• Global Mobility: What’s a principal place of residence these days?


    An interesting trend stemming from the pandemic is the increased time spent at second residences, for those lucky enough to have one. The “work from home” directive put in place last year was quickly interpreted as “work from anywhere.” So, why not live and work from the cottage? The result is that the line between principal and secondary residence is beginning to blur.

    What constitutes a principal place of residence for purposes of covering Home Sales expenses and Guaranteed Home Sale plans (GHSP)? Under pre-pandemic conditions, we all understood that the primary residence was where the employee lived most of the time, i.e., the home from which the employee travels to work. For the past year, that may have been the cottage, with commuting being from the couch to the kitchen table! As it became clear that this pandemic was going to last a while, some individuals, foreseeing a permanent change in working conditions, have even gone so far as to downsize to something smaller in town, or sell the house altogether and rent a small pied-à-terre instead.

    At some point soon, companies that cover Home Sale cost and offer GHSPs will be faced with having to determine which residence is eligible under the terms of their program. Vacation homes, which historically have taken longer to sell, are typically excluded from eligibility. Currently, these properties are selling quickly, but that might not always be the case.

    How is a vacation home defined? Should it still be excluded from home sale related benefits if the employee is spending most of his or her time there? To be sure, there are people who permanently reside on properties that are very much like a vacation home (e.g., in the country, on water, larger lot) but when it is the only home they own, eligibility for benefits is not an issue, provided it otherwise meets the requirements. The problem arises when two properties could be categorized a principal residence within the terms of the program. What options does an employer have?

    Where do employee lifestyle choices collide with GHSP objectives? How does the company achieve the right balance between helping the transferee with the sale of his or her property and mitigating risk? GHSP and Home Sale eligibility will need to be more tightly defined.

    The following are a few questions that should be discussed in determining if vacation homes should be eligible

    –  Should the exclusion of vacation homes be abandoned and a more explicit definition of “eligible property” be written based on time living there, as well as:

    a) clear location requirements that directly affect marketability, e.g., distance from urban centres, hospitals, groceries, and

    b) living condition requirements, e.g., must be within a reasonable drive to the site to which the employee reports, be accessible year-round, be hooked up to utilities, have reliable internet and heated in colder climates.

    – While benefits should continue to apply for the sale of one property only, should someone who rents in town but owns a property in the country be eligible?

    – Perhaps the best approach is to have eligibility apply only to the residence closest to the office site. If it is a rental unit, then the benefits do not apply.

    – Should provisions be written to address extraordinary circumstances that are likely to span a minimum period of time such as the current pandemic?

    Food for thought… No one doubts that the working environment will change going forward, to what degree is yet to be determined. Better to anticipate possible issues than be surprised by them. Ward O’Farrell Consultants is always available to discuss further.