B-210297, JUL 12, 1983

B-210297: Jul 12, 1983

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HOMEGUARD CONTRACT IS INSURANCE AGAINST SELLER'S CONTINGENT LIABILITY FOR DEFECTS IN HOME AND HENCE IS NOT ALLOWABLE UNDER PARA. 2-6.2D. THE EMPLOYEE IS ENTITLED TO REASONABLE ATTORNEY FEES FOR ADVISORY AND REPRESENTATIONAL SERVICES RENDERED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT NEW DUTY STATION IF THE CHARGES ARE CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE IN THE LOCALITY INVOLVED AND ARE WITHIN THE CUSTOMARY RANGE OF CHARGES FOR SUCH SERVICES IN THE LOCALITY. WE CONCLUDE THAT THE EMPLOYEE IS NOT ENTITLED TO THE EXPENSE FOR THE HOMEGUARD SERVICE CONTRACT WHICH IS INSURANCE TO THE BUYER AGAINST REPAIRS OR MAINTENANCE. THAT HE IS ENTITLED TO REIMBURSEMENT OF REASONABLE ATTORNEY FEES EVEN THOUGH THE CONTRACT PROVIDED THAT THE SELLER WOULD PAY ALL CLOSING COSTS SINCE.

B-210297, JUL 12, 1983

DIGEST: 1. INTERNAL REVENUE SERVICE EMPLOYEE MAY NOT BE REIMBURSED COST OF 1-YEAR HOMEGUARD SERVICE CONTRACT INCURRED UPON SALE OF HIS HOME INCIDENT TO TRANSFER FROM COLUMBUS, OHIO, TO CINCINNATI, OHIO. HOMEGUARD CONTRACT IS INSURANCE AGAINST SELLER'S CONTINGENT LIABILITY FOR DEFECTS IN HOME AND HENCE IS NOT ALLOWABLE UNDER PARA. 2-6.2D, FEDERAL TRAVEL REGULATIONS (FPMR 101-7), WHICH PRECLUDES REIMBURSEMENT OF INSURANCE EXPENSES. 2. INTERNAL REVENUE SERVICE EMPLOYEE PURCHASED NEW RESIDENCE AND SELLER AGREED TO PAY CLOSING COSTS. DESPITE THIS CONTRACT PROVISION, THE EMPLOYEE PAID MOST OF THE CLOSING COSTS AND CLAIMS ATTORNEY FEES IN CONNECTION WITH THE TRANSACTION. IN ACCORDANCE WITH GEORGE W. LAY, 56 COMP.GEN. 561 (1977), THE EMPLOYEE IS ENTITLED TO REASONABLE ATTORNEY FEES FOR ADVISORY AND REPRESENTATIONAL SERVICES RENDERED IN CONNECTION WITH THE PURCHASE OF A RESIDENCE AT NEW DUTY STATION IF THE CHARGES ARE CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE IN THE LOCALITY INVOLVED AND ARE WITHIN THE CUSTOMARY RANGE OF CHARGES FOR SUCH SERVICES IN THE LOCALITY.

DANIEL J. EVERMAN - REAL ESTATE EXPENSES:

THE ISSUE IN THIS DECISION INVOLVES AN EMPLOYEE'S CLAIMS INCIDENT TO A PERMANENT CHANGE OF STATION FOR REIMBURSEMENT FOR A HOMEGUARD SERVICE CONTRACT THAT HE PURCHASED UPON THE SALE OF HIS HOME AT THE OLD DUTY STATION AND FOR ATTORNEY FEES INCURRED IN HIS PURCHASE OF A RESIDENCE AT THE NEW DUTY STATION. WE CONCLUDE THAT THE EMPLOYEE IS NOT ENTITLED TO THE EXPENSE FOR THE HOMEGUARD SERVICE CONTRACT WHICH IS INSURANCE TO THE BUYER AGAINST REPAIRS OR MAINTENANCE, BUT THAT HE IS ENTITLED TO REIMBURSEMENT OF REASONABLE ATTORNEY FEES EVEN THOUGH THE CONTRACT PROVIDED THAT THE SELLER WOULD PAY ALL CLOSING COSTS SINCE, IN FACT, THE BUYER (EMPLOYEE) PAID MOST OF THE CLOSING COSTS AT SETTLEMENT.

THIS ACTION IS IN RESPONSE TO THE REQUEST OF V. G. LEIST, AN AUTHORIZED CERTIFYING OFFICER OF THE INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY, FOR A DECISION CONCERNING THE CLAIM OF AN EMPLOYEE, MR. DANIEL J. EVERMAN, FOR CERTAIN EXPENSES INCURRED IN CONNECTION WITH A PERMANENT CHANGE OF STATION FROM COLUMBUS, OHIO, TO CINCINNATI, OHIO, EFFECTIVE FEBRUARY 8, 1982.

HOMEGUARD SERVICE CONTRACT

BASED UPON ADVICE FROM THE REGIONAL HOUSING AND URBAN DEVELOPMENT (HUD) OFFICE, THE CERTIFYING OFFICER DISALLOWED MR. EVERMAN'S CLAIM OF $250 FOR A HOMEGUARD SERVICE CONTRACT. HUD ADVISED THAT THE PURCHASE OF HOMEGUARD SERVICE CONTRACT IN CONNECTION WITH THE SALE OF RESIDENCE IS A FORM OF INSURANCE PROTECTION FOR THE SELLER AND NOT A CUSTOMARY EXPENSE REIMBURSABLE UNDER PARA. 2-6.2F OF THE FEDERAL TRAVEL REGULATIONS (FPMR 101-7) (FTR) (SEPTEMBER 28, 1981). MR. EVERMAN, HOWEVER, CLAIMS THAT THE PURCHASE OF THE HOMEGUARD SERVICE CONTRACT IS A CUSTOMARY EXPENSE UNDER THE INTERNAL REVENUE MANUAL (IRM), CHAPTER 593(1)(G), A RESTATEMENT OF THE ABOVE REGULATION, BECAUSE THE REALTOR'S "PURCHASE AND SALE AND EXCHANGE CONTRACT" REQUIRED THE SELLER TO PROVIDE THE BUYER WITH A HOMEGUARD SERVICE CONTRACT.

IN JOHN D. GARRITY, B-193578, AUGUST 20, 1979, WE CONCLUDED THAT A HOMEGUARD MAINTENANCE SERVICE CONTRACT PURCHASED IN CONNECTION WITH THE SALE OF A HOUSE IN THE SAME LOCALITY (COLUMBUS, OHIO) IS AN INSURANCE CONTRACT TO PROVIDE MAINTENANCE SERVICES AND, AS SUCH, IT MAY NOT BE PAID SINCE FTR. 2-6.2D PRECLUDES REIMBURSING THE PURCHASER FOR INSURANCE EXPENSES, INCLUDING INSURANCE AGAINST DAMAGE OR LOSS OF PROPERTY. GARRITY, WE EXPLAINED:

"THE PURCHASE OF HOMEGUARD IS A SEPARATE CHARGE FOR BUYING INSURANCE TO ELIMINATE THE SELLER'S CONTINGENT LIABILITY TO THE BUYER FOR DEFECTS IN THE HOME. ALTHOUGH IN THIS CASE IT IS THE SELLER WHO IS PURCHASING THE INSURANCE CONTRACT, WE CONSTRUE THE INTENT OF THE PROHIBITION IN FTR 2-6.2D TO BE APPLICABLE TO THE SELLER AS WELL AS THE PURCHASER. HENCE, THE INSURANCE EXPENSES FOR PURCHASING HOMEGUARD MAY NOT BE REIMBURSED TO THE SELLER. MOREOVER, SINCE THE INSURANCE IN QUESTION IS TO PROVIDE PROTECTION AGAINST FUTURE MAINTENANCE COSTS, REIMBURSEMENT IS ALSO PRECLUDED BY THE PROVISION IN FTR 2-6.2D EXCLUDING THE REIMBURSEMENT OF MAINTENANCE COSTS TO EITHER THE SELLER OR PURCHASER. SEE VINCENT A. CROVETTI, B-189662, OCTOBER 4, 1977. IN THIS CONNECTION WE POINT OUT THAT THE COST OF THE HOMEGUARD CONTRACT MAY NOT BE ALLOWED AS A MISCELLANEOUS EXPENSE UNDER FTR CHAPTER 2, PART 3, SINCE FTR 2-3.1C PROVIDES THAT THE ALLOWANCE SHALL NOT BE USED TO REIMBURSE THE EMPLOYEE FOR EXPENSES INCURRED WHICH ARE DISALLOWED ELSEWHERE IN THE FTR."

THEREFORE, MR. EVERMAN MAY NOT BE REIMBURSED FOR THE $250 EXPENSE OF THE HOMEGUARD SERVICE CONTRACT.

ATTORNEY FEES

MR. EVERMAN ALSO CLAIMS ATTORNEY FEES IN THE AMOUNT OF $520 THAT WERE PAID FOR LEGAL SERVICES PROVIDED IN CONNECTION WITH HIS PURCHASE AT HIS NEW DUTY STATION. THE STATEMENT FROM MR. EVERMAN'S ATTORNEY INDICATES THAT THE SERVICES INCLUDED REVIEW AND IMPLEMENTATION OF THE PURCHASE CONTRACT, CONTACTS WITH REPRESENTATIVES OF THE SELLER, REPRESENTATION UP TO AND AT THE CLOSING, AND A TITLE OPINION ANALYSIS OF THE PROPERTY.

THE AGENCY DISALLOWED THE ENTIRE CLAIM BASED UPON A CONDITION IN THE "CONSTRUCTION AND PURCHASE" AGREEMENT WHICH REQUIRES THAT THE SELLER PAY "ALL LEGAL CLOSING COSTS." FURTHER, THE LOCAL HUD OFFICE ADVISED THE AGENCY THAT SINCE THE PURCHASE CONTRACT CONTAINED THE ABOVE PROVISION, ATTORNEY SERVICES WERE OPTIONAL AND NOT A NECESSARY EXPENSE.

THE CLOSING COSTS WHICH ARE LISTED ON THE "SETTLEMENT STATEMENT" INDICATE THAT THE SELLER PAID THE BROKER'S COMMISSION, THE LOAN DISCOUNT FEE, AND THE STATE TAX AND STAMPS ($9,391.04) WHILE THE BUYER (MR. EVERMAN) PAID THE LOAN ORIGINATION FEE, APPRAISAL AND CREDIT REPORT FEES, LENDER'S INSPECTION FEE, SETTLEMENT OR CLOSING FEE, TITLE EXAMINATION AND TITLE INSURANCE BINDER FEES, TITLE INSURANCE, RECORDING FEES, AND OTHER EXPENSES ($4,457.41). NOTWITHSTANDING THE PROVISION IN THE CONTRACT WITH THE SELLER, IT APPEARS THAT MR. EVERMAN PAID A SUBSTANTIAL PORTION OF THE CLOSING COSTS. IN ADDITION, THERE IS NO INDICATION IN THE RECORD BEFORE US THAT THE SELLER PROVIDED ANY LEGAL SERVICES IN CONNECTION WITH THIS TRANSACTION.

THE NOW-SETTLED POLICY OF THIS OFFICE CONCERNING THE EXTENT TO WHICH LEGAL FEES MAY BE REIMBURSED WAS ESTABLISHED IN OUR DECISION GEORGE W. LAY, 56 COMP.GEN. 561 (1977). WE HELD IN LAY THAT FOR ANY SETTLEMENT OCCURRING AFTER APRIL 27, 1977, NECESSARY AND REASONABLE LEGAL FEES AND COSTS, EXCEPT FOR THE FEES AND COST OF LITIGATION, INCURRED BY REASON OF THE PURCHASE OR SALE OF A RESIDENCE INCIDENT TO A PERMANENT CHANGE OF STATION MAY BE REIMBURSED PROVIDED THAT THE COSTS ARE WITHIN THE CUSTOMARY RANGE OF CHARGES FOR SUCH SERVICES WITHIN THE LOCALITY OF THE RESIDENCE TRANSACTION. JUDY WYNEKOOP, B-205503, JUNE 2, 1982. THUS, WE ALLOWED IN LAY AND IN SUBSEQUENT CASES CLAIMS FOR ATTORNEY FEES FOR REPRESENTATIONAL AND ADVISORY SERVICES SUCH AS FOR REPRESENTATION AND ATTENDANCE AT CLOSING.

WE FIND THAT THE ATTORNEY FEES INCURRED BY MR. EVERMAN AS NOTED ABOVE WERE NECESSARY AND REASONABLE LEGAL FEES FOR REPRESENTATIONAL AND ADVISORY SERVICES WITHIN THE MEANING OF LAY. THE RECORD SHOWS THAT THE SERVICES WERE FOR REVIEW OF THE PURCHASE CONTRACT, CONTACTS WITH REPRESENTATIVES OF THE SELLER, TITLE OPINION ANALYSIS AND REPRESENTATION UP TO AND AT THE CLOSING. IN LAY, AND IN NUMEROUS OTHER CASES WE ALLOWED REIMBURSEMENT FOR THESE EXPENSES. SEE, FOR EXAMPLE, CONSTANCE A. HACKATHORN, B-205579, JUNE 21, 1982.

ACCORDINGLY, MR. EVERMAN'S CLAIM FOR THE $520 IN ATTORNEY FEES MAY BE PAID IF IT IS DETERMINED THAT SUCH CHARGES ARE CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE IN THE LOCALITY INVOLVED AND IF IT IS DETERMINED THAT THE CHARGES WERE WITHIN THE CUSTOMARY RANGE OF CHARGES FOR SUCH SERVICES IN THAT LOCALITY.