Board of Contract Appeals

                 General Services Administration

                      Washington, D.C. 20405







                                                 



                        September 1, 2004

                                                 





                         GSBCA 16467-RELO





                 In the Matter of ROBERT K. BASS





     Robert K. Bass, Orange Park, FL, Claimant.



     Judy Hughes, Travel Pay Services, Policy and Procedures, Defense Finance and

Accounting Service, Columbus, OH, appearing for Department of Defense.



DANIELS, Board Judge (Chairman).



     In Edward I. Wexler, GSBCA 16410-RELO (Aug. 11, 2004), we held that the statute

and regulations authorizing agencies to reimburse transferred employees for costs they incur

in selling homes at their old duty stations and buying homes at their new duty stations should

be interpreted broadly.  This holding is consistent with the purpose of the laws, which is to

require the Government to pay employees' legitimate costs of transfer, thereby minimizing

financial losses that employees may incur as a result of their relocations and helping to

protect the Government's investment in its skilled manpower.  Real estate transaction costs

should therefore be reimbursed if they are "allowable"   similar in nature and limited in size

to the kinds of costs which are specifically made reimbursable by the Federal Travel

Regulation (FTR).



     In this case, brought by Department of the Navy employee Robert K. Bass, we apply

the holding of Wexler.



                            Background



     Mr. Bass was transferred in December 2000 from a duty station in Georgia to one in

Florida.  For nearly two years thereafter, he and his wife attempted without success to sell

their former residence in Georgia.  Shortly before the second anniversary of his transfer, the

couple entered into an unusual arrangement through which they divested themselves of

ownership of the house.



     The essential elements of the arrangement are as follows.  Mr. and Mrs. Bass paid

$10,000 to a company called Custom Home Buyers, LLC.  At the same time, they transferred

to a trust title to the property.  Custom Home Buyers was the beneficiary of the trust; it had

the right generally to manage and control the property, and specifically to direct the trustee

(who was named by the company) to convey the title to a third party.  Under the terms of the

trust, when the property was later sold, Custom Home Buyers would receive all the proceeds

of the sale, but would pay to Mr. and Mrs. Bass $120,000.  Custom Home Buyers did sell the

property (for $147,000) and did pay the Basses $120,000.



     Settlement costs were incurred both in the transfer of title from Mr. and Mrs. Bass to

the trust and in the transfer of title from the trust to the ultimate purchaser.  The first group

of costs totaled $1083   $550 as a settlement fee to the transfer agent, $75 for a title

insurance binder, $382 for a title insurance premium, $50 for document preparation by

lawyers, and $26 in recording fees.  The second group of costs totaled $232   $50 for

document preparation by lawyers, $10 in recording fees, $147 in State of Georgia transfer

taxes, and $25 for a courier fee.  Custom Home Buyers paid all of these fees.



     Mr. Bass seeks to be reimbursed by the Government the $10,000 he and his wife paid

to Custom Home Buyers for its various roles under the arrangement the Basses entered into

with the company.  He characterizes the payment as $8917 in broker's commission and $1083

in legal and related fees.  The Department of Defense (DoD) denied the claim because it

could not find in its Joint Travel Regulations (JTR) any specific provision authorizing

reimbursement of a charge like the one the Basses paid.



                            Discussion



     In Wexler, we examined the transaction costs the transferred employee incurred in

implementing his unusual plan for purchasing a residence at his new duty station.  We held

that the agency must reimburse the employee for expenses which were similar to costs made

expressly reimbursable by the relevant regulations, provided that those expenses were not

greater than those customarily paid in the locality of the residence.  It is not surprising that

DoD did not apply this analysis to Mr. Bass' claim, since the case was filed before Wexler

was decided.  We apply the analysis now to the costs Mr. and Mrs. Bass incurred in selling

their home at their old duty station, and expect that in the future, agencies will use it as to

other irregular arrangements by transferred employees for the purchase and sale of their

residences.



     Of the $10,000 paid by Mr. and Mrs. Bass to Custom Home Buyers, some was used

to pay specific charges for settlement and some was in lieu of a commission to the company

for its services of finding an ultimate purchaser for the house.



     Two different settlements occurred   one for the transfer of title from the Basses to

the trust and one for the transfer from the trust to the ultimate purchaser.  Of the costs of the

first settlement, all are readily associated with specific charges of sale made reimbursable by

the FTR and the JTR   the fee to the transfer agent, fee and premium for title insurance,

lawyer's document preparation charge, and recording fees are all encompassed within 41

CFR 302-6.2(c) (2000) and JTR C14002-A.3 (Dec. 2000).  These costs are clearly

reimbursable   provided that they do not exceed amounts customarily charged in the locality

of the residence.  We leave to DoD, in the first instance, the determination of the amounts

customarily charged in the locality.



     Whether costs of the second settlement are reimbursable requires a more detailed

analysis, which we undertake in three parts.  First, the charges for the lawyer's document

preparation and the recording fees, as explained above, are encompassed within 41 CFR

302-6.2(c) and JTR C14002-A.3.  They would therefore normally be reimbursable in

connection with the sale of a residence.  The FTR and JTR provide, however, that when an

employee chooses to construct a new home at his new duty station and pays successive

settlement fees as a result, the employee may be reimbursed only once for each type of

allowable expense.  The purpose of the limitation is to restrict reimbursement to whatever

it would be if the employee were to have purchased an already-existing house.  Steven F.

Bushey, GSBCA 15289-RELO, 01-1 BCA   31,291; Robert D. Lee, GSBCA 14843-RELO, 

99-1 BCA   30,244; see 41 CFR 302-6.2(d)(1)(x), (d)(2)(vi); JTR C14002-A.4.a(10),

-A.4.b(6).  We think the principle is applicable by analogy to the situation before us now,

where successive settlements were necessary to fulfill the terms of the unusual arrangement

through which sale of the residence was accomplished.  Therefore, the second payments for

document preparation and recording should not be reimbursed.   



     Second, as to the costs of the second settlement, the state's transfer tax is encompassed

within 41 CFR 302-6.2(d)(1)(iv) and JTR C14002-A.4.a(4).  It was imposed only once and

is in an amount required by state law.  This expense is therefore reimbursable.  Third, as to

the charge for courier service, if this service was necessary for the transfer, rather than for

reasons of personal preference, it is reimbursable.  Kathy D. Peter, GSBCA 16114-RELO,

04-1 BCA   32,424 (2003).



     The principal service Custom Home Buyers provided for Mr. and Mrs. Bass was

finding someone to buy the house.  This sort of service is usually paid for through a broker's

fee or real estate commission, and such a cost is expressly made reimbursable by the FTR and

JTR.  See 41 CFR 302-6.2(a); JTR 14002-A.1.  We conclude that to effectuate the purpose

of the statute in question, Mr. Bass should be reimbursed for the implicit cost of the

commission.  Reimbursement of broker's fees or real estate commissions is limited by

regulation to "rates generally charged for such services by the broker or by brokers in the

locality of the old official station."  41 CFR 302-6.2(a); see also JTR 14002-A.1.  Thus, for

example, if that rate was six percent of the sales price at the time Mr. and Mr. Bass

transferred title so as to lose control over their former residence, the implicit commission

paid to Custom Home Buyers was six percent of the amount they received ($120,000), or

$7200.  If the rate was seven percent (as Mr. Bass believes), the implicit commission was

$8400.  DoD should ascertain the appropriate rate before reimbursing the employee for this

cost.



     Applying this analysis, DoD will reimburse Mr. Bass for most but not all of the

$10,000 he paid to Custom Home Buyers for that firm's services in selling his house.  The

amount which will remain unreimbursed must be considered a premium the employee paid

for entering into an unusual arrangement for the sale.











                                   _________________________ 

                                   STEPHEN M. DANIELS

                                   Board Judge