Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405







                                                 



                        February 28, 2002

                                                 





                         GSBCA 15718-RELO





                   In the Matter of VERNA POPE





     Verna Pope, Gilbert, AZ, Claimant.



     Janice Mickels, Budget & Accounting Analyst, Defense Contract Audit Agency,

Central Region, Irving, TX, appearing for Department of Defense.



DANIELS, Board Judge (Chairman).



     The Defense Contract Audit Agency transferred auditor Verna Pope from Tucson,

Arizona, to Tempe, Arizona, in April 2000.  Ms. Pope bought a new home near Tempe and

asked the agency to reimburse her for various costs she incurred in making this purchase. 

The agency paid for most of the costs but refused payment for some.  Ms. Pope requests that

we review the agency's denial of seven items   fees paid by her for document preparation,

loan processing, two home inspections, credit reports, an attorney's services, and seller

administration.  We affirm the agency's determination as to five of these items and reverse

it as to two of them.



     Document preparation fee; loan processing fee



     Real estate transaction charges which are paid incident to and as a prerequisite to the

extension of credit are considered to be finance charges under the Federal Travel Regulation

(FTR), the fundamental regulation governing benefits for federal civilian employees who are

transferred from one permanent duty station to another.  Finance charges are not

reimbursable except to the extent that the FTR makes them so.  41 CFR 302-6.2(d)(2)(v)

(1999); Larry W. Poole, GSBCA 15730-RELO (Jan. 24, 2002).  



     A kind of finance charge which is expressly made reimbursable by the FTR is a loan

origination fee.  A loan origination fee is "a fee paid by the borrower to compensate the

lender for administrative type expenses incurred in originating and processing a loan."  41

CFR 302-6.2(d)(1)(ii).  Fees for preparation of documents needed to close a loan, and for the

processing of the loan, are species of loan origination fee.  Pamela R. Harris, GSBCA

15645-RELO, 01-2 BCA   31,640; Kathleen M. Lewis, GSBCA 15613-RELO, 01-2 BCA 

 31,616; Daniel H. Coney, GSBCA 15506-RELO, 01-2 BCA   31,610; Jeffrey P. Zippin,

GSBCA 15115-RELO, 00-1 BCA   30,744; John P. Kemp, GSBCA 14335-RELO, 98-2 BCA 

 39,751.



     Although the FTR makes loan origination fees reimbursable, it also places a limitation

on the extent of reimbursement.  Generally, the limitation is one percent of the loan amount.

"Reimbursement may exceed 1 percent only if the employee shows by clear and convincing

evidence that:  (A) The higher rate does not include prepaid interest, points, or a mortgage

discount; and (B) The higher rate is customarily charged in the locality where the residence

is located."  41 CFR 302-6.2(d)(1)(ii).



     The agency has already reimbursed Ms. Pope for a loan origination fee in the amount

of one percent of the amount of her mortgage loan.  Although a document preparation fee

and a loan processing fee are shown separately from the loan origination fee on the transfer

agent's settlement sheet, they are for our purposes simply additional fees for loan origination. 

Ms. Pope has not shown that a rate in excess of one percent of the loan amount is customarily

charged in the Tempe, Arizona, area for loan origination fees.  Consequently, she may not

be reimbursed for the additional loan origination costs associated with document preparation

and loan processing.  Harris; Coney; Zippin; Joseph Thompson, GSBCA 15077-RELO, 00-1

BCA   30,615 (1999).



     Home inspection fees



     The FTR makes a home buyer's property inspection fees reimbursable when they meet

three tests: the fees must be (a) customarily paid by the purchaser of a residence in the

locality in question, (b) in an amount no greater than is customarily paid in that locality, and

(c) required by federal, state, or local law, or by the lender as a precondition to the purchase. 

41 CFR 302-6.2(d)(1)(xi); Harris; Lewis; Thomas E. Sullivan, GSBCA 15453-RELO, 01-1

BCA   31,339; Albert L. Van Tuinen, GSBCA 14492-RELO, 98-2 BCA   30,091.  



     Ms. Pope incurred two inspection fees with regard to her purchase.  She paid one fee

to a home inspection service which provided her with a report on the building's condition. 

The other fee, in a lesser amount, was charged by her mortgage lender.



     Ms. Pope says that she hired the service to examine aspects of the structure which

were inaccessible to her (for example, the roof) or of unique importance (wheelchair

accessibility features).  According to the employee, a realtor she contacted believes that

three-quarters of all home buyers in the Tempe area hire services to inspect homes prior to

purchase.  Neither the employee nor the agency has commented on the other inspection fee,

which is shown on the settlement sheet among various charges imposed by the lender.



     The fee paid by Ms. Pope to the home inspection service is not reimbursable because

it fails the third of the three tests set out in the FTR: it was not required by federal, state, or

local law, or by the lender as a precondition to the purchase.  Even if we were to determine

that a home inspection fee is customarily paid by the purchaser of a residence in the Tempe

area  [Foot # 1 ] and that the amount paid by this purchaser was not greater than what is

customary there, the failure to pass the third test makes the fee non-reimbursable.  The

smaller inspection fee, on the other hand, was required by the lender, so the agency should

repay Ms. Pope for it unless the agency concludes, based on further investigation, that

lenders in Tempe customarily do not assess an inspection fee or that the fee in question

exceeds the customary amount.



     

****************** Footnote Begin **********

[Foot # 1 ]       The evidence may not support such a conclusion.  "The fact that a practice

may be 'common' or 'normal' does not raise it to the status of a charge 'customarily assumed'

by the purchaser."  Van Tuinen.

****************** Footnote End ************



 Credit report fees



     The cost of preparing a home buyer's credit reports is reimbursable, providing that this

cost is customarily paid by a purchaser of a residence in the locality in question and does not

exceed amounts customarily paid in that locality.  41 CFR 302-6.2(d)(1)(iii); Poole.  The

agency determined, based on information from the Arizona Mortgage Lenders Association

and the company through which Ms. Pope secured her mortgage loan, that the typical cost

of a full credit report in the Phoenix area (including Tempe) is no more than sixty dollars. 

The agency has already reimbursed the employee in this amount for credit report fees. 

Additional costs were incurred by Ms. Pope, according to the mortgage company, "from

having to obtain new credit reports each time the time limit expired."  We conclude from this

evidence that because of some events peculiar to this employee's purchase, more than one

credit report had to be prepared.  The agency acted appropriately in not reimbursing the

additional costs associated with the extra report or reports, which were apparently caused by

actions of the employee herself or the persons with whom she engaged in the transaction at

issue.



     Attorney fee



     The FTR makes "legal and related expenses" involved in a home purchase

reimbursable, provided that these costs meet three tests:  they must be (a) not included in

brokers' or similar charges for which reimbursement is claimed under other categories, (b)

customarily paid by a purchaser of a residence in the locality in question, and (c) in an

amount not in excess of what is customarily paid in that locality.  The FTR makes numerous,

specifically-designated "legal and related expenses" reimbursable, and it states that "similar

expenses" are reimbursable as well.  41 CFR 302-6.2(c); Van Tuinen.  The General

Accounting Office, our predecessor in settling claims by federal civilian employees for

relocation benefits, held that because obtaining necessary and reasonable legal services

incident to the purchase or sale of residential housing is both prudent and customary, all fees

customarily charged for such services (except for litigation) are reimbursable.  The principle

was first enunciated in George W. Lay, 56 Comp. Gen. 561 (1977), and followed thereafter.

See Frank W. Hahnenberg, B-248,506 (Oct. 26, 1992); John C. Bisbee, 65 Comp. Gen. 473

(1986); Reid T. Stone, B-210,604 (Aug. 24, 1983); Alexander D. Bell, B-201,382 (July 7,

1983); Constance A. Hackathorn, B-205,579 (June 21, 1982).  The Board adopted the

reasoning and conclusion of these decisions, as to attorney fees, in Edward C. Brandt,

GSBCA 13649-RELO, 97-2 BCA   29,054.



     Ms. Pope engaged a lawyer to review documents prepared by the seller regarding the

prospective transaction, for the purpose of ensuring that the documents would require the

seller to convey a wheelchair-accessible house.  The agency denied reimbursement of the

very small fee charged by the lawyer, on the ground that the attorney may have given advice,

but did not actually prepare a conveyance, other instrument, or contract.  (Preparation of any

of these documents is specifically listed in the FTR as generating a reimbursable expense.) 

The agency's conclusion is inconsistent with the law since Lay.  Legal advice incident to the

purchase of a residence is a service similar to the ones noted by the agency, and thus

reimbursable if necessary and in a reasonable, customary amount.  Ms. Pope has cited good

cause for seeking legal counsel as to the appropriateness of the seller's proposed documents,

and the small amount charged for her attorney's services is undoubtedly reasonable.  The cost

of these services is therefore reimbursable.



     Seller administration fee



     The builder from whom Ms. Pope bought her home charged a small "seller

administration fee."  According to the company through which the employee secured her

mortgage, this particular builder charges the fee on all home purchases.  The employee and

the agency agree that no other builder in the area charges a similar fee.



     Neither the Board nor the General Accounting Office has ever been asked to decide

whether a charge called a "seller administration fee" is reimbursable to the employee.  The

FTR does not say explicitly whether such a charge is reimbursable or not.  The regulation

does provide for reimbursement of charges which are "similar in nature" to those fees it

explicitly makes reimbursable, but this fee is not similar to any of those.  See 41 CFR

302-6.2(d)(1)(vi).  We think the "seller administration fee" assessed by Ms. Pope's builder

is best viewed as merely an incremental portion of the sales price.  As such, it is not a charge

which the agency ought to pay.



     In summary, we conclude that the agency has properly implemented the FTR with

regard to all but two of the fees submitted for our review by the employee.  The agency must

reimburse Ms. Pope for the attorney fee she incurred.  It should also reimburse her for the

lender's inspection fee she paid, unless it determines that such a fee is not customarily paid

in the Tempe, Arizona, area, or that the amount she paid exceeded the customary charge in

that area.











                              _________________________

                              STEPHEN M. DANIELS 

                              Board Judge