Today we will dive into Leasehold properties and explain how Leasehold works in relation to the Westbank First Nations (WFN) and buying Kelowna real estate.
When purchasing property in BC, there are a few different classifications of property: Freehold and Strata are the most popular with Leasehold Property coming up shortly after.
Background: In the 1960s, development on Westbank lands was minimal. In 1973, consultants were hired to develop a land use plan. The objective was to establish a land use policy framework and provide a process which would guide the band council, locatees, and developers. A series of by-laws were enacted by Council to create a framework of law and ensure consistency.
In 1974, Westbank First Nation members voted in favour of surrendering 177.3 acres of reserve lands for a 99 year lease for the Lakeridge Park residential development. Westbank began exploring options for self-government in the 1970s. In the 1980s, Westbank assumed land management powers from Canada.
A band subdivision was developed in 1981 and In 1982, twenty-four new homes were built. By 1986, the number of band member housing units had grown to 84. The band member population was now up to 255 with 198 living on reserve.
In 1982, a major specific land claim was settled for lands that were taken away in the early 1900s. Money from this settlement was used to purchase two parcels of land in 1984 in the Gallagher Canyon area. These parcels were granted reserve status in 2001 and are now known as Medicine Hill Indian Reserve no. 11 and Medicine Creek Indian Reserve no. 12. The land base for Westbank First Nation now totaled 5,306 acres.
Some popular Leasehold Property Developments in West Kelowna include:
- Aria, 175 unit condo development on 2 Eagles golf course
- Home Depot/Canadian Tire development in Westbank
- Sage Creek, 270 unit modular home development
- Carrington Business Park, 8 acre business park on Hwy 97
- Copper Sky, 536 unit condo development
- Elkridge and West Harbour are also popular developments on the Westside
Under leasehold property, there are two types of leases: A head lease and a sub lease. There are differences between each of these leases:
A Head Lease is a Crown land lease with a local government, Band corporation, Crown corporation or other public entity (including a port authority) which permits the tenure holder to sub-tenure to third parties. Typically the Head Lease is for 99 years.
A Sublease is a legally binding contract made between a tenant and a new tenant (also known as a subtenant or a sublessee). The sublease gives the sub-tenant the right to share or take over the rented premises from the first tenant.
Within a Head Lease or Sublease, there are two types of payment arrangements:
Payable (pay as you go): A payable lease is where the purchaser pays a monthly fee in addition to the mortgage and other condo or strata fees ( if applicable)
Pre-paid: The entire rent/lease is paid in full from the beginning.
Often a pre-paid lease is more attractive for buyers as it doesn’t adjust to inflation as some payable leases can but then again not everyone has that much money to spend at one time if they are factoring in down payments, deposits and moving costs as well. Pre-paid leases can feel similar to owning a conventional freehold titled property since the only monthly and annual fees are those which a homeowner would normally pay, such as strata and/or condo fees.
The Good and The Bad: Leasehold property is usually a touch less expensive than Freehold, but there are other important considerations when purchasing leasehold property:
It is marketable only when the lease is not nearing renewal – the closer to renewal date it is, the more the value is certain to drop.
Banks generally only finance leaseholds that have at least five years remaining on top of the amortization period.
When you purchase a leasehold property, you own the actual home and/or buildings on the land (depreciating assets), but you rent or lease the land itself (fixed asset).
Most leasehold real estate in the Okanagan is based on a 99 year Head Lease divided into sub-leases for each individual property.
As with any lease you are considering, review it with your lawyer. If the lease is part of a purchase involving Native Land, find a lawyer who specializes in these properties. Be sure to allow extra time to remove conditions, sometimes up to three weeks, as paperwork must go through several channels.
If your potential land purchase is on Westbank First Nations land, be aware that Westbank lands are not governed under the Indian Act. Rather, Westbank lands are governed under a comprehensive set of community laws. WFN has full jurisdictional control over Westbank lands and resources. WFN is governed under the Westbank Self Government Act – the WFN Self Government Agreement between WFN and the Government of Canada, which came into existence in the year 2000.
Within this agreement there are several stipulations regarding land governance, including:
Member approval needed for long term leases/licences on Community Lands
Subject to WFN Laws, Council approval is no longer required for private land transactions (e.g. leases, mortgages & transfers
Within the Okanagan, most leases on WFN land have been in existence since the early 1990′s, leaving approximately 75 years left on leases depending on which development – another important fact to take into consideration. For an archived list of WFN Leases and terms you can browse here. Contact me if you are considering the purchase of property in the Okanagan – I will help you find what is best for you and guide you through the process!