURCHASER'S ATTORNEY, ABSTRACT SEARCHER, TITLE INSURANCE COMPANY, REAL ESTATE BROKER AND MAINTAINING CARE AND SECURITY OF PROPERTY OF PREMISES."

MR. FEIT IN LETTER OF MAY 1, 1973, WITH RESPECT TO ABOVE ITEMS STATED:

"2. TITLE INSURANCE PAID FOR BY THE WINSTONS WAS AN ABSOLUTE NECESSITY IN ORDER TO CONVEY MARKETABLE TITLE. THERE WAS A VIOLATION OF A DEED COVENANT WHICH INVOLVED THE FACT THAT THE HOUSE WAS BUILT ON TWO BUILDING LOTS PARALLEL TO THE STREET INSTEAD OF PERPENDICULAR. IT IS QUITE INVOLVED, BUT THROUGH ENORMOUS EFFORTS ON MY PART WE WERE ABLE TO OBTAIN TITLE INSURANCE TO COVER IT WHICH WAS A CONDITION PRECEDENT TO THE PURCHASER'S ATTORNEY ACCEPTING TITLE.

"3. OUR FEE FOR LEGAL SERVICES AT $1,200.00 WAS FOR LESS THAN I WOULD HAVE CHARGED IF I HAD BILLED ON AN HOURLY BASIS USING THE MINIMUM FEE RECOMMENDED BY THE ALBANY COUNTY BAR ASSOCIATION OF $35.00 PER HOUR. BRIEFLY THE TIME EXPENDED RESULTED FROM THE FACT THAT ANOTHER CONTRACT HAD PREVIOUSLY BEEN SIGNED WITH A DIFFERENT PURCHASER WHO SUBSEQUENTLY BACKED OUT. THERE WERE EXTENSIVE NEGOTIATIONS WITH THAT ATTORNEY AND THE BROKER. BECAUSE THE WINSTONS MOVED TO D.C. POWERS OF ATTORNEY HAD TO BE DRAWN AND I HAD TO PERSONALLY SUPERVISE THE PROPERTY ON A DAILY BASIS. SIX DEEDS WERE DRAWN BEFORE THE FINAL ONE WAS ACCEPTED BY THE PURCHASER'S ATTORNEY WHO WAS AT BEST AN ECCENTRIC AND OBSTRUCTIONIST. ALL IN ALL, MY OFFICE TIME EXCEEDED FIFTY HOURS AND DID NOT INCLUDE LONG-DISTANCE PHONE CALLS, MILEAGE AND MANY HOURS ON THE PHONE AT HOME."

THE APPLICABLE REGULATION SECTION 4.2, OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-56 (REVISED AUGUST 17, 1971) 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."

WE HAVE CONSISTENTLY HELD THAT UNDER THE ABOVE-QUOTED REGULATION NO REIMBURSEMENT IS TO BE ALLOWED FOR LEGAL SERVICES WHICH ARE OF AN ADVISORY NATURE OR WHICH ARE ESSENTIALLY FOR NEGOTIATION. SEE B 178399, JUNE 13, 1973 AND B-175710, JULY 17, 1972, CITED THEREIN. THE SERVICES DESCRIBED ABOVE APPEAR TO BE PRIMARILY ADVISORY. ONLY ATTORNEY'S FEES THAT REPRESENT SERVICES OF THE TYPE ENUMERATED IN 4.2C ARE REIMBURSABLE. NOTWITHSTANDING THAT LEGAL DIFFICULTIES IN CONSUMMATING THE SALE TRANSACTIONS MAY HAVE NECESSITATED THE ADVISORY SERVICES OF AN ATTORNEY THERE IS NO AUTHORITY BY WHICH THE EMPLOYEE MAY BE REIMBURSED FOR THOSE SERVICES. HOWEVER, IF THE TIME ALLOCABLE TO CONTRACT AND DEED PREPARATION WERE SPECIFICALLY IDENTIFIED REIMBURSEMENT THEREFOR WOULD BE APPROPRIATE. SEE B-175710, SUPRA. SINCE YOU SAY THAT IT IS CUSTOMARY IN THE AREA OF THE SALE FOR THE BUYER TO PAY FOR THE TITLE INSURANCE POLICY THE COST OF TITLE INSURANCE IS NOT FOR ALLOWANCE UNDER THE REGULATION. ALSO, EVEN IF THE COST OF SUCH INSURANCE IS REGARDED AS A COST OF PERFECTING A MARKETABLE TITLE IT MUST BE REGARDED AS AN EXPENSE PERSONAL TO THE SELLER WHICH IS NOT REIMBURSABLE UNDER THE CONTROLLING REGULATIONS. SEE ANSWER TO QUESTION 3, B-163709, APRIL 19, 1968.

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