July 29, 2015
41.4.77
Background
The grievor accepted an indeterminate appointment with Department A. The letter of offer indicated June 2009 as the start date and the location of duty was City A, Province X. At the time of the appointment, the grievor lived in the City B, Province Y.
In June 2009, despite the real estate agent's recommended listing price, the residence at origin was marketed at a higher price. In mid-September 2009, the grievor lowered the price. The same month, a third party made an offer on the house which was much lower than the new price, therefore it was rejected. Subsequently, a member of the grievor's family offered to buy the house. In October 2009, the parties negotiated and agreed to a selling price that was higher than the last offer.
The Department refused to allocate the Home Sale Assistance of 10% to the grievor given that the sale was not an arm's length transaction.
Bargaining Agent Presentation
The Bargaining Agent representative explained that the selling price of the residence at origin was lowered to 95.375% of its appraised value and therefore, the grievor did not have to obtain approval from the Departmental National Coordinator (DNC), in accordance with Section 8.3 of the Directive. It was further noted that the price was lowered on the suggestion of the real estate agent and prior to the family member offer on the residence.
The Bargaining Agent representative also stated that the grievor received two offers on the property and that the family member's offer was higher than the other. As such, one cannot assume that the grievor should have turned down the higher offer only because it is a member of the family. In fact, the grievor's property sold higher than 2 other units in the same complex, during the same period of time. As such, it can only be assumed that the grievor's home was sold at a fair market price value.
The Directive only requires that an arm's length relationship exist between the employee and the service providers. The purchaser of a house is not a service provider. The relationship between the grievor and all actual service providers was at arm's length. As such, the fact that the grievor sold the property to a member of the family does not contravene Section 2.2.
Departmental Presentation
The Departmental representative explained that the grievor was advised by both the Contracted Relocation Service Provider (CRSP) and the DNC that there would be no entitlement to HSA if the property was sold to the family member. Despite this information, the grievor went ahead and accepted the offer.
It is the Department's position that although the relationship between the seller and the buyer is not specified in the definition of an arm's length transaction, the principles of the Directive supersede the definition and that the intent of paying the grievor's relocation from public funds, should be carefully examined.
Furthermore, the representative maintained that not only is the grievor related to the buyer, the same real estate agent and lawyer acted for both the seller and the buyer and in accordance with the Brookfield relocation information package and the Income Tax Act, there cannot be an arm's length relationship when one service provider acts for both parties.
In addition, the Values and Ethics Code for the Public Sector indicates that a public servant should avoid situations that could give the appearance of a conflict of interest, result in a potential conflict of interest or result in an actual conflict of interest. This mirrors the intent of the Directive that public servants must be careful to ensure that there is no advantage to others as a result of their employment with the Government. As such, the Employer is of the opinion that given that the sale was between two members of the same family, with only one real estate agent and one lawyer, the perception could be that the transaction was manipulated to benefit a party and that there would be a potential misuse of public funds if the Employer were to pay any amount of HSA.
The Departmental representative explained that the grievor could have obtained a higher offer from an arm's length buyer but refrained from acting in a way that would attract additional offers. There is no evidence that would suggest that the property could not have been sold to an impartial third party or that the grievor was pressured by a deadline to sell the residence. Moreover, it could be perceived that the real estate agent and the lawyer did not have a vested interest in negotiating the best price as they benefitted from an agreement between the two family members.
The representative suggested that the intent of the Directive is to ensure that both sales and purchases related to any relocation activities are at arm's length to ensure there is no real or perceived possibility that a transaction has been manipulated for a participant's benefit.
Executive Committee Decision
The Executive Committee considered and agreed with the report of the Relocation Committee which concluded that the grievor was not treated within the intent of the Directive. The rule on arm's length relationships does not apply to buyers and sellers. As such, the grievance is upheld.