[Question Concerning Prepayment Penalty for Sewer Assessment Lien]

B-216425: Aug 21, 1985

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The Forest Service requested a decision concerning the entitlement of an employee to reimbursement for a sewer improvements lien prepayment penalty he had paid on his former residence when he sold it incident to a permanent change of station. The agency had disallowed the expense, holding that it was not a penalty associated with a mortgage or other security instrument. The employee resubmitted his claim, contending that it was a reimbursable prepayment penalty since the municipal code of the city of his former residence had imposed the penalty on real estate owners. The agency again disallowed the expense. GAO found that the prepayment of the assessment to satisfy the lien was required by the lending institutions and by federal regulations and was customarily paid by the seller in the locality of the old official station. GAO also found that the prepayment penalty was required by the municipal code and that the recorded assessment roll, enacted by city council ordinance, qualified as a security instrument. Accordingly, the employee was entitled to reimbursement for the prepayment penalty charge.

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