B-239073.2, Mar 15, 1991, 70 Comp.Gen. 329
B-239073.2: Mar 15, 1991
A transferred employee's residence at his old duty station was situated on an undivided 11.2-acre parcel of land in an area which permitted 2-acre residence sites. Some of his property was in a flood plain and other parts were sufficiently low lying that they remained wet much of the year. Where a parcel of land has not been subdivided and it is questionable that it can be satisfactorily subdivided into additional residential sites under existing zoning requirements and health restrictions. None of that property will be deemed unrelated to the residence site and expense proration is not required. Sold his one-half interest to her based on an agreed to selling price which was below the market price.
B-239073.2, Mar 15, 1991, 70 Comp.Gen. 329
CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Reimbursement - Eligibility - Lot sales 1. A transferred employee's residence at his old duty station was situated on an undivided 11.2-acre parcel of land in an area which permitted 2-acre residence sites. However, some of his property was in a flood plain and other parts were sufficiently low lying that they remained wet much of the year. Under paragraph 2-6.1f of the Federal Travel Regulations, only that land which reasonably relates to the residence site may be included for real estate expense reimbursement purposes. Where a parcel of land has not been subdivided and it is questionable that it can be satisfactorily subdivided into additional residential sites under existing zoning requirements and health restrictions, none of that property will be deemed unrelated to the residence site and expense proration is not required. CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Reimbursement - Eligibility CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Reimbursement - Eligibility - Property titles 2.A transferred employee, who jointly owned a residence with his former wife, sold his one-half interest to her based on an agreed to selling price which was below the market price. His claim for expenses which would have been incurred had the residence been sold on the open market is denied. Reimbursement for real estate transaction expenses under the Federal Travel Regulations is limited to those allowable expenses which the transferred employee actually incurs and is legally obligated to pay. B-168074, Oct. 29, 1969, and B-180986, Sept. 18, 1974. CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Litigation expenses - Attorney fees - Reimbursement 3. A transferred employee, who jointly owned a residence with his former wife, was required to secure a modification of the court order associated with the divorce decree so that the employee could sell his interest in the residence to his former wife. While the modification itself was not contested, it was a continuation of a litigated matter. Under paragraph 2-6.2c of the Federal Travel Regulations the costs of litigation are not reimbursable. Hence, the legal fee incurred to secure the court order modification may not be reimbursed. CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Reimbursement - Eligibility CIVILIAN PERSONNEL - Relocation - Residence transaction expenses - Reimbursement - Eligibility - Property titles 4. A transferred employee, who jointly owned a residence with his former wife, sold his entire interest in the property to his former wife. The rule requiring proration of expenses between the employee and his former wife is not applicable because the residence was not sold by both parties to a third party. Hence, the employee is entitled to full reimbursement of the allowable expenses he incurred in that transaction.
Willie E. Williamson Real Estate Transaction Expenses:
This decision responds to a request from an Authorized Certifying Officer, National Finance Center, Department of Agriculture. /1/ It concerns the entitlement of an employee to be reimbursed real estate expenses incident to a permanent change of station in December 1985. conclude that the employee may be reimbursed only for part of the expenses he claimed, for the following reasons.
Mr. Willie E. Williamson, an employee of the Rural Electrification Administration (REA), Department of Agriculture, was transferred from Washington, D.C., to Mankato, Minnesota, and reported for duty there on December 8, 1985. When notified of his transfer in October 1985, he resided in Davidsonville, Maryland, and commuted to and from his duty station in Washington, D.C., from that residence.
The Davidsonville, Maryland, residence was jointly owned by Mr. Williamson and his wife. In the spring of 1985, Mr. Williamson had instituted divorce proceedings against her. The divorce was granted in June 1987. The court order in the divorce stipulated that the jointly owned residence in Davidsonville was to be sold and the net proceeds of the sale were to be equally divided between the parties.
The property in question consisted of a three-bedroom house on an 11.2- acre parcel of land. Following several appraisals each by Mr. Williamson and his former spouse, they agreed upon a selling price of $250,000. Thereafter, Mr. Williamson attempted to place the residence on the market, but his former wife would not permit it to be listed because she wanted to purchase the residence and was attempting to secure financing.
Due to the delay in selling the residence, Mr. Williamson secured agency approval on November 17, 1987, to extend the time to sell his residence until December 7, 1988. On November 30, 1988, Mr. Williamson sold his one -half interest in the residence to his former spouse for $105,000. Mr. Williamson filed a voucher claiming $12,500 as expenses incident to that sale. The agency allowed $1,500, and disallowed the remaining $11,000.
Most effect, that had his former spouse not prevented sale of the property on the open market, it would have been sold through a broker at a higher price and his share of the broker's fee and other expenses to be reimbursed by the government would have totaled $12,500.
Based on Mr. Williamson's appeal, the certifying officer asks the following questions, summarized below:
1. Since Mr. Williamson started legal proceedings for his divorce prior to his notification of transfer, would he be entitled to real estate expenses on the sale of the residence to his former spouse?
2. If the answer to question 1 is yes, may the agency reimburse Mr. Williamson based on the 11.2 acres or should the reimbursement be prorated based on smaller acreage?
3. If Mr. Williamson may be reimbursed for real estate expenses, should reimbursement be based on the sale price of $105,000 or the appraised price of $250,000?
4. Would any portion of Mr. Williamson's claim be reimbursable since no receipts, other than his letter, have been furnished?
The regulations governing real estate expense reimbursement at the times Mr. Williamson was transferred and sold his residence in Davidsonville, Maryland, are those contained in chapter 2, part 6, of the Federal Travel Regulations (FTR), Sept. 1981, as amended by Supp. 4, Aug. 23, 1982. /2/ Paragraph 2-6.1 of the FTR, which sets forth the conditions of entitlement, states that residence sales expenses which are required to be paid may be reimbursed to a transferred employee, provided that: title to the residence is in the employee's name and/or the name or names of one or more members of his immediate family; the employee occupied the residence when he was definitely informed of his transfer; and the settlement or closing on the property occurred after definite notice of transfer, but not later than 2 years (which may be extended up to an additional 1 year) after the employee reports for duty at his new official station.
Effect of Divorce Proceedings
The fact that Mr. Williamson initiated divorce proceedings before notice of transfer does not preclude reimbursement. We have held that a final decree of divorce between an employee and spouse after issuance of travel orders does not defeat those rights to which the employee is otherwise entitled under the FTR. A divorce decree does, however, limit reimbursement to the extent of the employee's interest in the property at the time of settlement. Gerald S. Beasley, B-196208, Feb. 28, 1980. See also, B-174612, Jan. 12, 1972; modified on reconsideration, B-174612, July 14, 1972.
Mr. Williamson initiated divorce proceedings in the spring of 1985, received notice of transfer in October 1985, and reported for duty at his new station in December 1985. The divorce was granted in June 1987 and the residence was sold in November 1988. Therefore, since Mr. Williamson occupied that residence when he was notified of transfer (October 1985), and jointly held title to the residence with his then wife, but was divorced prior to actual settlement, he is entitled to real estate expenses to the extent of his interest in the property at the time of settlement.
If the residence had been sold to a third party, his reimbursement normally would be limited under FTR, para. 2-6.1f to one-half of the allowable real estate expenses. Gerald S. Beasley, B-196208, supra. See also Thomas A. Fournier, B-217825, Aug. 2, 1985. That amount would reflect the extent of his interest as joint owner. As shown above, however, the property was not sold to a third party. Instead, Mr. Williamson sold his entire interest in the residence to the other joint owner, namely his former wife.
The agreed selling price of Mr. Williamson's interest in the residence was $105,000, which was to be paid by Mr. Williamson's former wife to him. The settlement statement reflects the sale of that one half interest by Mr. Williamson to his former wife. Thus, the transaction was not a sale of the title interests of both joint owners to a third party, but was a sale by one of the owners of his entire interest in the property to the other. Hence, the rule of Beasley and Fournier, supra, requiring proration of sales expenses is not applicable. Mr. Williamson is, therefore, entitled to full reimbursement of the allowable expenses he incurred in that transaction.
Land in Excess of the Residence Site
Paragraph 2-6.1f of the FTR also provides:
"... The employee shall also be limited to pro rata reimbursement when he/she sells or purchases land in excess of that which reasonably relates to the residence site."
The application of this regulation was considered at length in K. Diane Courtney, 54 Comp.Gen. 597 (1975). We ruled therein that the agency concerned is responsible for the initial determination as to what portion of the real estate sold reasonably relates to the residence site and the amount of the claimed expenses which are allowable for that portion. However, we advised agencies that doubtful cases should be forwarded to our Office. Examples of matters to be considered in making that determination include prevailing and customary practices in the locality; zoning laws; past, present, and potential future use of the land; and local requirements concerning on site waste disposal systems.
Information secured by the agency from an official of the Office of Planning and Zoning of the county in question shows that under its zoning code, the minimum lot size in the area is 2 acres per lot. Notwithstanding that, the official suggested that the maximum subdivision potential of Mr. Williamson's property would be four lots, but that three lots would be more realistic. However, he noted that the 11.2 acres has not been subdivided or approved for subdivision to accommodate additional residential dwellings.
Mr. Williamson, in turn, states that his property is part of an old estate which is on the National Register of Historic Places. Further, he maintains that only part of the property is suitable for residential purposes because nearly 3 acres on one end of the parcel lies in a 50 year flood plain zone, other parts in the middle are sufficiently low lying so that all natural water flow from other adjacent properties flows through his, and there are numerous fresh water springs throughout the property. Since much of the land remains wet year around, he contends that it is unusable for additional residence sites under current county requirements.
County officials seem to agree with Mr. Williamson's argument. They have recognized the existence of the flood plain problem and the need to conduct a current storm drainage study. Further, they have recognized the need for percolation tests as a health requirement because public water and sewer are not available. Their report also states that when the parcel was created in 1970 it conformed to the lot requirements of the time, but would not qualify as a legal lot under current requirements if created now.
In brief, the information of record does not establish that the 11.2 acres is divisible into other residence sites; only that it might be divisible if certain zoning requirements and health standards can be met. In view of those reports, we consider satisfaction of these requirements and standards too problematical to conclude that any part of the parcel would support other residence sites. In the circumstances, we do not believe that any of the property sold should be deemed to be in excess of that which reasonably relates to the site of Mr. Williamson's residence. Therefore, proration for excess land is not required.
Qualifying Real Estate Expenses
Mr. Williamson maintains that he is entitled to reimbursement of constructive costs as if the residence were sold to a third party at its market value of $250,000. He estimates such costs to be $25,000, of which he would have paid $12,500.
Paragraph 2-6.1 of the FTR provides that reimbursement shall be allowed "for expenses required to be paid by him/her in connection with the sale of one residence." Specific reference to the actual expense requirement is made in connection with each of the reimbursable expense items listed in FTR, para. 2-6.2. Thus, only where a transferred employee is legally obligated to pay an otherwise allowable real estate expense item, may he be reimbursed that cost.
There is no basis upon which a claim for expenses not incurred may be paid. B-180986, Sept. 18, 1974, and B-168074, Oct. 29, 1969.
As part of the sequence leading to the sale, Mr. Williamson secured an appraisal of the residence at a cost of $250 and he obtained a receipt for that cost. Paragraph 2-6.2b of the FTR permits reimbursement of the customary cost of an appraisal fee. We have held that such fee may be reimbursed if it was incurred after definite notice of transfer was given. Gerald S. Beasley, B-196208, supra. Mr. Williamson was actually transferred in December 1985 and the property appraisal was not performed until October 1986. Therefore, since an appraisal fee may be reimbursed when selling a residence (B-186009, Oct. 12, 1976), Mr. Williamson may be reimbursed that cost of $250 as an expense of the sale of his interest to his former wife, if the cost of that appraisal was customary.
The only other expense charged Mr. Williamson was $1,500 at settlement. That cost represented the legal fee incurred to modify the original divorce decree so as to permit his one-half interest in the residence to be sold to his former spouse. That modification was apparently deemed necessary by the settlement attorney since the original divorce decree restricted the sale of the residence to a third party.
Under FTR, para. 2-6.2c, legal fees incurred to search title, prepare abstracts, conveyances and other documents required in the chain of conveying property interest from seller to buyer are reimbursable. However, costs of litigation are not reimbursable. The modification of the court order in the divorce proceeding did not involve the adversary relationship normally associated with litigation and was not contested. However, since the original court order was issued as part of a divorce settlement between Mr. Williamson and his former wife, the further action necessary to modify that court order was a continuation of a litigated matter, so as to preclude payment of the legal fees involved. Therefore, no part of the $1,500 legal fee may be reimbursed. Cf. Charles W. Dodge, B-160040, July 13, 1976.
/1/ Mr. W. D. Moorman - Reference FSD-1 WMD.
/2/ Incorp. by ref., 41 C.F.R. Sec. 101-7.003 (1988).