The Spagnuolo Group of Real Estate Law Firms is recognized as one of the leading law firms in helping clients purchase, refinance or sell residential property, including lands located on First Nations Lands. Our firm is recognized by most lenders and our lawyers have been featured in a variety of articles.
Below are answers to common questions regarding First Nations Land Leases. Feel free to email us if any question is unanswered.
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.
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?
Leased lands are located on a Reserve, which is owned by Her Majesty the Queen, in Right of Canada. The land has been set aside as Reserve Land under the Indian Act of Canada.
Certain band members (called “Locatees”) had possession of these lands and requested that the Federal Government enter into 99 year leases with Developers, for the benefit of the various Locatees. Essentially, the band member agreed 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.
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 who would like to purchase the property. 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.
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. 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.
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 blocks of the self government process was to set out clearly in each document that the rights of non natives on reserve are to be protected at all times. The various documents used to establish the Native Leased Land all state clearly that the rights of non natives are protected. Actual title to the lands remains in the Crown. The Native Band takes over management of the lands for their own benefit but all leases will continue in accordance with their terms. The Band 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 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. 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. This can only be determined by reviewing the Headlease.
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) has been passed on to the individual Sublessees in their subleases.
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. They are very similar to living in a free hold strata but please consult the Sublease for actual wording.
- The sublease is for the remainder of the original Headlease, less one day.
- The Rent is either fully or partially prepaid at closing.
- You must pay your share of common costs, which, like strata fees, are paid monthly, based on a proposed budget, and any variation in actual costs is made up at the end of each year, again much like a strata.
- You are responsible for the repairs to your premises, but in most communities, will have any such repairs done for you by the Sublessee's association at your expense. Think of the Sublessee’s association as a Strata Council.
- A number of services are provided to you as part of your common costs. These vary widely depending upon the Development. Some of the major items typically include upkeep of common areas, insurance on the structure (but not the contents) of your home, water service, garbage removal, street lighting, property manager and administration.
- In some communities, where the Developer is still managing the project, if more than 50% of the Sublessees are dissatisfied with the way the developer is managing the common areas and services, and the situation is not corrected after notice, then the Sublessee's Association can take over the management of the common areas.
- You will pay for all utilities supplied to the premises and will pay your fair share if separate bills are not rendered.
- You must pay your land rent and common area charges when due.
- You must pay your annual property taxes when due.
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.
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 be revealed by a lawyer reviewing the Headlease. 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.
I UNDERSTAND THAT SOME 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 various First Nations, 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, some Bands actually contract with the B.C. Assessment Authority to do the assessments for them, so the same assessor who assesses properties in the local 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.
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 Bob Bassett in our office. 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 Bob Bassett.