B-182412, APR 18, 1975

B-182412, APR 18, 1975

1. EMPLOYEE CONTRACTED TO HAVE HOME CONSTRUCTED AT NEW DUTY STATION FOLLOWING TRANSFER. BECAUSE OF CONSTRUCTION DELAYS, HOME WAS NOT COMPLETED BY SCHEDULED TIME, AND EMPLOYEE WAS REQUIRED TO OBTAIN TWO EXTENSIONS OF PERMANENT MORTGAGE LOAN COMMITMENT AT TOTAL COST OF $200. THERE CAN BE NO REIMBURSEMENT OF THIS COST AS IT DIRECTLY RELATES TO CONSTRUCTION OF NEW RESIDENCE, AND REIMBURSEMENT IS SPECIFICALLY BARRED BY FTR PARA. 2-6.2D (MAY 1973). 2. EMPLOYEE WHO CONTRACTED TO HAVE HOME CONSTRUCTED AT NEW DUTY STATION FOLLOWING TRANSFER, SOUGHT REIMBURSEMENT OF FEES FOR PREPARATION OF DOCUMENTS, RECORDING OF DOCUMENTS, AND TITLE EXAMINATION AND/OR TITLE INSURANCE FOR CLOSING OF BOTH CONSTRUCTION MORTGAGE LOAN AND PERMANENT MORTGAGE LOAN. SINCE FEES RELATING TO CONSTRUCTION LOAN RESULT DIRECTLY FROM CONSTRUCTION THERE CAN BE NO REIMBURSEMENT OF THOSE FEES. FTR PARA. 2-6.2D (MAY 1973). WHERE REIMBURSEMENT IS SOUGHT FOR EXPENSES RELATING TO BOTH TYPES OF LOANS, REIMBURSEMENT MAY BE PAID ONLY FOR PERMANENT MORTGAGE LOAN.

WESLEY J. LYNES - REAL ESTATE EXPENSES - NEW CONSTRUCTION:

THIS MATTER IS BEFORE US BASED UPON A REQUEST FOR AN ADVANCE DECISION SUBMITTED BY A DISBURSING OFFICER OF THE INTERNAL REVENUE SERVICE, REGARDING THE REIMBURSEMENT OF CERTAIN REAL ESTATE EXPENSES INCURRED BY MR. WESLEY J. LYNES INCIDENT TO HIS TRANSFER.

UNDER THE AUTHORITY OF TRAVEL AUTHORIZATION CC-38-73, MR. LYNES WAS TRANSFERRED FROM MIAMI, FLORIDA, TO NASHVILLE, TENNESSEE. HE REPORTED TO HIS NEW DUTY STATION ON JULY 2, 1973. ON JULY 11, 1973, HE ENTERED INTO A CONTRACT FOR THE CONSTRUCTION OF A HOME IN NASHVILLE. A MORTGAGE LOAN COMMITMENT WAS OBTAINED FROM THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, AND, BASED UPON THAT MORTGAGE COMMITMENT, A CONSTRUCTION MORTGAGE LOAN WAS SECURED FROM THE FIRST AMERICAN NATIONAL BANK. ACCORDING TO THE ORIGINAL TIMETABLE, THE HOME WAS TO BE COMPLETED AND THE SETTLEMENT ON THE EQUITABLE MORTGAGE WAS TO BE HELD ON OR BEFORE FEBRUARY 8, 1974. HOWEVER, DUE TO UNSPECIFIED CONSTRUCTION DELAYS, THE HOUSE WAS NOT READY BY THAT DATE.

MR. LYNES WAS ABLE TO OBTAIN AN EXTENSION OF THE EQUITABLE COMMITMENT TO MARCH 8, 1974, AT A COST OF $100. IT WAS NECESSARY TO OBTAIN FURTHER EXTENSIONS, FIRST UNTIL APRIL 8, 1974, AGAIN AT A COST OF $100, AND FINALLY UNTIL THE ULTIMATE SETTLEMENT DATE, MAY 14, 1974, AT NO FURTHER COST. FOLLOWING AN INITIAL AGENCY DENIAL, MR. LYNES SUBMITTED A RECLAIM VOUCHER FOR THE $200 PAID TO OBTAIN THE EXTENSIONS OF THE EQUITABLE MORTGAGE COMMITMENT.

MR. LYNES WAS DENIED REIMBURSEMENT FOR THE FEES PAID TO SECURE THE EXTENSIONS OF THE MORTGAGE COMMITMENT ON THE GROUNDS THAT THESE FEES WERE NOT EXPENSES CUSTOMARILY PAID BY A BUYER IN THE AREA, AND THAT THESE EXPENSES RESULTED FROM CONSTRUCTION AND REIMBURSEMENT WAS SPECIFICALLY PROHIBITED BY THE REGULATIONS. IN HIS RECLAIM VOUCHER, MR. LYNES RAISES ESSENTIALLY THREE CONTENTIONS IN FAVOR OF REIMBURSEMENT. FIRST, HE STATES THAT PAYMENT OF THESE FEES WAS NECESSARY AND REQUIRED IN ORDER TO PRESERVE THE MORTGAGE COMMITMENT FROM EQUITABLE, AND THUS AVOID A MORTGAGE AT A HIGHER INTEREST RATE. SECOND, HE CONTENDS THAT THESE CHARGES WERE EQUIVALENT TO THE PRESERVATION OF A MORTGAGE COMMITMENT ON AN EXISTING HOME WHEN THE SETTLEMENT WAS DELAYED, FOR REASONS NOT WITHIN THE BUYER'S CONTROL, BEYOND THE TERM OF THE COMMITMENT. THIRD, THAT THE CURRENT CONDITION OF THE ECONOMY, AND PARTICULARLY THE CONSTRUCTION INDUSTRY, NECESSITATES THE PRESERVATION OF WHATEVER COMMITMENTS CAN BE OBTAINED.

REIMBURSEMENT OF REAL ESTATE EXPENSES INCURRED INCIDENT TO A TRANSFER IS GOVERNED BY THE FEDERAL TRAVEL REGULATIONS (FPMR 101-7) (MAY 1973), SPECIFICALLY HERE, BY PARAGRAPH 2-6.2D, WHICH PROVIDES, IN PERTINENT PART, THAT:

"*** IN CASES INVOLVING CONSTRUCTION OF A RESIDENCE, REIMBURSEMENT OF EXPENSES WOULD INCLUDE THOSE ITEMS OF EXPENSE WHICH ARE COMPARABLE TO EXPENSES THAT ARE REIMBURSABLE IN CONNECTION WITH THE PURCHASE OF EXISTING RESIDENCES AND WILL NOT INCLUDE EXPENSES WHICH RESULT FROM CONSTRUCTION."

WE HAVE HELD THAT WHEN CONSTRUCTION MORTGAGE LOAN CHARGES EXCEED THE AMOUNTS CHARGED FOR PERMANENT MORTGAGE LOANS, THERE CAN BE NO REIMBURSEMENT OF THE EXCESS. B-164491, NOVEMBER 15, 1968, AND B 164938, AUGUST 26, 1968. WE HAVE ALSO HELD THAT WHEN THERE ARE EXPENSES INCURRED RELATING TO A CONSTRUCTION MORTGAGE LOAN AND A PERMANENT MORTGAGE LOAN, THERE MAY BE REIMBURSEMENT ONLY FOR THE EXPENSES RELATING TO THE PERMANENT MORTGAGE LOAN. B-164452, JULY 2, 1968. THE CHARGES FOR THE PERMANENT MORTGAGE LOAN COMMITMENT EXTENSIONS WERE INCURRED DIRECTLY AS A RESULT OF THE FACT THAT MR. LYNES CONTRACTED TO HAVE A HOME CONSTRUCTED INSTEAD OF PURCHASING AN EXISTING HOME. THEREFORE, THERE CAN BE NO REIMBURSEMENT OF THESE CHARGES.

REGARDING THE CONTENTIONS RAISED BY MR. LYNES, FIRST, WHILE IT MAY BE TRUE THAT IT WAS NECESSARY FOR HIM TO OBTAIN THE EXTENSIONS OF THE EQUITABLE MORTGAGE COMMITMENT, NOT ALL EXPENSES THAT EMPLOYEES ARE REQUIRED TO PAY INCIDENT TO A TRANSFER ARE REIMBURSABLE. EXPENSES MAY BE REIMBURSED ONLY WHEN SPECIFICALLY AUTHORIZED BY THE STATUTE OR REGULATION. IN THE SAME VEIN, WE KNOW OF NO AUTHORITY FOR THE PAYMENT OF EXTENSION FEES AS CLAIMED HERE, EVEN WHEN AN EXISTING HOME IS PURCHASED. THE FACT THAT THE COMPLETION OF CONSTRUCTION WAS DELAYED BY CIRCUMSTANCES BEYOND MR. LYNES' CONTROL CANNOT OVERRIDE THE SPECIFIC LANGUAGE OF THE REGULATIONS. B-166317, MAY 9, 1969. WHILE IT IS REGRETTABLE THAT THE CURRENT CONDITIONS IN THE CONSTRUCTION INDUSTRY ARE SUCH THAT DELAYS AND DIFFICULTIES OF THIS TYPE ARE BECOMING MORE FREQUENT, SUCH PROBLEMS CANNOT BE USED AS THE BASIS FOR AN EXPANSION OF THE GOVERNMENT'S LIABILITY. FTR PARA. 2-6.2E (MAY 1973).

OUR EXAMINATION OF THE RECORD HERE REVEALED THAT MR. LYNES HAS ALREADY BEEN REIMBURSED FOR THE FOLLOWING EXPENSES SHOWN IN MAKING SETTLEMENT FOR THE CONSTRUCTION MORTGAGE LOAN GRANTED BY THE FIRST AMERICAN NATIONAL BANK:

LEGAL FEE - DOCUMENT PREPARATION $ 25.00

TITLE SEARCH AND PREPARATION OF TITLE OPINION 50.00

RECORDING: WARRANTY DEED 21.14

DEED OF TRUST 34.50

$130.64

IT IS ALSO NOTED THAT MR. LYNES WAS REIMBURSED $125 FOR APPRAISAL AND INVESTIGATION COSTS INCIDENT TO THE PURCHASE OF A LOT THAT WAS NOT USED TO CONSTRUCT HIS RESIDENCE ON. ADDITIONALLY, THE FOLLOWING EXPENSES WERE REIMBURSED IN RELATION TO THE SETTLEMENT OF THE PERMANENT MORTGAGE LOAN GRANTED BY EQUITABLE:

DOCUMENT PREPARATION $ 15.00

RECORDING: DEED OF TRUST 38.50

MORTGAGEE'S TITLE POLICY 236.00

$289.50

THE TWO LISTS OF EXPENSES COVER THE SAME TYPE OF EXPENSES FOR BOTH THE CONSTRUCTION AND PERMANENT MORTGAGE LOANS. IN LIGHT OF OUR HOLDING IN THIS CASE AND IN B-164452, SUPRA, MR. LYNES SHOULD NOT HAVE BEEN REIMBURSED FOR THE EXPENSES INCURRED INCIDENT TO THE CLOSING OF THE CONSTRUCTION MORTGAGE LOAN. NEITHER WAS HE ENTITLED TO BE REIMBURSED THE $125 FOR APPRAISAL AND INVESTIGATION COSTS INCIDENT TO THE PURCHASE OF THE FIRST LOT. THEREFORE, COLLECTION ACTION SHOULD BE INSTITUTED TO SECURE THE RETURN FROM MR. LYNES OF THE $130.64 PAID IN RELATION TO THE CLOSING OF THE CONSTRUCTION MORTGAGE LOAN, AS WELL AS THE $125 TO WHICH HE WAS NOT ENTITLED.

ACCORDINGLY, MR. LYNES' RECLAIM VOUCHER MAY NOT BE CERTIFIED FOR PAYMENT, AND COLLECTION ACTION AS DESCRIBED ABOVE SHOULD BE INSTITUTED.