Washinton, D.C

U.S. Office of Personnel Management
Compensation Claim Decision
Under section 3702 of title 31, United States Code

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Damon B. Ford
Compensation and Leave Claims
Program Manager
Agency Compliance and Evaluation
Merit System Accountability and Compliance


08/09/2023

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Date

The claimant is a Federal civilian employee of the Training and Mission Support, Fort Sam Houston, Texas, G7 Training Directorate, U.S. Army Installation Management Command, U.S. Department of the Army (DA), San Antonio, Texas. He requests the U.S. Office of Personnel Management (OPM) reconsider DA’s denial of back pay requested by him for the difference between the monthly living quarters allowance (LQA) he received from June 2021 through June 2022 (i.e., 1,500 Euros (€1,500)) and the monthly rent paid by him (i.e., €2.600) for a civilian dwelling he lived in while working as a Federal civilian employee with DA in Vicenza, Italy. We received the claim on March 15, 2022, the agency administrative report (AAR) on November 9, 2022, and the claimant’s response to the AAR on December 13, 2022. For the reasons discussed herein, the claim is denied.

In 2008, while serving as active-duty military in Vicenza, Italy, the claimant entered into a rental contract with an owner of a dwelling in that area. On September 30, 2013, the claimant was appointed to a federal civilian position with DA in Vicenza and was subsequently determined eligible to receive LQA as an employee recruited outside the continental United States (OCONUS) in accordance with the Department of State Standardized Regulations (DSSR) section 031.12(a) and (b); Department of Defense Instruction (DoDI) 1400.25 Volume 1250; and Army in Europe Regulations (AER) 690-500.592. He remained in the same dwelling while transitioning from his military service to his inititial federal civilian position with DA and initiated a new rental contract on October 2, 2013, in the amount of €1,500 per month. Subsequent to his appointment, DA’s Civilian Human Resources Agency, Europe’s LQA Team (CHRA-E’s LQA Team) approved and granted the claimant LQA in the amount of €1,500 per month.

Following the sale of the claimant’s rented dwelling, the new owner proposed raising the rent to €3,000 per month. Concerned that €3,000 exceeded his LQA cap and not wishing to change residence with less than 15 months left in his OCONUS tour, the claimant coordinated with the new owner and the agency’s local housing authority to establish his rent at €2,600 per month (within his LQA cap) effective July 1, 2021. He then requested a corresponding increase in his monthly LQA grant from the agency to fully compensate him for the €1,100 increase in his monthly rent. On September 2, 2021, the agency denied the claimant’s request to increase his LQA grant to €2,600 per month and sustained his original LQA grant of €1,500 per month. On July 31, 2021, the claimant returned to the U.S. and entered on duty in his current position in San Antonio, Texas.

The agency states that it is reasonable that an increase in rent may occur when ownership of property changes hands. However, it attributes the increase in the claimant’s rent, in part, to upgrades proposed by the new owner and subsidized, to some extent, by the Italian government and asserts that the increase is high and unjustifiable and should not be visited upon the agency. In its AAR to OPM, the agency writes:

As we have noted in our memorandum to [the claimant], while it is reasonable that rent increases occur when ownership of rental property changes, here, the increase seemed to have been rather high and not justifiable. The renovations/upgrades to the building envisioned by the landlady, and promoted and in-part, funded by the Italian government, is commendable, however, cannot be visited on [the claimant’s] employing agency.

The agency also states that, although funds may be granted under DSSR section 137 for initial repairs and improvements to make a dwelling habitable at the time of initial occupation, these funds must be approved by the agency in advance and, note that the claimant’s situation does not justify this sort of funding.  In a memorandum, dated September 2, 2021, the agency writes:

…while allowances may be granted when initial repairs and improvements may be authorized under the DSSR § 137, such an allowance is to cover expenses upon initial occupation of the quarters to make them habitable, and must be approved administratively in advance. This is not the case here.

The agency states that, although it appears the claimant obtained assistance from the local housing authority when he negotiated the monthly rent with the new owner, he failed to obtain authorization from CHRA-E’s LQA Team prior to obligating himself, and by extension the agency, to a €1,100 increase in his monthly rent and that the claimant intentionally negotiated the rent at €2,600 to remain below his LQA cap to avoid having to pay the additional rent expense himself. In its AAR to OPM, the agency writes:

 [The claimant] seems to take the position that while the initially requested monthly amount of €3,000 was too high and therefore, negotiated the price to €2,600, to keep the expenses within his LQA limitations imposed by the DSSR, the latter amount would be current market value, and thus appropriate for authorization. In other words, as long as the expenses associated with rent, and to some degree with utilities, are within the DSSR-imposed LQA cap, it would be appropriate for the agency to pay, irrespective of the reasoning. We disagree with this sentiment. Here, while it was beyond [the claimant’s] control that a change in ownership occurred and that the new owner adjusted the rent upwards, it appears that he committed the agency to a significant increase that he himself would not agree to.

The agency further states that DoDI guidelines indicate that LQA grants are not intended to reimburse 100 percent of rent-related costs for employees. It asserts it has discretionary authority under current DSSR and DoDI guidelines to determine whether or not to grant LQA, as well as a fiduciary responsibility to ensure that unreasonable costs are not incurred in the disbursement of public funds and cites OPM decision number 12-0008 as support for its decision.  In its AAR to OPM, the agency writes:

Further, as the DOD emphasizes in its instruction 1400.25-V1250, paragraph 4e, LQA [is] designed to cover substantially all average allowable costs for suitable, adequate quarters, including utilities. [it is] not intended to reimburse 100 percent of an employee’s quarters costs…”.

Finally, we wish to note here we also rely on OPM’s previous position on specifically regarding a rental increase of a substantial nature in its decision on February 13, 2013, filed under OPM Claim No., 12-0008, and its consistent notion found in other decisions of a similar character that “the agency has the discretion and the fiduciary responsibility to ensure that unreasonable costs are not being incurred in the disbursement of public funds.”

Based on the aforementioned rationale, the agency denied the claimant’s request to increase his monthly LQA grant to €2,600.

The claimant believes the agency’s decision to deny his request to increase his LQA to €2,600 per month is based on inaccurate information and/or a poor understanding of his overall situation and disagrees with the agency’s assertion that the increased rent resulted from proposed Italian government-funded renovations and improvements, stating no improvements were performed to the dwelling during his occupancy and states the higher rent was the result of an increase in the market value. In his claim to OPM, he writes:

The denied request was not based on the full development of the facts or without evaluating the totality of the situation.

No improvements to the house were made. No promises to renovate were made.

The rent increased [€2,600 per month] because that is what this type of house [in the Vincenza area] could be rented for by the new landlord in the current market.

The claimant believes the agency should increase his LQA grant to fully cover the rent for his dwelling during the claim period, stating he would have had to pay at least €2,600 per month rent for a comparable dwelling if he moved to another dwelling and that the increased rent was sanctioned by the agency because its local housing office assisted him during his negotiations with the new owner. He states:

The monthly rent of €2,600 is not unreasonable since the U.S. Government would’ve likely paid the increase had I moved to another location.

I involved the USAG Italy Housing Office every step of the way throughout this entire process and this could not have come to fruition without their knowledge and expertise. I relied on their guidance and consultation throughout this process…Housing facilitated the lease renewal with the new property owner with an effective date of 01 JUL 21.

The claimant believes the agency mis-valued the dwelling and, as a result, its decision to deny an increase in his LQA grant to correspond with the increased value of the dwelling is “arbitrary, capricious, and unreasonable”. He states:

For individuals [agency] in Germany to make a factual determination that my house in Italy is not worth [€]2,600 a month in rent, but is only worth [€]1,500, without ever visiting it and ignoring all of the market information and the Army housing rental prices, is a factual determination that is unreasonable on its face. The agency’s decision to disallow the requested LQA should be reversed because it is arbitrary, capricious, and unreasonable.

The claimant asserts he was unable to move during the period coinciding with the change in ownership of his dwelling due to his COVID-related responsibilities and that DA did not lawfully consider this issue when deciding not to increase his LQA grant. He states:

…during notification to vacate period, I was promoted to a critical leadership position in USAG Italy. I was the primary official for COVID Management serving both the Garrison Commander and SETAF-AF Commanding General. The organization could not afford my absence during a household move lasting three to five weeks during a peak European COVID period.

The claimant requests back pay to cover the difference between the €2,600 rent he paid and the €1,500 for LQA he received each month between June 2021 and June 2022.

The DSSR sets forth the basic criteria for the granting and payment of LQA. DSSR section 131.1 defines LQA as "a quarters allowance granted to an employee for the annual cost of suitable, adequate, living quarters for the employee and his/her family." Section 131.3, Scope, further states:

The LQA rates are designed to cover substantially all of the average employee's costs for rent, heat, light, fuel, gas, electricity, water, taxes levied by the local government and required by law or custom to be paid by the lessee, insurance required by local law to be paid by the lessee, and agent's fee required by law or custom to be paid by the lessee.

Section 137 of the DSSR, Allowance for Necessary and Reasonable Initial Repairs, Alterations, and Improvements Under Unusual Circumstances, makes provision for reimbursing an LQA recipient for the cost of needed repairs within the first three months of a rental agreement as follows:

The purpose of this allowance is to cover, under unusual circumstances, the cost of initial repairs, alterations and improvements which are incurred within 3 months of a rental agreement, and which are basic to making the employee's first permanent residence at a post habitable. Before granting the initial repair allowance, the head of agency shall determine that: (1) the lessor will not assume the cost of the repairs; (2) the quarters are below reasonable standards of health, safety or comfort; and (3) no adequate rental quarters are known to be available locally at a rate which, when combined with estimated utility and tax costs, is within the maximum authorized allowance for the employee concerned.

Section 137 of the DSSR, by its plain terms, only covers LQA reimbursement to a recipient for the cost of initial repairs, alterations, and improvements which are incurred within three months of a rental agreement, and which are basic to making the employee's first permanent residence at a post habitable. Therefore, this one-time "repair allowance" is intended for unusual circumstances where the quarters are below reasonable standards of health, safety or comfort, the lessor will not pay for the repairs or upgrades, and no other adequate quarters are available locally. It may be used to pay for the cost of the specified types of repairs or alterations required to make a residence "reasonably habitable." However, it may not be used to pay the cost of renovations to suitable, adequate quarters.

The claimant specifically states no renovations/improvements were performed and that his dwelling had always been suitable, adequate quarters and the agency provides no evidence that renovations/improvements were performed on the dwelling by the new owner, which may have influenced the increase in monthly rent. Therefore, DSSR section 137 is not applicable to the claimant’s case.

The DSSR makes clear that LQA is a discretionary grant and that its rates are designed to cover “substantially all” rather than “all” allowable costs, including rent, incurred by the average employee for “suitable, adequate living quarters.” Therefore, if the rent being paid by an LQA recipient for suitable and adequate housing increases due to a change in ownership, employees are not automatically entitled to a corresponding increase in LQA nor are they entitled to receive the maximum allowable LQA for their pay and living circumstances.

The claimant asserts the agency’s concern that proposed renovations/improvements to the dwelling by the new owner, and allegedly subsidized in-part by the Italian government, may have influenced the increase in monthly rent from €1,500 to €2,600 per month is unfounded, stating his dwelling had always been suitable, adequate quarters and that no renovations/improvements to the dwelling occurred while he lived there.

Under 5 CFR 178.105, the burden is upon the claimant to establish the liability of the United States and the claimant’s right to payment. Consequently, the claimant was responsible for providing any and all documents which he felt might prove agency liability for LQA payments, as provided in 5 CFR 178.105. Therefore, his assertions that the agency failed to advise him of other possible supporting information which may have positively influenced their decision is unfounded.

The statutory and regulatory languages are permissive and give agency heads considerable discretion in determining whether to grant LQA to agency employees. Wesley L. Goecker, 58 Comp. Gen. 738 (1979). The DSSR establishes only basic LQA eligibility criteria and bestows considerable discretion to agency heads to decide under what circumstances they will grant LQA to eligible individuals. See Mark Roberts v. United States, U.S. Court of Federal Claims, No.10-754C (April 30, 2012; reissued May 21, 2012). DSSR section 013 authorizes agency heads to issue further implementing regulations for their own agencies. Thus, an agency may decide not to increase an employee LQA grant when it finds that the circumstances justify such action, and the agency’s action will not be questioned unless it is determined that the agency’s action was arbitrary, capricious, or unreasonable. In the present case, the agency’s decision to deny the requested increase in LQA is not considered arbitrary, capricious, or unreasonable because the agency’s actions comply with the DSSR and implementing guidelines in the DoDI. Therefore, the claim is denied.

This settlement is final. No further administrative review is available within the OPM. Nothing in this settlement limits the claimant’s right to bring an action in an appropriate United States court.

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