QUESTIONS & ANSWERS REGARDING FIRST NATIONS LAND LEASES
Bassett Spagnuolo has prepared this short paper to assist our clients when they are considering a move to one of the residential communities situated on First Nations Leased Lands. We are particularly referring to leases on the Westbank Indian Band Lands or as they are now known, the Westbank First Nation Lands. As each developer has a different lease this paper must fairly general. For answers regarding a specific community, please contact the writer.
It should be noted that this paper is intended to cover the residential projects listed in the following paragraph. There is another large development known as Lakeridge park, which has a completely different lease structure. For information on that subdivision, please see the section below on Lakeridge Park.
I UNDERSTAND THAT I AM "BUYING" A 99 YEAR LEASE ON INDIAN RESERVE LAND OWNED BY THE CROWN - can you explain what that means to me?
Firstly, the land, on which the Westbank residential communities Known as Sun Village, Westlake Gardens, Grandview Terrace, Royal Heights, Bayview and Sonoma Pines are located, is in the Tsinstikeptum Indian Reserve, part of the lands of the Westbank First Nation ("WFN"). The land is owned by Her Majesty the Queen, in Right of Canada and has been set aside as Reserve Land under the Indian Act of Canada. WFN has been managing its own lands in varying capacities since the late seventies, and now has full control of all of its Lands. Self Government will not have any effect on existing leases and leasehold interests.
Secondly, the individual band members who had possession of these lands, described as the "Locatees", have requested that the Federal Government enter into 99 year leases with each of the Developers, for the benefit of the various Locatees. Essentially, the band member agrees to suspend his or her use and occupation of the land for the 99 year period of the lease in return for payment of the prepaid rent for the term of the lease. Each lease is a direct contractual agreement between the Federal Government and the developer and there are no other parties to the lease. Under the new Self Government initiative, WFN will stand in the place of the Federal Government and will have all the benefits and be responsible for all of the obligations of the Federal Government with respect to all existing leases and agreements.
Thirdly, each developer's lease is described as a "Headlease", since it allows subdivision of the lands and the issuance of subsidiary leases, or "Subleases" to people like yourselves. Your interest will be as holder of a Sublease from the developer to yourselves, which, subject to the terms of the Headlease and Sublease, will entitle you to the use and occupation of the premises for the remainder of the original 99 year lease, less one day. So long as you pay your rent, common costs and property taxes, and the terms of the Headlease and Sublease are properly fulfilled by all parties, you will be entitled to the use of the property in the same manner as if you owned a home built on freehold property.
Fourthly, since this is a leasehold situation, the terms we usually use to describe a land transaction are misleading. While you can "Buy" from the developer, you are actually acquiring a "Sublease" and when you "Resell" your home you will be "Assigning" your Sublease and while you can "Own" the leasehold interest, you cannot the "Own" the land, since it will continue to be owned by the Crown, subject to the Headlease and subleases. The only way that one can accurately use these ownership related words is to remember to add the phrase "a subleasehold interest" after each of them. eg. you can purchase a subleasehold interest, you can sell or mortgage that interest.
WHAT EFFECT WILL SELF GOVERNMENT HAVE ON MY LEASEHOLD INTEREST?
The self government process will not affect your leases in any way. One of the most basic building block of the self government process was to set out clearly in each document theat the rights of non natives on reserve are to be protected at all times. The Framework Agreement on First Nation Land Management, the Individual Agreement on First Nation Land Management, First Nation Land Management Act, the Westbank First Nation Self Government Agreement, and the Westbank First Nation Land Code all state clearly that the rights of non natives are protected. Actual title to the lands remains in the Crown. WFN takes over management of the lands for their own benefit. All leases will continue in accordance with their terms. WFN simply replaces the Federal Government as the nominal lessor with respect to all existing leases, and will be the signatory for all new leases.
One major benefit to the Self government for non natives is the legal requirement for an advisory council. This now enshrines in law the voluntary advisory council previously established by the WFN and gives it specific legal authority to represent the concerns of non native living on reserve.
I'M TOLD THAT THE HEAD LEASE IS A FULLY PREPAID LEASE? - What does that mean?
A prepaid lease is simply a lease that has had all rent paid fully in advance instead of paying the rent monthly or annually, therefore those Headleases where all lease payments are paid in advance are said to be "Fully Prepaid" for the full 99 years. As purchaser's, we want to know that the developer has already paid the full rent and all other expenses for the same period of time that he expects us to prepay.
Some projects have fully prepaid headleases for the whole of the proposed development, while others prepay each phase before proceeding. The first project, known as Bayview, did not provide for a fully prepaid headlease or for prepaid phases, but instead solved the concerns of lawyers and "purchasers" by providing a special formula for paying fully for each lot as and when the first sublease is created and providing that in the event of a default by the developer at any later date, the completed lots would become part of a head lease assigned to a corporation in which all of the existing tenants are shareholders. In this way each lot is "locked in" to a prepaid Headlease when the first sublease transaction is completed. This model has been improved and modified substantially to cover entire phases in the new Sonoma Pines project. There, not only is each phase fully prepaid before proceeding, the Head Lease states that each phase that is prepaid will be the subject of a new head lease to the homeowners management company in the event of a default by the developer. Although the specific aspects may differ slightly, each project on the WFN lands can be treated as having a fully prepaid headlease.
DO I HAVE TO FULLY PREPAY MY SUBLEASE?
Different Marketing approaches were used by the various developers of the projects on WFN Lands. In the Bayview and Grandview communities, the purchaser had to must fully prepay the subleasehold rent for the full term of the sublease. In Sun Village, the developer created a plan under which the purchasers could elect either to fully prepay the sublease in every respect, or to prepay only the construction cost of the home, deferring the prepaid rent for the land portion and pay for it on a monthly basis throughout the term of the sublease. In Westlake Gardens, a similar program was in place. It is important to know when comparing prices whether any part of the sublease is being paid on a monthly basis, and how much it will cost to fully prepay the rent for the remainder of the term.
WHAT ARE THE TERMS OF MY SUBLEASE?
Your Sublease gives you the right to the use and occupation of the premises for the remainder of the 99 years and creates some obligations that must be honoured. The following are some of the highlights of the sublease that you will be asked to sign. (Please consult the Sublease for actual wording)
WHAT ARE THE TERMS OF THE HEADLEASE?
The Headlease entered into by the developer with the Federal Government is the primary document giving the developer and the sublessees the use of the land. Each development has a slightly different Headlease. The Headlease contains many requirements relating to preliminary matters that have already been fully completed, which we will not address here. (Please consult the specific Headlease for full details). The most important continuing obligations of the Developer under the Headlease are to pay the rent on undeveloped lands within the lease area, (if it has not been fully prepaid), to pay the taxes and to maintain the property. Each of these continuing obligations (with the exception of the headlease rent) have been passed on to the individual Sublessees in their subleases.
I'VE HEARD SOME THINGS ABOUT LEASING ON INDIAN LAND - Can the Aboriginal people take my home away, include it in a land claim or raise the rent unfairly?
Since this land is already part of an Indian reserve, it is not involved in any lands claims and will not be affected by any land claims settlements. Regarding the land claims put forward by the Westbank First Nation, the band recently signed a Framework Agreement which establishes the basis on which their land claims will be negotiated and settled. This is only the first step in the land claims settlement process, but the Westbank First Nation is one of only two nations that have achieved this degree of progress to date.
You will almost certainly talk to someone who will tell you about a problem someone has had either with long term leases on Provincial Land or with Indian Land Leases. While there have been some serious situations that have arisen in other areas, we are of the opinion that the flaws in the lease arrangements that created those problems should not occur here. Most of the problems have arisen where a developer has purported to sublease lands to individuals for a long term, but has not prepaid his headlease for the same period of time. As noted above the Headleases are either fully prepaid for the full 99 years, or alternate provision has been made in the case of Bayview, and there can be no claims made for additional rent or rent increases here.
Another problem that we have heard about is the rent increases required when renewing short term leases of twenty or thirty years that were made in the sixties or seventies when land values were only a tiny fraction of what they are today. Those high percentage rent increases can't happen here because there are no renewal terms for this lease and the rent was set and fully paid for the full 99 years.
Both the Headleases and Subleases have been written in such a manner that we believe the problems that have arisen elsewhere have been resolved. Indeed, the Banks, CMHC and the solicitors acting for purchasers in the various developments on the Westbank First Nations lands have approved of the Headleases and Subleases and appear fully satisfied.
I UNDERSTAND THAT THE WESTBANK FIRST NATION LEVIES THE PROPERTY TAXES ON THIS LAND - What if they decide to increase the taxes?
In the process of establishing "Self Government" for the Westbank First Nation, certain controls on both the assessment and the mil rate were established. The Band taxing authority must use the same guidelines and methods of assessment as the B.C. Assessment Authority now uses for regular land. The assessments must be consistent with assessments for similar homes in surrounding areas. In fact, the Band actually contracts with the B.C. Assessment Authority to do the assessments for them, so the same assessor who assesses properties in the Westbank area also assesses these homes. With respect to the mil rate, which is the taxation factor applied to the assessed value to get the tax bill, the Federal Government must approve the mil rate each year and it must be consistent with the mil rates charged by surrounding areas for similar services to those provided to this area.
CAN I RESELL MY HOME IF I WANT?
You have right to "resell" your home at any time, by "assigning" your subleasehold interest in the land. All assignments require the consent of the developer, the Westbank First Nation and the Federal Government, which is not to be unreasonably withheld.
CAN I MORTGAGE MY INTEREST IN THE LAND?
You have the right to mortgage or assign your interest in the sublease at any time. CMHC will insure mortgages in most of the newer projects and many local banks have packages to meet your needs.
The subdivision known as Lakeridge Park is located on the hillside just above the Lake Okanagan Floating Bridge on Tsinstikeptum I.R. #10.
This project was begun in 1974, when the Westbank First Nation, ("WFN") established a band owned company called Westbank Indian Band Development Corporation ("WIBDCO"). WFN designated the lands for development and WIBDCO obtained a headlease from the Federal Government. The Headlease provided for an initial term of 99 years, with a provision for a possible renewal for a further 50 years.
The lands were subdivided and through an agreement with the provincial government, the subdivision plans were registered both in the Canada Lands Survey Records in Ottawa and in the the British Columbia Land Title system by filing at the Land Title Office in Kamloops. All of the lands comprising the original phases of Lakeridge Park are still registered in both registries. This dual registration adds a second set of registration fees, and also makes the property subject to the B.C. Property Transfer Tax. The option of registering reserve land in the B.C. Land Title System was later withdrawn by B.C., and therefore, the newest phase of Lakeridge Park, in the area known as Bayview Court, (not to be confused with the Bayview Community in Westbank) is registered only in Ottawa. As the original Headlease and subleases do not match the criteria required by CMHC, leases in Lakeridge Park are not eligible for CMHC insurance.
The Subleases provide for an initial 99 year term, with a commitment from the lessor to use it best efforts to obtain a 50 year renewal of the headlease, and to grant a 50 year renewal to the sublessees. The renewal requires notice to be given in 2048, to be effective in 2074. The fee for the renewal is 3/4 of the fair market value of the Land alone, without consideration of the improvements thereon, based upon the 2074 value.
For leases in Phases I and II, if the Lessor fails to grant the renewal lease, the Lessor will buy the land and improvements for a price equal to 3/4 of the fair market value of the land and improvements. Phase III leases do not contain this provision.
There is an Annual Service Fee payable under each lease, which is fixed for the first 35 years of the term. In Phases I and II the service fee is calculated at 0.75% of the Fair Market value of the land at the time of the issuance of the Sublease. For Phase III the service fee is calculated at 1% instead of 0.75% on the same value. On the expiry of 35 years from the date of the issuance of the Sublease,(1974 in most cases) this Annual Service Fee will float to 0.75% or 1% of the fair market value of the land alone, based upon the then current value, without improvements, and will be fixed at that rate for five years. It will then be reassessed every five years thereafter until the end of the term.
For more information about Lakeridge Park, please contact Bob Bassett.
I'M STILL CONCERNED ABOUT BEING ON LEASED INDIAN LAND - Where can I get more information?
There are many other valid questions with equally valid answers that simply cannot be covered
in what is intended to be a short paper. If you would like to discuss any aspect of your leasehold
transaction before proceeding, please feel free to contact the writer, Bob Bassett, at Bassett &
Company in Westbank. Although we have been favoured with most of the referrals and have
acted for most of the purchasers at all of the projects on the WFN Lands, we do not act for the developers of those communities, the
Westbank First Nation or any other interested party. We are a fully independent law firm and
represent the homeowners only in these communities. We did, however, act for the developer of the Royal Heights bare land subdivision located on I.R.#10 but that development has been turned over to a company representing all of the Howmeowners and the developer is no longer involved in any way.
We are pleased to offer a short informational interview to any prospective buyer
at no charge and have an attractive all inclusive package price for our conveyancing work. All of
us at Bassett Spagnuolo look forward to meeting you and assisting you with your transaction.
This paper is intended to provide general information only, in order to answer some of the more common questions that arise in dealing with First Nations Lands. We have found that for every question we answer, another one is often raised. This paper is not to be relied upon as legal advice. As each developer has a different lease this paper must be fairly general. For a more complete dialogue, please contact the writer.
BOB BASSETT
Bassett Spagnuolo
Barristers, Solicitors & Notaries Public
260 - 2300 Carrington Road, Westbank, B.C., V4T 2N6
Phone 250-768-5152
Fax 250-768-3003
