Lease costs before the Supreme Court

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The question of how much rent tenants should be paying for residential lots in Musqueam Park is now before the Supreme Court, with a final decision expected by fall.

The Supreme Court is being asked to decide the amount of rent that should be paid on 75 lots located in Vancouver on the Musqueam Indian Band reserve. The tenants, who have built their homes on the land in question, negotiated 99-year leases with the federal government in 1965. In 1980, the government transferred control of the land to the Musqueam band, and in 1991 taxation authority over the land was also transferred to the band.

The terms of the lease had the rent set at a pre-determined rate for the first 30 years - $298 per year for the first 10 years, $343 annually for the next 10 years, and $375 annually for the last 10 years. The lease calls for a rent review after the first 30 years, and after each subsequent 20-year period. The first rent review took place in 1995.

According to the lease, the rent from 1995 onwards was to be set at six per cent of current land value. In 1995 the Musqueam band appraised the land and set the current land value of each lot at $600,000. At six per cent of current land value, that would mean an annual rent of $36,000.

The tenants appealed the rent increase to the Federal Court of Canada. In 1997, the Court ruled the value of the land should be set at half of that of neighboring lots because on-reserve land was less valuable than off-reserve land, and because the land had been unserviced at the time the lease was signed. The annual rent was set at $10,000 a year.

That decision was appealed successfully by the band, with the Federal Court of Appeal disagreeing with the Federal Court decision that the value should be reduced by 50 per cent, but agreeing allowances should be made for servicing costs. The average rent was set at $22,800 annually.

As a result of the Court of Appeal decision, tenants declared a rent strike, and appealed to the Supreme Court. The band cross-appealed, questioning the decision to reduce the rent to account for servicing costs.

According to information provided by the band, the Supreme Court has three choices in its ruling. It can uphold the Federal Court of Appeal decision setting the rent at $22,800 a year, it can allow the tenants appeal and set the rent at $10,000 a year, or it can allow the band's cross appeal and set the rent at $36,000 a year.

According to information provided by Indian and Northern Affairs Canada (INAC), the department, as landlord of the land in question, has sent notices of default to all leaseholders, and a statement of claim has been filed in the British Columbia Supreme Court to collect lease payments in arrears. According to INAC, as of March only two tenants were up-to-date on rental payments at the level set by the Federal Court of Appeal.

Lewis Harvey is lawyer for the Musqueam band. He said the huge increase in the rental rate for the land doesn't demonstrate how exorbitant the increase is, but how unfair the old rent was.

Annual rents over the initial 30 years of the lease averaged out at just over $300 per year.

"You can't rent a trailer pad anywhere within a thousand miles of the city of Vancouver for that kind of rent," Harvey said.

Once the Supreme Court decision comes down, Harvey said, it will be the end of avenues for appeal regarding the rent issue, but not necessarily the end of the litigation.

Most tenants haven't paid rent in two years, and some haven't paid since 1995.

"There are going to be some tenants who are going to have to be removed, who are going to have to be evicted," Harvey said.

MLA Colin Hansen is with the provincial Liberal Party and Musqueam Park is located in the riding he represents, Vancouver-Quilchena. Hansen said he doesn't want to formally get involved in the lease controversy, feeling another level of government entering the fray would only further complicate an already complex situation. As an "interested arty," however, he did pass his views about the situation on to the MP for the area, Ted McWhinney, indicating he would like to see all the parties involved- the tenants, the band and the federal government - get together and try to reach a mediated settlement rather than leave the decision in the hands of the Supreme Court.

With a court decision, Hansen said, the tenants will lose because all the equity in their leases will be destroyed, and the band will lose because others will be reluctant in leasing from them in the future, Hansen said. What Hansen sees as a win-win option would be loan guarantees to the leaseholders from the federal government, allowing the tenants to borrow money to pay rent to the band.