Freehold vs. Leasehold
When you purchase a home where the land is freehold (registered in the BC Land Title Office), you own the land (or a portion thereof in the case of Stratas) on which the home resides. When you purchase property on First Nations land you own the home but lease the land from a First Nation individual or entity, such as a First Nation band (leasehold).
Leasehold Considerations
The right to hold and occupy the land a home is situated on under a leasehold agreement, there will be a lease agreement which speaks to the rights and obligations of the parties as it concerns the land during the lease period (the Term). Residential real estate leases on First Nation land are commonly governed by long-term, often 99 to 125 years, fully pre-paid leases. The lease being pre-paid, means that when you purchase a given property, you acquire the right to occupy the land the home sits on for the remainder of the term of the lease. As an example, if the lease for a given piece of land was entered into in 2020, for a term of 125 years, and you purchase the home in 2030, you will acquire the remaining 115 years of the lease term.
Modern developments on First Nation lands commonly have 1 lease for the whole development, or a given phase, between the First Nation member or entity and the developer of the lands. There are commonly tens or hundreds of units within a given residential development. The individual units are then granted subleases by the developer, which subleases are assigned (sold) to the homeowner. The lease and sublease, along with every assignment (sale) thereafter, will be registered in the applicable land registry that has jurisdiction over the First Nation land in question.
The lease will contain the various rights and obligations place on the parties to the agreement, and will commonly require that the homeowner to pay certain fees for maintenance, garbage removal, and other costs typically incurred on the given type of property. Property taxes and applicable city utilities (sewer and water) on individual (sub)leased lands are payable either directly by the homeowner, or are collected as part of the ongoing costs associated with the property. Traditional utilities, such as power, telecoms, gas and others, are almost universally charged to each individual unit, on terms between the homeowner and that utility provider.
Home Owners Associations
In multifamily developments on Fist Nation land, the management of the common areas (parts of the development not otherwise used/controlled by the homeowner), are commonly governed by a Home Owners Association (HOA). HOA’s are commonly managed similarly to Strata’s, however, as the Strata Property Act is provincial legislation, it does not have jurisdiction on First Nation land. Only laws of general application at the provincial level have effect on First Nation reserves.
Transaction Details
When considering purchasing a home on First Nation land, there are several important items to consider, including but not limited to:
- The Term of the lease, and how much time remains under the Term.
- Ongoing costs associated with the (sub)lease.
- Renewal rights, particularly if the remaining Term is shorter.
- Rights and responsibilities under the lease and sublease placed on the homeowner.
- Ability to mortgage the (sub)lease with a bank of your choice, and anything unique that might be needed to see that possible.
- HOA costs, management, rules and other considerations, similar to those you might consider when purchasing a freehold strata unit.
There are countless opportunities for people to purchase homes on First Nation land in BC, including here in the Okanagan, and this option can be desirable for numerous reasons, if for no other that some of the First Nation reserves in the Okanagan are located in some of the most beautiful areas of the valley. As with any real estate transaction, there are benefits and drawbacks to every type of transaction. If you are considering purchasing a home on First Nation land, the lawyers of Touchstone Law Group LLP will be happy to consider all parts of this transaction with you.
This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250) 448-2637 or any of our lawyers practicing in the area of real estate law.