B-209445-OM, DEC 15, 1982

B-209445-OM: Dec 15, 1982

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OFFICE OF FINANCIAL MANAGEMENT: THIS MEMO IS IN RESPONSE TO AN APPEAL BY MS. SHE LEARNED THAT BECAUSE SHE WAS LEAVING BEFORE THE EXPIRATION OF HER LEASE. NOT ONLY WOULD SHE BE RESPONSIBLE FOR PAYING THE RENT UNTIL THE END OF THE LEASE OR UNTIL THE APARTMENT WAS RENTED TO ANOTHER TENANT. POINTING OUT THAT THE $505 WAS NOT COVERED BY THE TERMS OF THE LEASE. SHE STATES THAT SHE WAS TOLD THAT ALL CHARGES WOULD BE REIMBURSED. THE RENTAL PAYMENTS MUST BE CONTINUED UNTIL A NEW TENANT IS OBTAINED. THERE IS ALSO A CHARGE OF $30.00 PAYABLE TO ACADEMY HOUSE FOR APPROVAL OF ALL NEW TENANTS. PAYNTER ALSO CLAIMED AND WAS REIMBURSED FOR THE RENT SHE PAID FOR THE LATTER HALF OF DECEMBER AND FOR JANUARY.

B-209445-OM, DEC 15, 1982

SUBJECT: TERRI PAYNTER - LEASE TERMINATION EXPENSES - B-209445-O.M.

DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT:

THIS MEMO IS IN RESPONSE TO AN APPEAL BY MS. TERRI PAYNTER, EVALUATOR, SAN FRANCISCO REGIONAL OFFICE, FROM THE DENIAL BY YOUR OFFICE OF HER CLAIM FOR CERTAIN LEASE TERMINATION EXPENSES.

MS. PAYNTER INCURRED LEASE TERMINATION EXPENSES IN CONNECTION WITH A PERMANENT CHANGE OF STATION FROM PHILADELPHIA TO SAN FRANCISCO. SHE REPORTS THAT FROM A TELEPHONE CONVERSATION WITH HER REALTOR, SHE LEARNED THAT BECAUSE SHE WAS LEAVING BEFORE THE EXPIRATION OF HER LEASE, NOT ONLY WOULD SHE BE RESPONSIBLE FOR PAYING THE RENT UNTIL THE END OF THE LEASE OR UNTIL THE APARTMENT WAS RENTED TO ANOTHER TENANT, BUT SHE WOULD ALSO BE RESPONSIBLE FOR PAYING A FEE OF $505 TO COVER THE REALTOR'S CHARGE FOR FINDING A NEW TENANT AND THE COST OF APPROVING THE NEW TENANT.

MS. PAYNTER SAYS SHE INFORMED THE TRAVEL SECTION OF THESE CHARGES, POINTING OUT THAT THE $505 WAS NOT COVERED BY THE TERMS OF THE LEASE. SHE STATES THAT SHE WAS TOLD THAT ALL CHARGES WOULD BE REIMBURSED, BUT THAT SHE SHOULD GET AN ADDENDUM TO HER LEASE SPECIFYING THE ADDITIONAL TERMS.

ON DECEMBER 12, 1981, MS. PAYNTER SIGNED AN ADDENDUM TO THE LEASE WHICH PROVIDED AS FOLLOWS:

"IF THE TENANT SHALL TERMINATE THIS LEASE PRIOR TO THE DATE STATED THEREIN, THE RENTAL PAYMENTS MUST BE CONTINUED UNTIL A NEW TENANT IS OBTAINED. IN ADDITION, THE REALTOR'S FEE OF $475 (ONE MONTH'S RENT) MUST BE PAID TO JANE MC DONOUGH REALTY TO ADVERTISE, SCREEN, PREPARE THE LEASE AND RENTAL APPLICATION, AND SHOW THE APARTMENT. THERE IS ALSO A CHARGE OF $30.00 PAYABLE TO ACADEMY HOUSE FOR APPROVAL OF ALL NEW TENANTS. THIS CHARGE MUST BE BORNE BY TENANT IN THE EVENT OF EARLY TERMINATION ALSO."

IN ADDITION TO THE $505 FEE, MS. PAYNTER ALSO CLAIMED AND WAS REIMBURSED FOR THE RENT SHE PAID FOR THE LATTER HALF OF DECEMBER AND FOR JANUARY, FEBRUARY AND MARCH OF 1982. HER LEASE EXPIRED AT THE END OF JULY 1982, BUT THE APARTMENT WAS RENTED IN APRIL 1982. BY A MEMO DATED SEPTEMBER 16, 1982, THE TRAVEL SECTION INFORMED MS. PAYNTER THAT AS THE RESULT OF A POST AUDIT REVIEW, IT WAS DETERMINED THAT THE REALTOR'S FEE OF $475 AND THE TENANT APPROVAL CHARGE OF $30 WERE NONREIMBURSABLE ITEMS SINCE MS. PAYNTER INCURRED LIABILITY FOR THEM AFTER SHE WAS INFORMED OF HER TRANSFER. THE TRAVEL SECTION BASED ITS DETERMINATION ON JOHN M. TAYLOR, B-201598, JUNE 15, 1981, IN WHICH WE HELD THAT 5 U.S.C. SEC. 5724AA)(4), THE STATUTORY AUTHORITY FOR LEASE TERMINATION EXPENSES, IS INTENDED TO COMPENSATE AN EMPLOYEE FOR COSTS HE DID NOT INTEND TO INCUR AT THE TIME HE EXECUTED THE LEASE AND WHICH HE WOULD NOT HAVE INCURRRED BUT FOR HIS TRANSFER, AND NOT COSTS THE EMPLOYEE COULD HAVE AVOIDED OR COSTS HE INCURRED KNOWINGLY AFTER BEING ADVISED THAT HIS TRANSFER WOULD OCCUR.

SECTION 5724AA)(4) OF TITLE 5 PROVIDES FOR REIMBURSEMENT OF ONLY THOSE EXPENSES AN EMPLOYEE IS REQUIRED TO PAY. LEASE SETTLEMENT COSTS ARE DETERMINED TO BE REQUIRED AND ARE REIMBURSABLE WHEN THE CONDITIONS OUTLINED IN THE FEDERAL TRAVEL REGULATIONS, FPMR 101-7 (SEPTEMBER 1981) (FTR), PARAGRAPH 2-6.2H, WHICH STATES AS FOLLOWS, ARE MET:

"H. SETTLEMENT OF AN UNEXPIRED LEASE. EXPENSES INCURRED FOR SETTLING AN UNEXPIRED LEASE (INCLUDING MONTH-TO-MONTH RENTAL) ON RESIDENCE QUARTERS OCCUPIED BY THE EMPLOYEE AT THE OLD OFFICIAL STATION MAY INCLUDE BROKER'S FEES FOR OBTAINING A SUBLEASE OR CHARGES FOR ADVERTISING AN UNEXPIRED LEASE. SUCH EXPENSES ARE REIMBURSABLE WHEN (1) APPLICABLE LAWS OR THE TERMS OF THE LEASE PROVIDE FOR PAYMENT OF SETTLEMENT EXPENSES, (2) SUCH EXPENSES CANNOT BE AVOIDED BY SUBLEASE OR OTHER ARRANGEMENT, (3) THE EMPLOYEE HAS NOT CONTRIBUTED TO THE EXPENSE BY FAILING TO GIVE APPROPRIATE LEASE TERMINATION NOTICE PROMPTLY AFTER HE/SHE HAS DEFINITE KNOWLEDGE OF THE TRANSFER, AND (4) THE BROKER'S FEES OR ADVERTISING CHARGES ARE NOT IN EXCESS OF THOSE CUSTOMARILY CHARGED FOR COMPARABLE SERVICES IN THAT LOCALITY. ***"

THIS REGULATION NOT ONLY REQUIRES DOCUMENTATION SHOWING THAT LEASE TERMINATION EXPENSES WERE ACTUALLY INCURRED AND PAID, BUT ALSO A SHOWING THAT THE EMPLOYEE WAS OBLIGATED BY APPLICABLE LAW OR THE TERMS OF HIS LEASE TO INCUR THE EXPENSE CLAIMED. AN EMPLOYEE MAY NOT OBLIGATE HIMSELF FOR EXPENSES AFTER NOTICE OF HIS TRANSFER, SO IF MS. PAYNTER'S OBLIGATION TO PAY THE FEE IN QUESTION AROSE SOLELY FROM THE ADDENDUM, WE WOULD UPHOLD THE DENIAL OF HER CLAIM. HOWEVER, IT APPEARS THAT SHE WAS OBLIGATED UNDER THE ORIGINAL TERMS OF THE LEASE.

THE PERTINENT PROVISION OF THE LEASE, IDENTIFIED AS PARAGRAPH 12(C), PROVIDES AS FOLLOWS:

"(C) EFFECT OF TERMINATION - CONTINUATION OF LIABILITY. IF THIS LEASE SHALL BE TERMINATED BY LANDLORD UPON DEFAULT BY TENANT UNDER SUB-SEC (A) OR (B) ABOVE, LANDLORD SHALL HAVE ALL RIGHTS PROVIDED BY THE LANDLORD AND TENANT ACT OF 1951 AS SUCH ACT MAY BE AMENDED FROM TIME TO TIME INCLUDING WITHOUT LIMITATION THE RIGHT TO BRING AN ACTION IN ASSUMPSIT FOR RENT ACCRUED TO THE DATE OF SUCH DEFAULT AND FOR DAMAGES FOR TENANT'S BREACH OF THIS LEASE AND FURTHER INCLUDING WITHOUT LIMITATION THE RIGHT TO PROCEED IN AN ACTION FOR RECOVERY OF POSSESSION OF DEMISED PREMISES. IN ANY SUCH EVENT, TENANT SHALL REMAIN LIABLE FOR THE LOSS OF RENT TO LANDLORD FOR THE BALANCE OF THE TERM OF THIS LEASE REDUCED BY ANY AMOUNT REALIZED BY LANDLORD ON RELETTING OF DEMISED PREMISES. IN ANY SUCH EVENT, LANDLORD IS GRANTED THE RIGHT BUT NOT THE DUTY, ACTING AS AGENCT FOR TENANT TO RELET DEMISED PREMISES FOR SUCH TERM OR TERMS WHETHER SHORTER OR LONGER THAN THE TERM HEREIN RESERVED AND UPON SUCH CONDITIONS AS LANDLORD IN ITS SOLE DISCRETION DEEMS REASONABLE APPLYING THE NET PROCEEDS OF SUCH RELETTING IN REDUCTION OF THE RENT OBLIGATIONS OF TENANT. FOR THE PURPOSE OF THIS SECTION, THE TERM 'NET PROCEEDS OF SUCH RE-LETTING' SHALL MEAN THE ACTUAL RENT RECEIVED BY LANDLORD AS A RESULT THEREOF REDUCED BY REASONABLE EXPENSES INCLUDING COMMISSIONS, ATTORNEYS' FEES AND THE COST OF REPAIRING, RETURNING TO THEIR ORIGINAL CONDITION OR REMODELING DEMISED PREMISES."

THIS SECTION PROVIDES THAT THE LESSEE'S OBLIGATION WILL BE REDUCED BY THE NET PROCEEDS RECEIVED UPON RE-LETTING THE PREMISES, WHICH ARE TO BE ARRIVED AT BY SUBTRACTING REASONABLE EXPENSES INCURRED TO RE-LET THE PREMISES. THE EXPENSES CHARGED MS. PAYNTER APPEAR TO BE OF THE TYPE CONTEMPLATED BY THE LEASE.

THE FIRST PROVISION OF FTR PARAGRAPH 2-6.2H, REQUIRING THAT THE TERMS OF THE LEASE PROVIDE FOR PAYMENT OF THE SETTLEMENT EXPENSES, IS THEREFORE SATISFIED. SIMILARLY, THE SECOND AND THIRD PROVISIONS ARE SATISFIED SINCE IT DOES NOT APPEAR THAT THE EXPENSES COULD BE AVOIDED BY OTHER ARRANGEMENT NOR DOES IT APPEAR THAT MS. PAYNTER CONTRIBUTED TO THE EXPENSE BY FAILING TO GIVE PROMPT LEASE TERMINATION NOTIFICATION. THE FOURTH PROVISION OF FTR PARAGRAPH 2-6.2H IS THAT BROKER'S FEES MAY BE REIMBURSED ONLY TO THE EXTENT THAT THEY ARE NOT IN EXCESS OF THOSE CUSTOMARILY CHARGED FOR COMPARABLE SERVICES IN THAT LOCALITY.

ACCORDINGLY, IF YOU DETERMINE THAT THE CHARGE MS. PAYNTER PAID IS CUSTOMARY FOR THE SERVICES RENDERED SHE MAY BE REIMBURSED FOR THE EXPENSE CLAIMED.