B-177595, MAR 2, 1973

B-177595, MAR 2, 1973

CIVILIAN EMPLOYEE - REAL ESTATE EXPENSES - LEASE-PURCHASE AGREEMENT - FORFEITURE OF DEPOSIT DECISION REGARDING THE CLAIM OF JOHN R. LAWLESS, AN EMPLOYEE OF THE INTERNAL REVENUE SERVICE, FOR $1,848 REPRESENTING REAL ESTATE EXPENSES INCURRED INCIDENT TO A CHANGE OF STATION. UNDER THE LEASE-PURCHASE CONTRACT, MR. LAWLESS WAS OBLIGATED TO EXPEND THE MONEYS NOW SOUGHT AS MONTHLY RENTAL UNTIL SUCH TIME AS HE FORMALLY PURCHASED THE RESIDENCE. THEREFORE, THE CLAIM FOR RENTAL MONEY CANNOT BE SAID TO BE A PENALTY FOR EARLY TERMINATION AND, UNDER OMB CIRCULAR NO. A- 56, MAY NOT BE ALLOWED. A FORFEITED DEPOSIT INCIDENT TO A TRANSACTION THAT DOES NOT QUALIFY AS COMPENSABLE UNDER SUBSECTION 4.2F OF OMB CIRCULAR NO. A-56 CAN BE REIMBURSED AS A MISCELLANEOUS EXPENSE UNDER SUBSECTION 3.1B, UP TO THE PERMISSIBLE LIMITS OF SUBSECTION 3.3B, WHERE THE TRANSFER WAS THE CAUSE OF THE FORFEITURE.

TO MS. MILDRED J. KELL:

REFERENCE IS MADE TO YOUR LETTER DATED MAY 8, 1972, WITH ENCLOSURES, REFERENCE ADFF:MK, REQUESTING OUR DECISION AS TO WHETHER THE ENCLOSED VOUCHER IN THE AMOUNT OF $1,848 IN FAVOR OF MR. JOHN R. LAWLESS, AN EMPLOYEE OF THE INTERNAL REVENUE SERVICE, MAY BE CERTIFIED FOR PAYMENT UNDER THE CIRCUMSTANCES HEREINAFTER DESCRIBED.

THE RECORD SHOWS THAT ON MAY 24, 1970, MR. LAWLESS ENTERED INTO A LEASE- PURCHASE CONTRACT, DEPOSITING $1,500 ON A DWELLING IN CENTERVILLE, VIRGINIA, AND AGREEING TO LEASE THE PROPERTY AT A RATE OF $295 PER MONTH UNTIL DATE OF SETTLEMENT WHICH WAS TO OCCUR NO LATER THAN MAY 23, 1971. THIS DWELLING WAS MR. LAWLESS' RESIDENCE FOR COMMUTING TO HIS OFFICIAL DUTY STATION AT WASHINGTON, D. C.

SUBSEQUENTLY, MR. LAWLESS WAS NOTIFIED OF A CHANGE OF HIS OFFICIAL DUTY STATION FROM WASHINGTON, D. C., TO ATLANTA, GEORGIA, WITH A REPORTING DATE OF APRIL 18, 1971. UPON THIS NOTIFICATION OF IMPENDING TRANSFER, MR. LAWLESS UNSUCCESSFULLY ATTEMPTED TO SELL HIS CONTRACT RIGHTS TO THE CENTERVILLE, VIRGINIA DWELLING. UNABLE TO ACCOMPLISH THIS HE WAS REQUIRED UNDER THE TERMS OF THE CONTRACT TO FORFEIT HIS DEPOSIT ON THE HOME.

MR. LAWLESS IS NOW REQUESTING REIMBURSEMENT OF THE FORFEITED DEPOSIT ($1,500) AS WELL AS THE RENTAL PAYMENT FOR THE PERIOD FROM APRIL 19, 1971, THE EFFECTIVE DATE OF HIS TRANSFER, THROUGH MAY 23, 1971, THE EXPIRATION DATE FOR SETTLEMENT UNDER THE CONTRACT ($348).

SECTION 18 OF THE LEASE-PURCHASE CONTRACT HERE INVOLVED STATES -

"THE ENTIRE DEPOSIT SHALL BE HELD BY TOWN & COUNTRY PROPERTIES, INC., AGENT UNTIL SETTLEMENT HEREUNDER IS COMPLETED. IF THE PURCHASER SHALL FAIL TO MAKE FULL SETTLEMENT, THE ENTIRE DEPOSIT HEREIN PROVIDED FOR MAY BE FORFEITED AT THE OPTION OF THE SELLER IN WHICH EVENT THE SAME SHALL BE CONSIDERED AS LIQUIDATED DAMAGES FOR THE BREACH OF THIS AGREEMENT, AND THEREAFTER THE PURCHASER SHALL BE RELIEVED FROM FURTHER LIABILITY HEREUNDER, OR, WITHOUT FORFEITING THE DEPOSIT, THE SELLER OR THE AGENT MAY AVAIL HIMSELF OF ANY LEGAL OR EQUITABLE RIGHTS AND REMEDIES WHICH HE MAY HAVE UNDER THIS CONTRACT. IN THE EVENT OF THE FORFEITURE OF THE DEPOSIT, THE AGENT SHALL RETAIN ONE HALF THEREOF AS A COMPENSATION FOR HIS SERVICES AND SHALL PAY TO THE SELLER THE REMAINING ONE HALF OF SAID DEPOSIT."

SECTION 4.2F OF THE CONTROLLING REGULATIONS, OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO. A-56, AS REVISED, STATES -

"F. SETTLEMENT OF AN UNEXPIRED LEASE. EXPENSES INCURRED FOR SETTLING AN UNEXPIRED LEASE (INCLUDING MONTH-TO-MONTH RENTAL) ON RESIDENCE QUARTERS OCCUPIED BY THE EMPLOYEE AT THE OLD OFFICIAL STATION MAY INCLUDE BROKER'S FEES FOR OBTAINING A SUBLEASE OR CHARGES FOR ADVERTISING AN UNEXPIRED LEASE. SUCH EXPENSES ARE REIMBURSABLE WHEN (1) APPLICABLE LAWS OR THE TERMS OF THE LEASE PROVIDE FOR PAYMENT OF SETTLEMENT EXPENSES, (2) SUCH EXPENSES CANNOT BE AVOIDED BY SUBLEASE OR OTHER ARRANGEMENT, (3) THE EMPLOYEE HAS NOT CONTRIBUTED TO THE EXPENSE BY FAILING TO GIVE APPROPRIATE LEASE TERMINATION NOTICE PROMPTLY AFTER HE HAS DEFINITE KNOWLEDGE OF THE PROPOSED TRANSFER, AND (4) THE BROKER'S FEES OR ADVERTISING CHARGES ARE NOT IN EXCESS OF THOSE CUSTOMARILY CHARGED FOR COMPARABLE SERVICES IN THAT LOCALITY. ITEMIZATION OF THESE EXPENSES IS REQUIRED AND THE TOTAL AMOUNT WILL BE ENTERED ON AN APPROPRIATE TRAVEL VOUCHER. THIS VOUCHER MAY BE SUBMITTED SEPARATELY OR WITH A CLAIM THAT IS TO BE MADE FOR EXPENSES INCIDENT TO THE PURCHASE OF A DWELLING. EACH ITEM MUST BE SUPPORTED BY DOCUMENTATION SHOWING THAT THE EXPENSE WAS IN FACT INCURRED AND PAID BY THE EMPLOYEE."

IT IS OUR VIEW THAT THE REIMBURSEMENT SOUGHT FOR THE RENT PAID DURING THE PERIOD APRIL 19 - MAY 23, 1971 ($348), DOES NOT REPRESENT AN EXPENSE WHICH MR. LAWLESS INCURRED FOR THE "SETTLEMENT OF AN UNEXPIRED LEASE." NOWHERE IN THE EXPRESS TERMS OF THE CONTRACT WAS THERE ANY PROVISION STATING THAT THE PENALTY FOR EARLY LEASE TERMINATION WAS THE REQUIRED PAYMENT OF RENT FOR THE BALANCE OF THE TERM. PURSUANT TO THE CONTRACT MR. LAWLESS WAS OBLIGATED TO EXPEND THE MONEYS NOW SOUGHT FOR MONTHLY RENTAL OF THE PREMISES UNTIL SUCH TIME AS HE FORMALLY PURCHASED THE RESIDENCE. IN SUCH LIGHT, THE CLAIM FOR RENTAL MONEY OF THE PROPERTY HERE INVOLVED DURING THE PERIOD APRIL 19 - MAY 23, 1971, CANNOT BE SAID TO HAVE BEEN A PENALTY FOR EARLY TERMINATION AND MAY NOT BE ALLOWED.

WE TURN NOW TO THAT PART OF THE CLAIM FOR REIMBURSEMENT OF THE $1,500 WHICH WAS FORFEITED UNDER PARAGRAPH 18 OF THE CONTRACT. IT WAS INDICATED IN B-170632, SEPTEMBER 10, 1970, COPY HEREWITH, THAT FORFEITED DEPOSIT INCIDENT TO A TRANSACTION THAT DID NOT QUALIFY AS COMPENSABLE UNDER SUBSECTION 4.2F OF CIRCULAR NO. A-56 COULD BE REIMBURSED AS A MISCELLANEOUS EXPENSE UNDER THE PROVISIONS OF SECTION 3.1B OF THE CIRCULAR WHERE THE CAUSE OF SUCH FORFEITURE WAS THE TRANSFER. IT IS OUR VIEW THAT THE PRINCIPLE ENUNCIATED IN THAT DECISION IS FOR APPLICATION HERE. ACCORDINGLY, MR. LAWLESS MAY RECEIVE RECOMPENSE FOR THE $1,500 CLAIMED, UP TO THE PERMISSIBLE LIMITS OF REIMBURSEMENT UNDER SECTION 3.3B OF CIRCULAR NO. A-56, I.E., NOT TO EXCEED EQUIVALENT OF TWO WEEKS BASIC COMPENSATION. IN THIS REGARD CONSIDERATION MUST OF COURSE BE GIVEN (FOR THE PURPOSE OF THE PRESCRIBED LIMITS) TO ANY REIMBURSEMENT THE EMPLOYEE MAY HAVE ALREADY RECEIVED UNDER SECTION 3.

THE VOUCHER, AND ACCOMPANYING PAPERS, ARE RETURNED HEREWITH FOR HANDLING IN ACCORDANCE WITH THE FOREGOING.