April 12, 2012
41.4.37
Background
The employee grieved the Employer's refusal to honor the relocation agreement as indicated in the letter of offer as well as the shortfall in the sale of the home, the mortgage insurance and the interest accumulated from the borrowing costs outstanding added to the mortgage.
Bargaining Agent Presentation
The Bargaining Agent representative explained that the grievor had purchased a residence at origin for $485,000 however 2 mortgages were assumed with a combined total of $501,000. Two appraisals were conducted on the grievor's residence with an average value of $485,000. On April 19, 2010 the grievor listed the property at $534,900 in order to liquidate both mortgages while also providing some leeway for negotiation.
The Department objected to the list price as it was higher than the appraised value. The Department considered this to be an indication that the grievor was not actively marketing the home, a condition of the Temporary Dual Residence Assistance (TDRA). The grievor lowered the asking price in June 2010 and agreed to provide the Contracted Relocation Service Provider (CRSP) with weekly reports via the realtor. TDRA was subsequently approved on June 23, 2010.
The Bargaining Agent representative explained that the Employer stopped the TDRA effective September 1, 2010 as it concluded that the grievor had not satisfied the obligation to have the realtor provide weekly reports. The Employer also demanded that the grievor further lower the asking price. As a result of this action, the grievor was forced to liquidate in mutual funds in order to avoid being evicted from a temporary residence. The grievor was not provided with TDRA for the months of September and October until November 2010.
The Employer has employed a punitive application of the Directive by not recognizing the assets and liabilities involved in the acquisition of a second mortgage. The Bargaining Agent representative submitted that the purchase price of the residence at origin should factor in the mortgage amount to allow for a more accurate account of the real losses potentially incurred in a relocation. The grievor should be entitled to Home Equity Assistance (HEA) as per section 8.20 of the Directive as the Bargaining Agent representative is of the view that the purchase price should include the mortgage amount.
Furthermore, it was submitted that as result of being forced to sell the home prior to the expiration of the one year timeframe allotted by the Directive and at a lower price than the mortgages held, the grievor suffered a loss of equity. This loss affected the ability to transfer equity to the new home purchased thereby forcing the grievor to incur mortgage default insurance premiums.
The Bargaining Agent representative noted a revision to the corrective action sought. The grievor is now seeking approximately $36,000 to cover the following: the shortfall between the sale price of the residence and the amount of the two mortgages plus interest; the remainder of the maximum allowable for mortgage-breaking penalties per section 8.11 for the first mortgage plus interest; reimbursement of mortgage-breaking penalties for the second mortgage plus interest; for the withdrawal amount of mutual funds; and reimbursement of the mortgage default insurance premium per section 9.17 plus interest.
Departmental Presentation
The Departmental representative noted that the grievor was not forced to sell the house at a loss but rather was required to abide by the rules set out in the Directive. The grievor cannot demonstrate that the house sold for less than its original purchase price and as such does not qualify for HEA under section 8.20 of the Directive.
The sale price of the home ($485,000) was above both appraisal values ($460,000 and $482,000) therefore no loss was incurred and the grievor is not eligible for Home Sale Assistance under section 8.3 of the Directive.
The Departmental representative further indicated that the mortgage default insurance premium was properly applied by the CRSP based on the first mortgage on the former residence. It was submitted that the grievor is not entitled to any further reimbursements.
The Directive is silent on the issue of interest and therefore there is no authority for the reimbursement of such fees.
The issue of mutual funds was not raised in any of the previous levels of the grievance procedure therefore the Department could not provide a response.
In addition, the Departmental representative indicated that the Directive does not recognize second mortgages.
Executive Committee Decision
The Executive Committee considered and agreed with the report of the Relocation Committee which concluded that the employee was treated within the intent of the NJC Relocation Directive. It was agreed that the grievor was not forced to sell the residence at the price accepted however as it was sold at its original purchase price and over the appraisal value there is no shortfall. The fact that the grievor owed more than the purchase price is not covered by the Directive.
With respect to the issue of mortgage insurance, the grievor was treated within the intent of the Directive as reimbursement was in proportion with the equity transferred.
Furthermore, the Directive does not provide for forecasted interest costs nor does it address assistance on second mortgages. The grievor was reimbursed the full value of the Temporary Dual Residence Assistance claims as submitted. The Committee also notes that the Directive does not provide direction on how personal funds should be used. As such, the grievance was denied.