# 2019-101 Pay and Benefits, Appraisal upon purchase for an income-producing property

Case summary

F&R Date: 2020-02-27

The grievor purchased a principal residence that contained a basement in-law suite. The Canadian Armed Forces (CAF) reimbursed him a prorated amount of his purchase benefits based on the subtraction of the square footage of the rental suite from the total square footage of the living space of the house. To make this calculation, Brookfield Global Relocation Services directed the grievor to conduct an appraisal of the house at his own cost.

The grievor argued that the residence was not an income-producing property as the use of his basement suite to generate income was an ancillary function. He also disagreed with the calculation used to determine his eligible benefits, arguing that basements do not count as living space. As such, the grievor requested a full reimbursement of his purchase benefits and the reimbursement of the cost of the appraisal he was required to conduct.

The Committee noted that the CAF considers a property to be “income-producing” when a renter is installed on the closing date of the purchase or sale. The Committee found this to be a reasonable interpretation. The Committee also found the grievor's basement suite to be a self-contained unit and, as it was rented to a tenant at the time of purchase, concluded that the residence was an income-producing property. As such, the Committee found that the grievor was entitled to prorated benefits as per article 8.1.06 - Income property, of the Canadian Forces Integrated Relocation Program (CFIRP) Directive.

As for the calculation of his benefits, the Committee determined that it was reasonable to compare the measurements of a rented finished basement with the overall measurements of the living space in the house. The Committee performed its own calculation of the grievor's entitlements and found that the CAF already reimbursed him the benefits to which he was entitled.

However, as the CFIRP does not require an appraisal for a home purchase, the Committee found that the grievor was aggrieved by being directed to conduct one at his own cost. As such, the Committee recommended that the Final Authority (FA) use the Ministerial authority found in article 2.1.01 - Authorities, to direct the reimbursement of the grievor's appraisal fees. The Committee also recommended that the reimbursement come from the Core envelope.

Finally, the Committee observed that CFIRP article 8.1.06 would benefit from a review in order to clarify certain elements including, but not limited to, the CAF's definition of “income-producing property” and the formula used to calculate the percentage of eligible benefits.

FA decision summary

The FA, the Chief of the Defence Staff, agreed with the Committee's findings and recommendations. The FA agreed that the grievor's property was income-producing and that the percentage of purchase expenses reimbursed was in accordance with the CFIRP. The FA directed that the grievor be reimbursed for the appraisal pursuant to the authority in CFIRP article 2.1.01. The FA also directed that the terms income-producing property and income property be more clearly defined in future iterations of the CFIRP and directed that the Chief of Military Personnel request, in the next CFIRP submission to Treasury Board, that the CFIRP provide for the reimbursement of appraisal costs upon the purchase of an income-producing property.