Claim for Lease Termination Expenses

B-201153: Jan 18, 1982

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A transferred employee claimed expenses incurred in settling an unexpired lease on property which included both his former residence and income-producing farmland. The employee had executed a 5-year lease of property at his old official station and, as a result of the transfer, the employee could not comply with the lease terms and was charged lease cancellation expenses. The lease for the income-producing land included the use and care of a farmhouse provided at no cost to the employee. Federal regulations limit the reimbursement of real estate expenses to costs associated with conveyance of a residence and the land which reasonably relates to the residence. In this case, GAO could not agree with the agency that the employee leased only land and believed that a portion of the lease payments could be attributable to the use of the farmhouse for a residence. Thus, the Forest Service should determine, in accordance with these principles, the proportion of the lease cancellation fee that applies to the residence and land reasonably related to it. Since the employee's family remained in the residence into the new lease year, the Forest Service must also consider how that affected the employee's reimbursement. GAO concluded that the employee violated his duty to minimize his lease termination expenses in failing to move his family off the property prior to the beginning of the new lease year. Therefore, the claim for the holdover payment was disallowed.

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