B-245457, Feb 1, 1992

B-245457: Feb 1, 1992

Additional Materials:

Contact:

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

 

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

The policy was not a prerequisite to financing or the transfer of the property as required by the FTR. Since the employee was not legally required to purchase the policy. Its cost is a nonreimbursable expense. No mortgage was involved in the purchase. Provides that the expenses of an owner's title insurance policy is reimbursable provided it is a prerequisite to financing or the transfer of the property. Or if the cost of the policy is inseparable from the cost of other insurance which is a prerequisite to financing or the transfer of the property. /1/ In interpreting the language of the previously cited FTR provision. This Office has consistently held that while the purchase of an owner's title insurance policy may have been advisable.

B-245457, Feb 1, 1992

DIGEST: Transferred employee paid cash in purchasing residence at new duty station with no mortgage involved. He may not be reimbursed for the cost of an owner's title insurance policy. The policy was not a prerequisite to financing or the transfer of the property as required by the FTR, 41 C.F.R. Sec. 302.6-2d(ix) (1991). Since the employee was not legally required to purchase the policy, its cost is a nonreimbursable expense, not essential to the purchase of the residence.

Dr. William E. Howard III:

Dr. William E. Howard III, an employee of the Department of the Army, seeks reimbursement of the cost of an owner's title insurance policy which he incurred in connection with his transfer from Fredericksburg, Virginia, to McLean, Virginia, in July 1991. Dr. Howard paid cash for his new residence in McLean. No mortgage was involved in the purchase.

The Federal Travel Regulation, 41 C.F.R. Sec. 302.6-2(d)(ix) (1991), provides that the expenses of an owner's title insurance policy is reimbursable provided it is a prerequisite to financing or the transfer of the property, or if the cost of the policy is inseparable from the cost of other insurance which is a prerequisite to financing or the transfer of the property. /1/

In interpreting the language of the previously cited FTR provision, this Office has consistently held that while the purchase of an owner's title insurance policy may have been advisable, the evidence must show that such insurance was purchased by the employee as a prerequisite to obtaining financing, not as a matter of prudence for the employee's own protection. Such was the case in Anders E. Flodin, 64 Comp.Gen. 674, 676 (1985), wherein reimbursement was denied even though the property purchased by the employee was encumbered by over 30 mechanics liens and the seller's attorney stated that the purchase of owner's title insurance was not only advisable but, in his opinion, mandatory because of the problems involved. We have also stated that the employee must have been legally required to obtain such a policy in connection with the purchase of the residence. /2/

Here, inasmuch as the expense of the owner's title insurance policy was not a prerequisite to financing or the transfer of the McLean residence and Dr. Howard was not legally required to obtain such a policy, it appears that he purchased the policy for his own protection. As such, it must be regarded as a nonreimbursable personal expense and not essential to the purchase of the residence. Accordingly, the cost of the policy, $1,426, may not be reimbursed.

Mr. Larry A. Tucker Chief Regulatory Policy Branch (FBXR) Federal Supply Service General Services Administration

Dr. William E. Howard III, an employee of the Department of the Army, Department of Defense, seeks reimbursement of the cost of an owner's title insurance policy, which he incurred in connection with his transfer from Fredericksburg, Virginia, to McLean, Virginia, in July 1991. Dr. Howard paid cash for his new residence in McLean. No mortgage was involved in the purchase.

As you are aware, under the provisions of 41 C.F.R. Sec. 302.6 2(d)(ix) (1991), the expense of an owner's title insurance policy is reimbursable provided it is a prerequisite to financing or the transfer of the property; or if the cost of the policy is inseparable from the cost of other insurance which is a prerequisite to financing or the transfer of the property. See also para. C14002.1.d(1)9 of the Joint Travel Regulations.

In interpreting the FTR provisions, this Office has denied reimbursement of owner's title insurance where the property purchased by the employee was encumbered by over thirty mechanic's liens and the seller's attorney recommended and stated that "owner's title insurance was advisable and in my opinion mandatory because of the problems involved." We stated that while the purchase of the owner's title insurance may have been advisable, it did not appear that the insurance was purchased by the employee as a prerequisite to obtaining financing, but as a matter of prudence for his own protection. See Anders E. Flodin, 64 Comp.Gen. 674, 676 (1985). This has been the position taken by this Office in a long line of decisions dating from 1971 to the present. Our position is based on the language of the FTR provision cited above. Copies of a representative sampling of these decisions are enclosed.

As you will note, Dr. Howard questions the fairness of the regulation on two grounds. First, he states that the owner's title insurance policy appears to be viewed as a nonreimbursable owner's option unless a mortgage company is involved. Dr. Howard states that since he was concerned by the low, but significant possibility that title to the property might come into question during the period he owns it, he considered the expense to be a necessity, not an option, to assure that the defense of the title would be covered and handled correctly.

Secondly, Dr. Howard feels that it is not fair for an employee to be denied reimbursement of the cost of owner's title insurance protection when such reimbursement is permitted when a mortgage company is involved. He contends that a federal employee should receive the same consideration as a mortgage company when he seeks the same level of protection with the owner's title insurance policy. Dr. Howard does not feel that the federal government should penalize an employee for paying cash for his home as the FTR effectively does. He requests a review of the rationale behind this reimbursement and that he be reimbursed for the $1,426 that he paid for the owner's title insurance on his new home.

We are issuing a decision, Dr. William E. Howard III, B-245457, today, copy enclosed, in which we have denied Dr. Howard's claim for reimbursement of the $1,426 that hepaid for the owner's title insurance on his new home.

In light of the statutory responsibility (5 U.S.C. Secs. 5721-5734 (1988)) vested in the Administrator of General Services to promulgate regulations applicable to civilian employees of government agencies, including the Department of Defense, for allowances for expenses incurred in connection with residence transactions, we are requesting that your Office review its regulations in light of the questions raised by Dr. Howard.

A copy of our decision, along with a copy of this letter and copies of our decisions concerning this issue, are being forwarded to Dr. Howard.

Dr. William E. Howard III:

We refer to your letter of August 27, 1991, with enclosures, in which you seek reimbursement of the cost of an owner's title insurance policy which you incurred in connection with your transfer from Fredericksburg, Virginia, to McLean, Virginia, in July 1991.

By decision of today, Dr. William E. Howard III, B-245457, based upon our prior decisions, we have denied your claim. However, on this date, we are forwarding a letter to the appropriate official, Mr. Larry A. Tucker, Chief, Regulatory Policy Branch, Federal Supply Service, of the General Services Administration, in which we request that his Office review its regulations inasmuch as the Administrator of General Services has been vested with the statutory responsibility to promulgate regulations for allowances for expenses incurred in connection with residence transactions.

We are also enclosing copies of a sampling of the decisions of the Comptroller General of the United States, interpreting the Federal Travel Regulation, in which we have denied reimbursement of owner's title insurance unless the insurance purchased by the employee was a prerequisite to obtaining financing, holding that, generally, the purchase of the policy is a matter of prudence for the employee's own protection and not essential to the consummation of the residence purchase.

/1/ See also para. C14002.1d(2)1, Vol. 2, Joint Travel Regulations, Feb. 1, 1991.

/2/ See William H. Brewster, B-193750, Aug. 28, 1979. See also Alex Kale, 55 Comp.Gen. 779 (1976); John F. Stanton, B-210474, Aug. 29, 1983; B-175716, July 5, 1972; B-170571, Nov. 16, 1971.