ALLOWANCES FOR EXPENSES INCURRED IN CONNECTION WITH RESIDENCE TRANSACTIONS

• Citation: 41 CFR Part 302-11
• Sections: 14

§ 302-11.1 Eligibility to receive an allowance for expenses incurred in connection with residence transactions.

(a) Eligibility to receive an allowance for expenses incurred in connection with residence transactions is indicated where applicable at § 302-3.100 of this chapter; new appointees and employees assigned under the Government Employees Training Act (GETA) are not eligible for such expenses. Employees may receive reimbursement for the one residence from which they regularly commute to and from work on a daily basis and which was their residence at the time they were officially notified by competent authority of the transfer to a new official station. Employees must occupy the residence at the time they are notified of their transfer, unless the transfer is from a foreign area to an official station within the United States other than the one the employee left when they transferred out of the United States. If an employee previously transferred from an official station in the United States to a foreign area and they are now transferring back to the United States, then, in addition to the eligibility requirements of this section, they must have completed the time period specified in their service agreement for the overseas tour of duty.

(b) The title to the property for which an employee is requesting an allowance for residence transaction must be:

(1) Solely in the employee's name;

(2) Solely in the name of one or more of their immediate family members; or

(3) Jointly in the employee's name and in the name of one or more of their immediate family members.

(c) Reimbursement of any residence transaction expenses (or settlement of an unexpired lease) that occurs prior to being officially notified (generally in the form of a change of station travel authorization) is prohibited.

(d) Employees may not receive an advance of funds for residence transaction expenses.

§ 302-11.2 Types of reimbursable residence transaction expenses.

(a) If an employee qualifies for a residence transaction expense allowance, they may be reimbursed for the:

(1) Expenses of selling the old residence and purchasing a new residence in the United States; or

(2) Settlement of an unexpired lease at the old official station in the United States from which transferred to another official station in the United States or when assigned to a foreign post of duty; and

(3) Expenses of purchasing a new residence in the United States upon return to the United States upon completion of the foreign tour of duty and the return is to a different official station, and is 50 miles distance from the official station which the employee transferred from.

(b) Employees do not have to sell the residence at their old official station to be eligible for residence purchase transactions at their new official station.

§ 302-11.3 Settlement of an unexpired lease.

When an employee has an unexpired lease (including month to month) that is for residence quarters at their old official station, they may be reimbursed for settlement expenses, including but not limited to broker's fees for obtaining a sublease or charges for advertising if:

(a) Applicable laws or the terms of the lease provide for payment of settlement expenses;

(b) Such expenses cannot be avoided by sublease or other arrangement;

(c) The employee has not contributed to the expenses by failing to give appropriate lease termination notice promptly after having definite knowledge of their transfer; or

(d) The broker's fees or advertising charges are not in excess of those customarily charged for comparable services in that locality.

§ 302-11.4 Time limitations.

As noted in § 302-2.2, all aspects of the relocation must be completed within 1 year; therefore, the settlement dates for the sale and purchase or lease termination transactions must occur not later than 1 year after the day an employee reports for duty at their new official station. Agencies may extend the 1-year limitation to complete residence transactions for up to one additional year for reasons beyond the employee's control and acceptable to the agency. An extension of time to complete residence transactions also extends the time to complete any other aspect of the relocation that is still pending. To have the initial time period extended, the employee must submit a request to their agency prior to the expiration date.

§ 302-11.100 Title requirements.

(a) The Government will determine who holds title to a property based on:

(1) Whose name(s) actually appears on the title document ( e.g., the deed); or

(2) Who holds equitable title interest in the property as specified in § 302-11.101.

(b) If the employee or a member of their immediate family do not hold full title to the property for which they are requesting reimbursement, reimbursement will be on a pro rata basis to the extent of the employee's actual title interest plus their equitable title interest in the residence.

(c) To be eligible, the employee and/or a member(s) of their immediate family must have acquired title or equitable title interest in the residence as illustrated in the following table:

Table 1 to Paragraph ( c )

Type of transfer

Date

1. Between official stations in the United States

1. Prior to the date first notified of the transfer.

2. Returning from completion of any foreign tour of duty to a different official station in the United States, which is 50 miles distance from the official station from which transferred to the foreign official station

2. Prior to the date the employee transferred to the foreign area from which they are now returning.

§ 302-11.101 Equitable title interest.

“Equitable title interest” in a residence is determined by the agency if:

(a) The title is held in trust, and:

(1) The property is the employee's residence;

(2) The employee and/or a member(s) of their immediate family are the only beneficiary(ies) of the trust during either of their lifetimes;

(3) The employee and/or a member(s) of their immediate family retain the right to distribute the property during their lifetimes;

(4) The employee and/or a member(s) of their immediate family retain the right to manage the property;

(5) The employee and/or a member(s) of their immediate family are the only grantor/settlor of the trust, or retain the right to direct distribution of the property upon dissolution of the trust or death; and

(6) The employee provides their agency with a copy of the trust document; or

(b) The title is held in the name of a financial institution, and:

(1) The property is the employee's residence;

(2) The employee and/or a member(s) of their immediate family executed a financing agreement ( e.g., mortgage) with the financial institution;

(3) State or local law requires that lending parties take title to perfect ( i.e., protect) a security interest in the property, or the financial institution requires that it take possession of title as a condition of the financing agreement; and

(4) The employee provides their agency with a copy of the financing document; or

(c) The title is held both in the names of:

(1) The employee solely, or jointly with one or more members of their immediate family, or solely by one or more members of their immediate family;

(2) An individual accommodation party as defined in § 300-1.1 of this subtitle who is not a member of the employee's immediate family; and

(3) These conditions apply:

(i) The property is the employee's residence.

(ii) The employee and/or a member(s) of their immediate family have the right to use the property and to direct conveyance of the property.

(iii) The lender requires signature of the accommodation party on the financing document.

(iv) The employee and/or a member of their immediate family, are liable for payments under the financing arrangement ( e.g., mortgage).

(v) The accommodation party's name is on the title.

(vi) The accommodation party does not have a financial interest in the property unless the employee and/or a member(s) of the immediate family default on the financing arrangement.

(vii) The employee must provide documentation of the accommodation that is acceptable by the agency; or

(d) The title is held by the seller of the property and the following conditions are met:

(1) The property is the employee's residence;

(2) The employee and/or member(s) of their immediate family has the right to use the property and to direct conveyance of the property;

(3) The employee and/or member(s) of their immediate family must have signed a financing agreement with the seller of the property ( e.g., a land contract) providing for fixed periodic payments and transfer of title to the employee and/or a member(s) of the immediate family upon completion of the payment schedule; and

(4) The employee provides their agency with a copy of the financing agreement; or

(e) Another equitable title situation exists where title is held in the employee's name only or jointly with the employee and one or more members of their immediate family or with the employee and an individual who is not an immediate family member, and the following conditions are met:

(1) The property is the employee's residence.

(2) The employee and/or a member(s) of their immediate family has the right to use the property and to direct conveyance of the property.

(3) Only the employee and/or a member(s) of their immediate family has made payments on the property.

(4) The employee and/or a member(s) of their immediate family received all proceeds from the sale of the property.

(5) The employee must provide suitable documentation to their agency that all conditions in paragraphs (e)(1) through (4) of this section are met.

§ 302-11.200 Reimbursable expenses for sale and/or purchase of a residence.

Provided the residence transaction expenses are customarily charged to the seller of a residence in the locality of the old official station or paid by the purchaser at the new official station, agencies will, with appropriate supporting documentation provided by the employee, reimburse the following residence transaction expenses when they are incurred by the employee incident to the relocation:

(a) Broker's fee or real estate commission for the sale of the employee's residence at the old official station or purchase of a new residence at the new official station that the employee pays, not to exceed the rates that are generally charged in the locality of the old or new official stations;

(b) The customary cost for an appraisal;

(c) The costs of newspaper, bulletin board, multiple-listing services, and online or other advertising for sale of the residence at the old official station that is not included in the broker's fee or the real estate agent's commission;

(d) The cost of a title insurance policy, costs of preparing conveyances, other instruments, and contracts and related notary fees and recording fees; cost of making surveys, preparing drawings or plats when required for legal or financing purposes; and similar expenses incurred for selling the residence to the extent such costs:

(1) Have not been included in other residence transaction fees ( i.e., brokers' fees or real estate agent fees);

(2) Do not exceed the charges, for such expenses, that are normally charged in the locality of the residence; and

(3) Are usually furnished by the seller;

(e) The costs of searching title, preparing abstracts, and the legal fees for a title opinion to the extent such costs:

(1) Have not been included in other related transaction costs ( i.e., broker's fees or real estate agency fees); and

(2) Do not exceed the charges, for such expenses, that are customarily charged in the locality of the residence; and

(f) The following “other” miscellaneous expenses in connection with the sale and/or purchase of a residence, provided they are normally paid by the seller or the purchaser in the locality of the residence, to the extent that they do not exceed specifically stated limitations, or if not specifically stated, the amounts customarily paid in the locality of the residence:

(1) Federal Housing Administration or Department of Veterans Affairs fees for the loan application;

(2) Loan origination fees and similar charges such as loan assumption fees, loan transfer fees or other similar charges not to exceed 1 percent of the loan amount without itemization of the lender's administrative charges if the charges are assessed in lieu of a loan origination fee and reflect charges for services similar to those covered by a loan origination fee. Reimbursement may exceed 1 percent only when the employee provides evidence that the higher rate does not include prepaid interest, points, or a mortgage discount, and is customarily charged in the locality where the residence is located;

(3) Cost of preparing credit reports;

(4) Mortgage and transfer taxes;

(5) State revenue stamps;

(6) Other fees and charges similar in nature to those listed in paragraphs (f)(1) through (5) of this section, unless specifically prohibited in § 302-11.201;

(7) Charge for prepayment of a mortgage or other security instrument in connection with the sale of the residence at the old official station to the extent the terms in the mortgage or other security instrument provide for this charge. This prepayment penalty is also reimbursable when the mortgage or other security instrument does not specifically provide for prepayment, provided this penalty is customarily charged by the lender, but in that case the reimbursement may not exceed 3 months' interest on the loan balance;

(8) Mortgage title insurance policy, paid by the employee, on a residence purchased for the protection of, and required by, the lender;

(9) Owner's title insurance policy, provided it is a prerequisite to financing or the transfer of the property; or if the cost of the owner's title insurance policy is inseparable from the cost of other insurance which is a prerequisite;

(10) Expenses in connection with construction of a residence, which are comparable to expenses that are reimbursable in connection with the purchase of an existing residence;

(11) Expenses in connection with environmental testing and property inspection fees when required by Federal, State, or local law; or by the lender as a precondition to sale or purchase; and

(12) Other expenses of sale and purchase made for required services that are customarily paid by the seller of a residence at the old official station or if customarily paid by the purchaser of a residence at the new official station.

§ 302-11.201 Residence transaction expenses an agency will not pay.

Agencies will not pay:

(a) Any fees that have been inflated or are higher than normally imposed for similar services in the locality;

(b) Owner's title insurance policy, “record title” insurance policy, mortgage insurance or insurance against loss or damage of property and optional insurance paid for in connection with the purchase of a residence for the employee's protection;

(c) Interest on loans, points, and mortgage discounts;

(d) Property taxes;

(e) Operating or maintenance costs;

(f) Any fee, cost, charge, or expense determined to be part of the finance charge under the Truth in Lending Act, 15 U.S.C. 1601 et seq., and Regulation Z issued by the Board of Governors of the Federal Reserve System (12 CFR part 226), unless specifically authorized in § 302-11.200;

(g) Expenses paid by someone other than the employee or a member of their immediate family;

(h) Expenses that result from construction of a residence, except as provided in § 302-11.200(f)(10); and

(i) Losses incurred on the sale of the residence.

§ 302-11.300 Limit on how much an agency will reimburse for residence transactions.

Agencies will reimburse no more than:

(a) Ten percent of the actual sales price for the sale of a residence at the old official station; and

(b) Five percent of the actual purchase price of the residence for the purchase of a residence at the new official station.

§ 302-11.301 Determination of reasonableness for claimed expenses.

To determine if expenses are reasonable, employees should, in coordination with their agency, contact the local real estate association, or, if not available, at least three different realtors in the locality in which the expenses will be incurred and request:

(a) The current schedule of closing costs which applies to the area in which the employee is buying or selling;

(b) Information concerning local custom and practices with respect to charging of closing costs which relate to either the sale or purchase and whether such costs are customarily paid by the seller or purchaser; and

(c) Information on the local terminology used to describe the costs specified in paragraph (b) of this section.

§ 302-11.302 Purchase or sale of land in excess of what reasonably relates to the residence site.

When an employee purchases or sells land in excess of what reasonably relates to the residence site, reimbursement will be limited to a pro rata reimbursement of the land reasonably related to the residence site.

§ 302-11.303 Reimbursement for settlement of an unexpired lease.

(a) To request reimbursement for settlement of an unexpired lease, employees must itemize expenses (list all expenses separately) on a travel voucher and submit the voucher to the agency.

(b) When a lease is shared with someone else, reimbursement will be on a pro rata basis for that portion of the lease that the employee is responsible for.

§ 302-11.400 Policies, procedures, and controls.

(a) Agencies must establish internal policies and procedures to implement this part. The policies must define what documentation is acceptable from an employee when requesting reimbursement of residence transaction expenses.

(b) When paying allowances for expenses incurred in connection with residence transactions, agencies must:

(1) Determine who will authorize and approve residence transactions expenses on the employee's travel authorization;

(2) Determine who will review applications for reimbursement of residence transaction expenses;

(3) Determine who will authorize extensions beyond the 1-year limitation for completing sales and purchase or lease termination transactions; and

(4) Require employees to submit a travel claim with appropriate documentation to support the payment of claimed expenses, which must include as a minimum:

(i) The sales agreement;

(ii) The purchase agreement;

(iii) Property settlement documents;

(iv) Loan closing statements; and

(v) Invoices or receipts for other bills paid.

§ 302-11.401 Authorizing an extension of time.

When authorizing an extension of time limitation, agencies must determine that the:

(a) Employee has extenuating circumstances which have prevented them from completing the sale and purchase or lease termination transactions in the initial authorized time frame of one year; and

(b) The employee's residence transactions are reasonably related to the transfer of the official station.