First Nations Land: Unique Opportunity

BY LANEY THIRD

Currently in Canada, there are more than 3,000 reserves collectively holding roughly 3.8 million hectares. Much of this land is ideally located for development and often overlooked by developers. This presents a unique opportunity for those willing to invest time into understanding First Nations land ownership and developing the necessary relationships with appropriate stakeholders.

Types Of Land Ownership

The land ownership model that most people are familiar with, despite perhaps not knowing the name of, is fee simple. Homes that are not located on a reserve or leased land are likely owned in fee simple. Land owned in fee simple confers significant rights to the owner, such as the rights to use the land, sell it to anyone, rent it out, or mortgage it.

Reserve lands, on the other hand, are held in trust for bands by the federal government. Bands have exclusive use and occupation rights to these lands. These lands are communal and must be used in a way that benefits the entire band. Leases are the most common way that developers partner with First Nations bands or individuals. There are two types of First Nations land that a third party may obtain a leasehold interest in: lands held under a certificate of possession (CP) and designated lands.

Portions of reserve lands are often owned by individual band members who hold CPs. A CP is similar to a fee simple deed; a CP gives the holder the right to occupy the land, lease the land, sell the land to another band member, and bequeath the land in their will. The distinct difference between CP land and fee simple land is that a CP holder cannot sell the land to a non-band member or apply for a conventional mortgage. CP land typically does not qualify for a conventional mortgage because it cannot be foreclosed upon by a bank in the same way that fee simple land can be. This creates challenges for CP holders seeking to develop their own land and may require external investors.

A First Nation band may choose to designate community lands for long term leasing. To designate land for leasing, the band must hold a referendum of its membership. Some bands will broadly designate lands for industrial purposes; others will designate lands specifically for a predetermined development project.

Leasing First Nations Land

If a developer is interested in receiving a leasehold interest in any land located on reserve, the developer should approach the First Nation band or CP holder to discuss the status of the land. If both parties are interested in proceeding, the developer should begin doing due diligence to ensure the land is suitable for the intended purpose.

During the due diligence phase, the developer should review the First Nation’s land code, if one exists, as well as any bylaws that may impact potential development, subleasing, mortgaging, or assigning. The developer should further consult with the First Nation band to determine the applicable building code, as reserves do not automatically fall under federal or provincial building codes. It is common for leases to specify what building code must be adhered to. Several bands have created their own building code that applies to all projects on reserve. Prior to a lease being granted, the prospective tenant must obtain an appraisal of the land and environmental assessment.

Leases on designated land are restricted to a term of 99 years. Leases of CP land are typically limited to 49 years unless the First Nation band approves a longer lease.

Governance of First Nation lands varies greatly. As a starting point, the Indian Act requires that a lease of designated land is negotiated with the First Nation and Indigenous Services Canada (ISC) and granted by ISC on behalf of the First Nation. If the lease is for CP land, the CP holder will apply to ISC and then ISC will confirm approval with the applicable First Nation band and draft the lease.

There are some exceptions to ISC’s involvement, including: (i) bands with delegated authority under s. 60 of the Indian Act; (ii) bands that have adopted their own land code under the First Nations Land Management Act; and (iii) self-governing nations with a negotiated treaty or agreement in place. If the lease is not approved by ISC and the band is not exempt from this requirement, the lease will be void and any party who occupies the land may be in trespass.

Once a lease is entered into, the tenant may mortgage, assign, or sublease its leasehold interest, subject to the terms of the lease; some leases require that a tenant receives consent from ISC and/or the First Nation.

This area of law is very complex and specific to each individual First Nation band, and for this reason, any developer seeking to develop lands on reserve should consult with a lawyer who is familiar with First Nations land law.

Laney Third is an associate lawyer at Forward Law LLP in Kamloops. Visit www.forwardlaw.ca.