Over fifteen years ago the developers of the Sun Rivers Resort introduced a new concept to the Kamloops real estate market – a residential golf development on First Nations land. This posed some interesting questions and challenges for local real estate lawyers used to dealing with the more traditional fee simple title real estate market.
In actual fact leasing of First Nations lands has a long history in British Columbia. Many people are familiar with the Park Royal Mall in North Vancouver. Most would be surprised to know that the South Mall portion of the Mall is located within the Squamish Nation and is on leased. On a more local note the industrial park on the Kamloops Indian Reserve has been in existence for over forty years and has served as the home of many local industrial and commercial enterprises over the years. A number of recreational properties at Paul Lake, Little Shuswap Lake and Shuswap Lake are also located within local First Nation Reserves.
Obviously there are differences between fee simple title and leasing land. The developers at Sun Rivers attempted to minimize these differences in order to remove some of the concerns surrounding leasehold title and encourage the promotion of their development. Their goal was to make their leasehold title as close as possible to fee simple title. The following is a summary of the major legal issues and concerns involving a purchase at Sun Rivers:
1. Long term leasehold interest. The Subleases on each of the properties within the various neighbourhoods in Sun Rivers have an initial term of 99 years. This provides the owner with long term stability and maintains the value of the property. The Developer has negotiated an additional period of 15 years with the Kamloops Indian Band (“KIB”) which will be added to the terms of the Subleases once the last neighbourhood has been completed.
2. Prepaid Lease. The Subleases have been prepaid for the whole 99 year term. The lot prices are set at the prepaid amount at the outset and the owner does not have to pay anything further to the Developer or the Band for the full 99 years of the Sublease.
3. Property Tax. KIB has its own taxing authority. Owners at Sun Riv ers receive a tax assessment each year from KIB just like owners throughout Kamloops. These assessments are done in the same fashion as properties within the City and owners are entitled to the same rights of appeal if they feel the assessment is too high. KIB has agreed to use the same mil rate for their taxation as the City of Kamloops. Accordingly, property taxes on like valued properties within Sun Rivers and the City should be the same. Owners at Sun Rivers are also able to claim the same Homeowner Grants as others throughout the province. Taxes are payable on the 1st day of August rather than the 1st day of July.
4. Property Transfer Tax (“PTT”). As the lands within Sun Rivers are on federal lands, PTT is not applicable with respect to any purchases at Sun Rivers. This saves the purchaser the 1% tax on the first $200,000 of value and 2% on the remainder of the purchase price.
5. GST. GST is payable on new home construction at Sun Rivers. The New Home Rebate is claimable so there is no advantage or disadvantage to buying at Sun Rivers with respect to GST.
6. Strata Property Act. The provincial Strata Property Act does not apply to the Sun Rivers Development – again due to the fact that the development is on federal lands rather than provincial. Each of the neighbourhoods within Sun Rivers has its own neighbourhood association which is incorporated under the B.C. Society Act. The Associations act like a strata corporation. Each neighbourhood has its own set of Guidelines and Rules that mimic the Strata Property Act. The Associations have annual meetings and set annual budgets for their neighbourhoods. Monthly fees similar to strata fees are set by these Associations.
7. Registration Process. The registration of the transfer documentation is different than with fee simple title. KIB has its own Land Title Office. Final registration of the Assignment of Lease occurs within the Indian Land Registry Office. This is done in Vancouver. Unfortunately this process takes longer than registering documents within the B.C. Land Title system. To circumvent this delay and allow parties to have a fixed completion date we use a product called “Gap Insurance”. There are a number of title insurance companies in existence today who provide title insurance products for use by buyers – on and off reserve. One of the products they offer is Gap Insurance. Simply put – Gap Insurance guarantees that once we, as your lawyer, have submitted the Assignment and Mortgage documents for registration to KIB, we can move ahead on the basis that the Assignment and Mortgage have been properly registered. This provides your lawyer and your bank with certainty of title and registration. The same occurs on resale to insure that you can sell your property on the date set out in your Purchase and Sale Agreement.
8. Mortgaging Sublease. Most of the financial institutions in Kamloops are familiar with the Sun Rivers development and provide financing on the same basis as with fee simple property. Generally obtaining financing is not any more difficult at Sun Rivers and interest rates are the same as with fee simple title.
9. Design Guidelines. Each Neighbourhood Association has its own Guidelines for their neighbourhood. These deal with issues such as design of the homes, landscaping, the operation of the Association, budgeting and rules about parking and use of the property. These Guidelines should be reviewed in detail before you finalize your Purchase Agreement.
Hopefully this answers some of your legal questions as to purchasing a property at Sun Rivers. It is by no means intended to be an exhaustive list of all issues or matters. If you have any further questions concerning a possible purchase at Sun Rivers please call us at MJB Lawyers. We have a wealth of experience in dealing with transactions at Sun Rivers and can help you answer any concerns.