First Nation Land Development: WFN Case Study

1. FIRST NATION LAND DEVELOPMENT WFN: A CASE STUDY Barry M. Porrelli REAL ESTATE DEVELOPMENT ADVANCED TOPICS CLE September 23, 2014

2. FIRST NATION LEASES INTRODUCTION WESTBANK FIRST NATION LEGAL REGIMES UNDERSTANDING LEASES WFN LEASES TITLE INSURANCE CMHC PORRELLI LAW

3. 1. INTRODUCTION • Reserve land development and conveyancing represents much of our practice • Our firm is located on the Westbank First Nation (“WFN”) Indian reserve • Member and past chairman of WFN Economic Development Commission • First band in Canada with an EDC PORRELLI LAW

4. Projects I have been involved in include: • Royal Heights, a 33 lot subdivision in West Kelowna Estates in the early 90’s • many manufactured home parks • Sierra’s Westside MHP • Westpoint MHP PORRELLI LAW

5. More recently (for developer or CP Holder): • Aria, 175 unit condo golf course development • Home Depot/Canadian Tire development in Westbank • Anthem’s Superstore development in Westbank • Sunrise Estates, 100 homes (single family) • Sage Creek, 270 unit modular home development • Carrington Business Park, 8 acre business park • Vintage View, a commercial/hotel development • Big box development on the Adams Lake Band • Copper Sky, 536 unit condo development PORRELLI LAW

6. Tesoro Arca, 85 unit townhouse development • Snyatan, Winners/Future Shop mall in Westbank • Governor’s Landing and Governor’s Market in Westbank – commercial/retail • West Harbour, 200 home lakefront development • Cottages at Osoyoos Lake (284 homes) • Westside Landing (commercial) • Sears Home Centre • Lakeview Lodge, 100 bed Interior Health Care facility • Many other developments on Westbank First Nation and other reserves in B.C., in various stages of development PORRELLI LAW

7. WESTBANK FIRST NATION • Development on this reserve exploded few years ago • Tax assessed value of properties in 2013 was $1.3 billion • Building Permits average about $50 million a year • Recent explosion of commercial growth started around 2005 with the big box development with Home Depot as anchor • Followed by other large multinational and national operators such as Walmart, Canadian Tire, Superstore, Future Shop, London Drugs, Winners, several banks, etc. • Over 1.3 million square feet of commercial space • Over 400 businesses located on this reserve PORRELLI LAW

8. WFN is fortunate: • sound, stable, progressive Self-Government • nationally recognized leader in Chief Robert Louie • membership that, for the most part, favours development • large amount of urban, prime land, adjacent to or intersected by a highway, access to services, often highway or waterfront, or lakeview • About 10,000 non-natives living on WFN lands • 3900 residential units • Growth has far outstripped that of surrounding areas and most of B.C. PORRELLI LAW

9. 3. LEGAL REGIMES • INDIAN ACT • Approximately 630 First Nations in Canada, about 200 in British Columbia • Most bands in Canada are administered by Aboriginal Affairs and Northern Development Canada (“AANDC”) in accordance with the Indian Act • For most bands, land management and development must go through AANDC (Vancouver for B.C. First Nations) • Very cumbersome process where it can take years to get a proper Lease • Examples: Penticton, Osoyoos PORRELLI LAW

10. B. LAND CODE • First Nations Land Management Act (“FNLMA”) enacted in 1999 allows First Nations to develop a land code • Allows the Nation to manage and develop their lands largely autonomous from AANDC and opt out of Indian Act land provisions • About 20 land code Bands in B.C. and many in development • Lengthy procedure, federal funding scarce • Examples: Tzeachten in Chilliwack, Tsleil-Watuth in North Vancouver (WFN previously) PORRELLI LAW

11. PORRELLI LAW C. SELF-GOVERNMENT • A handful of Bands (21 in Canada, 5 in B.C.) have achieved a form of Self-Government (usually through Treaty) • Self-government is the ability of a First Nation to govern itself (within the framework of the Canadian Constitution) • Usually includes the ability to manage its own land and resources at the local level • On average takes about 15 years of negotiation for a First Nation to achieve • Examples: WFN, Sechelt (not tied to Treaty)

12. UNDERSTANDING LEASES • Reserve lands are generally held in the name of Her Majesty The Queen (the “Crown”) for the benefit of the particular First Nation • Generally no concept of “Fee Simple” or “Freehold”, most Reserve lands are not registered in any Provincial LTO • Generally there are 2 types of interests in WFN lands: • Community lands which are general band lands not allotted to a specific Member • CP or Certificate of Possession lands being lands where individual band Members have been allotted rights of possession • Has characteristics of freehold except cannot be freely transferred PORRELLI LAW

13. Majority of WFN lands are CP lands held by individual band Members • Generally, First Nations are prevented from freely dealing with their lands • A CP can only be transferred to the band or another band Member • So generally the way a non-native obtains a development interest on reserve is through Lease PORRELLI LAW

14. WFN • Quite a distinction between the WFN and most other Bands in Canada because the WFN achieved Self-Government in 2005 • Previously had land code • For most First Nations the leasing process is managed by AANDC • Prior to 2005, all Leases on this reserve were with the Crown as Lessor PORRELLI LAW

15. In 2005, the Self-Government Agreement with Canada recognized the validity of all previous Leases but the system changed and became more simplified • No longer under the control of Indian Affairs; Band and its Members largely free to deal with their land • No need for formal Designation or surrender • All Leases going forward are no longer with the Crown; now with WFN (if Band land) or the Band Member (if CP land) PORRELLI LAW

16. Lease process begins by a developer entering into a long-term Lease with the band or a band Member – a “Headlease” • Band Referendum needed only if Community Land • The many residential and commercial subdivisions on WFN have an underlying long-term Headlease granting the developer the rights to those lands for the term of the Lease • The developer then, as Lessee, develops the lands, either commercially or residentially, then subleases the individual units (homes, apartments, townhouses, commercial units) to buyers (sublessees) • Sublessee/buyer may then finance their purchase by way of mortgage of sublease PORRELLI LAW

17. 4. SUCCESSFUL WFN LEASES • A. STABLE AND MATURE GOVERNMENT • B. LONG-TERM 99-YEAR LEASES • On most reserves you need a Designation if band land • AANDC used to require an appraisal and membership vote if CP Land for leases beyond 49 years (no longer required) • Very streamlined leasing process since Self-Government • decisions are made at the band level and AANDC has no input whatsoever • AANDC has no say in the form of lease, negotiated between the Lessor and Lessee PORRELLI LAW

18. C. PRE-PAID LEASES • The rent PRE-PAID up front is the most secure • all rent owing under the Headlease is fully paid so there canbe no termination for failure to pay rent, or rent reviews • Historically, a lot of Headleases on reserves (in manufactured home parks for example) where rent is not pre-paid • rents are a percentage of revenue and/or reviewed every 5 years • this model is no longer popular • Most successful, secure residential leases are fully pre-paid for a 99-year term • All residential Leases on WFN land (except MHP’s) are pre-paid PORRELLI LAW

19. D. SECURE LAND REGISTRY • Most bands in Canada use a system of recording in the Indian Lands Registry in Ottawa which is not as secure • The federal Registry is generally just an “information” registry with no priority protection • In 2007, the Westbank First Nation passed regulations pursuant to its Self-Government Agreement which: • made all registrations mandatory • protects all prior interests • registered interests will have priority in order of registration • WFN uses electronic registration of documents which is quick and efficient • most reserves it takes months to register, WFN usually pending registration the same day PORRELLI LAW

20. 5. TITLE INSURANCE PORRELLI LAW • Title insurance is commonly used off-reserve to protect buyers and lenders • Historically was unavailable on reserve • In 2005 we assisted with the Hub Centre/Home Depot development in Westbank • First Canadian Title (“FCT”) provided title insurance which was a first in Canada on a Reserve • As a result title insurance is now widely available for most reserve developments

21. 6. CMHC PORRELLI LAW • Historically has been difficult to obtain on reserve in which case homes are harder to buy and sell and lending limited • WFN most residential subdivisions are CMHC insurable (some are not because they are age restricted, etc.) • On Indian Act bands CMHC and AANDC have finally developed a model Headlease with protections satisfactory to CMHC

22. SUMMARY • On WFN land generally have marketable lease arrangements: • protection that the WFN Self Government Agreement, Constitution and Leases provide • fully pre-paid 99-year Headleases • availability of Title Insurance • most CMHC approved • efficient Westbank Lands Register which recognizes priority of registered leases and subleases • generally no Property Transfer Tax PORRELLI LAW

23. Thank You Barry M. Porrelli Phone: 250.768-0717 barry@plaw.ca