B-211794, SEP 27, 1983

B-211794: Sep 27, 1983

Additional Materials:

Contact:

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

 

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

EMPLOYEE MAY NOT BE REIMBURSED FOR COST OF ESCROW AGENTS FEE UNDER PARAGRAPH 2-6.2C OF FEDERAL TRAVEL REGULATIONS SINCE AGREEMENT WAS SOLELY FOR EMPLOYEE'S CONVENIENCE AND WAS NOT DIRECTLY RELATED TO THE SALE ITSELF. HARDING - RELOCATION EXPENSE - ESCROW FEE: THIS DECISION IS IN RESPONSE TO A REQUEST FROM A CERTIFYING OFFICER. WAS TRANSFERRED ON A PERMANENT CHANGE OF STATION ASSIGNMENT FROM OROVILLE. IT IS REPORTED THAT AT THE TIME OF THE SALE. THE ECONOMIC CONDITIONS IN THE OROVILLE AREA WERE SUCH THAT HOME PURCHASERS WERE ENCOUNTERING GREAT DIFFICULTY IN SECURING MORTGAGE MONEY. WHICH WE UNDERSTAND IS. WHEREBY THE BUYER AGREES TO PURCHASE THE PROPERTY AND ASSUME RESPONSIBILITY TO MAKE ALL MORTGAGE PAYMENTS THAT THE SELLER WAS OTHERWISE LEGALLY OBLIGATED TO MAKE.

B-211794, SEP 27, 1983

DIGEST: EMPLOYEE RECEIVED A PERMANENT CHANGE OF STATION TRANSFER AND SOLD HIS HOME AT OLD STATION UNDER A CONTRACT FOR DEED. UNDER CONTRACT, PURCHASER AGREED TO MAKE MONTHLY MORTGAGE PAYMENTS OWED BY EMPLOYEE AND EMPLOYEE, AS SELLER, AGREED TO TRANSFER TITLE UPON PAYMENT IN FULL. MORTGAGE COMPANY APPROVED ARRANGEMENT, BUT ON PROVISO THAT EMPLOYEE SECURE ESCROW AGENT TO HANDLE FUTURE PAYMENTS FOR WHICH THE EMPLOYEE REMAINED LIABLE. EMPLOYEE MAY NOT BE REIMBURSED FOR COST OF ESCROW AGENTS FEE UNDER PARAGRAPH 2-6.2C OF FEDERAL TRAVEL REGULATIONS SINCE AGREEMENT WAS SOLELY FOR EMPLOYEE'S CONVENIENCE AND WAS NOT DIRECTLY RELATED TO THE SALE ITSELF. SEE CASES CITED.

ARTHUR L. HARDING - RELOCATION EXPENSE - ESCROW FEE:

THIS DECISION IS IN RESPONSE TO A REQUEST FROM A CERTIFYING OFFICER, THE BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR, ON THE QUESTION AS TO WHETHER THE COST OF AN ESCROW AGENT'S FEE INCURRED BY ONE OF THEIR EMPLOYEES INCIDENT TO THE SALE OF HIS FORMER RESIDENCE PURSUANT TO A PERMANENT CHANGE OF STATION TRANSFER MAY BE REIMBURSED. THE FEE MAY NOT BE REIMBURSED FOR THE REASONS STATED BELOW.

BY TRAVEL AUTHORIZATION NO. E0822, DATED MAY 21, 1982, THE EMPLOYEE, MR. ARTHUR L. HARDING, WAS TRANSFERRED ON A PERMANENT CHANGE OF STATION ASSIGNMENT FROM OROVILLE, WASHINGTON, TO DEERFIELD DAM, SOUTH DAKOTA. INCIDENT TO THAT ASSIGNMENT, MR. HARDING SOLD HIS HOME AT HIS OLD OFFICIAL STATION.

IT IS REPORTED THAT AT THE TIME OF THE SALE, THE ECONOMIC CONDITIONS IN THE OROVILLE AREA WERE SUCH THAT HOME PURCHASERS WERE ENCOUNTERING GREAT DIFFICULTY IN SECURING MORTGAGE MONEY. AS A RESULT, MR. HARDING SOLD HIS RESIDENCE ON A CONTRACT FOR DEED, WHICH WE UNDERSTAND IS, GENERALLY, AN AGREEMENT BETWEEN THE BUYER AND SELLER, WHEREBY THE BUYER AGREES TO PURCHASE THE PROPERTY AND ASSUME RESPONSIBILITY TO MAKE ALL MORTGAGE PAYMENTS THAT THE SELLER WAS OTHERWISE LEGALLY OBLIGATED TO MAKE. EXCHANGE, THE SELLER AGREES TO EXECUTE A WARRANTY DEED WHEN THE BUYER MAKES PAYMENT IN FULL. THE MORTGAGE COMPANY IS NOT A PARTY TO SUCH A CONTRACT; HOWEVER, SINCE SUCH AN AGREEMENT SOMEWHAT ALTERS THE FINANCIAL RISK ASSUMED BY THE COMPANY IN THE FIRST INSTANCE, THEIR APPROVAL IS GENERALLY SOUGHT BY THE SELLER.

IN THE PRESENT CASE, BEFORE MR. HARDING'S MORTGAGE COMPANY WOULD ALLOW SUCH AN ARRANGEMENT, THEY REQUIRED THAT HE SECURE AN ESCROW AGENT AND ESTABLISH AN ESCROW ACCOUNT TO HANDLE THESE PAYMENTS. THE CHARGE FOR WHICH REIMBURSEMENT IS BEING SOUGHT ($69.96) REPRESENTS THE COST OF OPENING SUCH AN ACCOUNT.

PAYMENT OF THE ESCROW AGENT'S FEE WAS DISALLOWED BY THE AGENCY ON THE BASIS OF OUR DECISION ARNOLD J. BEJOT, B-171338, APRIL 29, 1976. WE HELD IN THAT DECISION THAT WHERE SUCH AN ACCOUNT IS ONE WHICH IS SET UP STRICTLY FOR THE CONVENIENCE OF THE SELLER AND IS NOT REQUIRED BY A STATUTE OR REGULATION TO CONSUMMATE A SALE, THE COST MAY NOT BE REIMBURSED. IN RESPONSE, MR. HARDING CONTENDS THAT THAT DECISION SHOULD NOT BE APPLIED IN HIS CASE. HE AGREES THAT, AS A SELLER, THE ESCROW ACCOUNT WAS FOR HIS CONVENIENCE, BUT ARGUES THAT BECAUSE OF THE HOUSING MONEY MARKET CONDITIONS, CONTRACTS FOR DEEDS ARE BECOMING COMMONPLACE AND THE STANDARD BUSINESS PRACTICE OF LENDERS AND MORTGAGE HOLDERS IS TO REQUIRE THAT ESCROW AGENTS HANDLE DISBURSEMENTS OF ALL MONIES IN SUCH CASES.

THE BASIC RULE RECOGNIZED BY THIS OFFICE (B-171338, FEBRUARY 10, 1971), IS THAT IF IT IS THE CUSTOMARY PRACTICE OF THE AREA FOR AN ESCROW AGENT'S FEE TO BE CHARGED ALL PARTIES BY TITLE COMPANIES FOR HANDLING DISBURSEMENT OF PAYMENTS AS PART OF THE SALE ITSELF, THAT PORTION OF THE FEE CHARGEABLE TO THE EMPLOYEE IS REIMBURSABLE UNDER THE PROVISIONS OF PARAGRAPH 2-6.2C OF THE FEDERAL TRAVEL REGULATIONS, FPMR 101-7 (NOVEMBER 1981). HOWEVER, THAT 1971 DECISION WAS DISTINGUISHED IN THE BEJOT DECISION. IT WAS FOUND IN BEJOT THAT THE ESTABLISHMENT OF AN ESCROW ACCOUNT TO HANDLE MORTGAGE PAYMENTS AFTER THE SALE WAS FOR THE CONVENIENCE OF THE SELLER AND WAS NOT DIRECTLY RELATED TO THE SALE, AND, THEREFORE, WAS NOT REIMBURSABLE. POINTED OUT IN THAT DECISION THAT THE ESCROW AGENT THERE WAS MERELY IN SUBSTITUTION FOR THE SELLER HAVING TO MAKE HIS MONTHLY PAYMENTS TO THE MORTGAGE COMPANY. THUS, SUCH AN ARRANGEMENT WAS IN REALITY UNNECESSARY, SINCE THE SAME RESULTS COULD HAVE BEEN ACHIEVED BY SIMPLY HAVING THE BUYER SEND THE PAYMENTS TO THE SELLER AND HAVING THE SELLER, IN TURN, SEND THEM ON TO THE MORTGAGE COMPANY. A SIMILAR CONCLUSION WAS REACHED IN JOHN P. ALLEN, B-201009, APRIL 16, 1981. PRESENT CASE IS INDISTINGUISHABLE FROM THE BEJOT AND THE ALLEN CASES. AS A RESULT, WE CONSIDER THEM TO BE CONTROLLING AND MR. HARDING'S CLAIM MAY NOT BE CERTIFIED FOR PAYMENT.