Board of Contract Appeals General Services Administration Washington, D.C. 20405 ________________ March 3, 1998 ________________ GSBCA 14229-RELO In the Matter of DAVID G. WINTER David G. Winter, Hubert, NC, Claimant. Donald L. Smythe, Civilian Human Resources Office-East, Camp Lejeune Satellite Office, United States Marine Corps, Camp Lejeune, NC, appearing for Department of Defense. PARKER, Board Judge. In August 1994, David Winter, an employee of the United States Marine Corps, was transferred from Charleston, South Carolina to Camp Lejeune, North Carolina. Mr. Winter has asked the Board to review the Marine Corps' denial of portions of his claim for reimbursement of certain real estate expenses he incurred in connection with the construction of his new house in North Carolina. The claimed expenses and the Marine Corps' reasons for denying reimbursement are set forth in a memorandum of March 17, 1997, to Mr. Winter: Attorney's Fees: On the enclosure you claimed a total of $750.00 for attorney's fees; $250 for a title search when you purchased your lot[;] and another $500.00 for a title search when you obtained permanent financing for the lot and home which you had constructed on it. Because a title search in connection with permanent financing would normally include a search into the legal status of the building lot and any improvements on it, it would duplicate in part at least the title search into the lot alone. Title search expenses in connection with the construction of a home may not be reimbursed if they are a duplication of an expense item already allowed. See Schampers, James A., HHS, B- 233484. Because the $250.00 appears to represent [] duplication, in part at least, of work performed during the title search in connection with your permanent financing, it may not be approved for reimbursement. The $500.00 has been previously approved. If you provide additional information from your attorney showing that our understanding of what was done in connection with your two title searches is incorrect, this issue will be reevaluated. Loan Origination Fee: You have claimed a total of $1980.00 for Loan Origination Fees paid. This includes a 1% fee on the financing of your lot and an additional 1.5% fee when you secured your permanent financing. Reference (a) limits reimbursement for loan origination fees to 1% unless clear evidence is provided which indicates a higher fee does not include finance charges and the higher rate is customarily charged in the area. A 1% rate is the amount customarily charged in this area. In addition, the permanent financing includes an amount included in the financing for the building lot. Therefore, the loan origination fee paid in connection with the lot financing is a duplication of the expense experienced with your permanent financing and is not reimbursable. Schampers, supra. Your permanent financing was for a loan totaling $108,000.00 and $1080.00, representing 1% of the note, has been approved for payment. Survey: You submitted a claim for $275.00 for various survey expenses, including $75.00 for an Elevation Certificate for your building lot, $100.00 for a foundation survey, and $100.00 for a final survey. Reference (a), C14002A.4a.10 authorizes reimbursement for expenses in connection with construction of a residence for those expenses "which are comparable to expenses that are reimbursable in connection with the purchase of an existing residence." Because Elevation Certificates and foundation surveys are not comparable to expenses which would otherwise be reimbursable with the purchase of an existing residence, they are not reimbursable. The fee for the final survey has been previously approved as it was comparable to an expense normally incurred with the purchase of an existing residence. Plans: Your claim for reimbursement for house plans cannot be approved. The reference on the enclosure to "drawings or plats" authorizes reimbursement only for the costs of preparing illustrations of property and improvements thereon showing relationships to surrounding properties and does not authorize reimbursement for the cost of architectural plans. Recording Fees: Your claim for $56.00 for recording fees represents $28.00 for recording costs associated with the deed and mortgage for the lot and $28.00 for recording certain documents in connection with your permanent financing. Recording fees are normally incurred in connection with the purchase of an existing home and are, therefore, reimbursable. However, an employee may be reimbursed only once for each type of expense that is allowable under the law and regulations. See Michael D. May, B-223771, Nov. 25, 1986. As a result, only one $28.00 expense for recording fees may be reimbursed. This was previously authorized by reference (b). Lender's Appraisal Fee: You have submitted a claim for $525.00 for appraisal fees: $225.00 for the appraisal of your building lot and $300.00 in support of your permanent financing. The $300.00 appraisal expense duplicated in part the expense incurred for the appraisal of the building lot itself. Therefore the $225.00 is not properly reimbursable. The $300.00 was approved by reference (b). Inspections: The $280.00 claimed for inspection expenses is comprised of four separate items: $190.00 for a county inspection for a building permit; $20.00 for a county soil evaluation; $20.00 for an Improvements/Operations county permit; and a $50.00 expense for a final inspection fee. The first three items are integral steps in the construction process and are not normally incurred during the purchase of an existing home. Therefore, these three expenses are not reimbursable per reference (a), C14002A.4.a.10. The fourth expense, $50.00 for the final inspections, is a fee customarily paid when purchasing an existing home and has already been approved for payment. Termite: Your claim for $317.00 for termite treatment cannot be approved for reimbursement because it was part of the construction process itself and not an actual termite inspection. Additionally, even if a termite inspection was conducted, the fees for such an expense in this area are customarily paid by the seller not the purchaser. B-139093, October 13, 1997. . . . . Mortgage Title Insurance: Your claim for $251.60 is actually comprised of two insurance premiums: $90.00 on the building lot title and an additional $161.60 on the permanent financing package. Because the permanent financing includes both the lot and improvements (house, etc.), the $161.60 duplicates in part the cost associated with the title insurance on the lot alone. Therefore the $90.00 is not properly reimbursable. The $161.60 was previously approved for reimbursement. Taxes: The $161.00 for which you claim reimbursement for taxes paid, appears to be for property taxes, based on the documents you submitted. Per reference (a), C14002A.4.b.3, property taxes are not reimbursable. Discussion Attorney's Fees Mr. Winter claimed a total of $750 as attorney's fees for title searches: $250 for a title search in connection with the purchase of the lot on which he would build his home, and $500 for a title search in connection with the permanent financing for the completed home. The agency is correct that only the $500 charge may be reimbursed. A transferred employee's entitlement to reimbursement of real estate expenses incurred incident to relocation is governed by a statutory provision, 5 U.S.C. 5724a(a)(4) (1994), and the pertinent provision of the Federal Travel Regulation (FTR), which implements the statute. The FTR provides that, to the extent allowable, the Government shall reimburse a transferred employee for expenses required for "the purchase (including construction) of one dwelling at his/her new duty station." 41 CFR 302-6.1 (1995). Under subsection 302-6.2(d)(1)(x), reimbursable items include "[e]xpenses in connection with construction of a residence, which are comparable to expenses that are reimbursable in connection with the purchase of an existing residence." Under subsection 302-6.2(d)(2)(vi), expenses that result from construction of a residence are nonreimbursable. Thomas S. Cushing, GSBCA 13867- RELO, 97-2 BCA 29,022. The Board has construed these provisions of the FTR to provide that an employee who chooses to construct a home at the new duty station will be permitted to recover real estate expenses to the same extent as an employee who purchases an existing home. Where each stage of the building process involves a number of expenses which would appropriately be reimbursed in connection with the purchase of an existing residence, the employee may be reimbursed only once for each type of expense that is allowable under the regulations. Brent T. Wahlquist, GSBCA 14163-RELO, 97-2 BCA 29,095. Generally, the expenses incurred incident to permanent financing on the completed house are most representative of expenses an employee would incur to purchase an existing residence and determinations should be based primarily on an examination of that settlement. Id. Here, the agency was correct in reimbursing Mr. Winter for the $500 title search charge incurred in connection with the permanent financing. The $250 charge for a title search in connection with the purchase of the lot was duplicative, and would not have been incurred in connection with the purchase of an existing home. Loan Origination Fee Mr. Winter claimed loan origination fees totaling $1980, which included a one percent fee on the construction loan and a one-and-a-half percent fee on the permanent financing. The agency was correct in reimbursing Mr. Winter in the amount of $1080, or one percent of the amount of the permanent financing loan. The one percent loan origination fee incurred in connection with the construction financing is duplicative of the fee incurred in connection with the permanent financing. The fee in connection with the permanent financing, although allowable, is limited by regulation to one percent of the loan amount unless (1) the higher rate does not include prepaid interest, points, or a mortgage discount and (2) the higher rate is customarily charged in the locality where the residence is located. 41 CFR 302-6.2(d)(1)(ii). Mr. Winter has not disputed the agency's assertion that a one percent rate is customarily charged in the relevant area. Survey The agency reimbursed Mr. Winter for a final survey, but not for an "elevation certificate" or a "foundation survey," which were required in connection with construction of the home. The agency was correct; a final survey is the only one of these expenses which is comparable to an expense that would have been incurred in connection with the purchase of an existing home. Plans The agency's denial of Mr. Winter's claim for reimbursement of the cost incurred for architectural plans for the construction of his home was correct. Such an expenditure is not comparable to one which would be incurred in connection with the purchase of an existing home. Recording Fees Mr. Winter claimed $28 for recording costs associated with the deed and mortgage for the lot and $28 for recording certain documents in connection with the permanent financing. The agency properly denied reimbursement for the costs associated with the lot; they are duplicative of the costs incurred in connection with the permanent financing. Lender's Appraisal Fee Mr. Winter claimed $225 for the cost of appraising the building lot and $300 in appraisal fees in connection with permanent financing for the home. For the same reasons discussed above, we find that the agency properly denied the claim for expenses incurred in connection with the appraisal of the building lot. Inspections We hate to keep repeating ourselves, but, for the same reasons, the agency properly denied Mr. Winter's claim for the three inspections which were required in connection with the construction of the home. The agency properly reimbursed Mr. Winter for the final inspection of the finished home. Termite The agency properly denied Mr. Winter's claim for the cost of termite treatment required only as part of the construction process. Mortgage Title Insurance Mr. Winter's claim for mortgage insurance includes two separate items: $90 for insurance on the mortgage for the building lot and $161.60 for insurance in connection with the permanent financing of the home, which covered both the lot and the constructed home. The agency properly denied the claim for the cost of insurance on the mortgage for the lot. Taxes The agency denied Mr. Winter's claim for $161 in taxes paid at final settlement because the charge appeared to be for property taxes. The settlement sheet described the tax only as "1996 TAXES-ONSLOW COUNTY TAX." Property taxes are not reimbursable. Such things as mortgage taxes and transfer taxes are reimbursable, however. 41 CFR 301-6.2(d). We, like the agency, are not certain what the tax represents. The agency should reimburse Mr. Winter only if he provides proof that this tax was a mortgage or transfer tax and not a property tax. ________________________ ROBERT W. PARKER Board Judge