B.C. real estate developers are building housing and retail projects on First Nations-leased land as part of a bid to keep housing prices affordable.

Developers, including the Van Maren Group of Chilliwack and White Rock-based Rykon Developments, hope 99-year leases will help them stay competitive in a market where housing prices are rising rapidly and developable land is increasingly scarce.

In most cases, land is leased through the federal government, with revenue going to First Nations, but the Okanagan-based Westbank First Nation (WFN), which has achieved self-government status, controls its own leases.

"It's exactly the same as if you're buying a condo anywhere else," says Bill Morrison, senior partner with MAC Real Estate Solutions of Vancouver.

Courtesy of MAC Real Estate Solutions
The ARIA condo development on Westbank First Nation land will overlook Lake Okanagan.

In effect, buyers purchase the home without the land as the developer leases First Nations land up front.

Buyers have the option of including the total lease cost in the property's mortgage, or making separate monthly lease payments.

Meanwhile, purchasers do not have to pay the GST or the provincial two-per-cent property-transfer tax because leased lands are exempt.

MAC is marketing the ARIA 158-unit condo development overlooking Lake Okanagan on leased land that is owned by the WFN near Westbank, a Kelowna bedroom community.

Developers have been building on First Nations land through leases with the federal government for many years, says Morrison, but he predicts more developers will look to lease First Nations and privately owned land as a way of curbing land costs and keeping unit prices competitive with industry rivals.

"A lot of people are looking at this," says Morrison.

Eric Van Maren, president of the Van Maren Group, says leased-land development deals allow First Nations (whose members suffer from extreme poverty in many cases) to "pull themselves up by the bootstraps" through lease and property tax revenue, while developers get ideal locations and are able to charge less for their homes.

Van Maren says his leasing arrangements with the WFN at ARIA and the federal government for Tzeachten First Nation-owned land at his Halcyon Meadows project near Chilliwack enabled him to knock $20,000-$50,000 off his list prices.

At ARIA he was able to acquire 4.5 acres adjacent to the Vintage Hills golf course, where marketer Morrison says a view of Okanagan Lake is available "on every hole."

"It is impossible to find four and a half acres (elsewhere) surrounded by a golf course - all four sides with a view of the lake - for the price that I paid for it," says Van Maren.

At Halcyon, a free title arrangement would have required him to raise his prices by $50,000 per unit, he says. Under the lease arrangement, he lowered the unit price to $200,000 from $220,000.

"I thought it would be more attractive to charge $200,000 and ask people to pay $180 per month (for the lease)," he says.

The company, which only builds after the deal on each custom-built home is finalized, has already sold 156 of the 224 units available near Chilliwack - including 100 in the last year - while 114 units are occupied.

"The Halcyon has lots of competition from freehold developers and we've outsold our competitors by a wide margin," says Van Maren, adding he and rival developers have compared sales results with each other.

Freehold refers to land that has clear title. In conventional residential development projects, developers purchase land outright and then sell parcels with each home they build.

All Halcyon buyers, who are in their 50s and 60s, have chosen to make monthly lease payments so they can use equity from their previously owned homes to purchase such items as motorhomes or furniture or to invest in stocks, bonds and mutual funds, says Van Maren. Most purchasers of leased-land homes do likewise, he adds.

Other projects being developed on First Nations land through leases include Rykon's Sonoma Pines site next to ARIA on WFN land, and Sun Rivers Estates near Kamloops.

Bob Bassett, a Westbank-based lawyer and principal of Bassett and Company, whose firm assists non-native buyers with residential and commercial property purchases, says it's difficult to predict future leasing on First Nations land across B.C. because different native bands are at different levels of their treaty negotiations with the provincial and federal governments. The B.C. Treaty Commission negotiates on behalf of both.

Developers have been building homes on Westbank land since 1974 through leases with Ottawa, says Bassett, whose firm has handled more than 1,000 transactions. But future development on Westbank First Nation land will be a popular "no-brainer," he adds, because the band achieved self-government last year.

The WFN became the first Aboriginal band to achieve self-government after it signed an agreement with Ottawa in 2003 and the former Liberal government granted royal assent to legislation covering the deal in 2004.

According to the terms of the agreement, WFN was granted all rights, powers and privileges of a landowner, while the band's lands are still considered a reserve as defined by the Indian Act.

Unlike the landmark Nisga'a agreement in northwestern B.C., no land claims are dealt with under the legislation.

"With self-government, Westbank First Nation is wide open for business," says Bassett.

Leases that used to take two years to complete now take two months, he adds. In the past, he says, the federal Indian and Northern Affairs and Justice ministries had final approval over leases, and deals were changed frequently after they were negotiated by the WFN.

Now, the WFN has the final say. Money from the lease actually goes to residents who have certificates of possession on the property, who are known as locatees - not the band's government, says Bassett. But the band, which represents "Her Majesty the Queen," receives ongoing property tax revenue and is able to use it for projects that benefit all residents.

Ottawa still governs property taxation and conducts annual reviews using the same method as the B.C. Assessment Authority.

"We are in a position where we're looking at a brand new townsite, open and ready to go," says Bassett.

Non-native buyers are protected because their buildings are on reserve land that is not part of a land claims dispute.

As well, the Westbank self-government agreement and other related land-management agreements stipulate the rights of non-native residents will be protected. An elected advisory council comprised of non-native residents who will collaborate with the band council is being set up, with an election expected this summer.

Meanwhile, mixed-use developers, including Vancouver-based Anthem Properties, are building retail complexes that include Canadian Tire and Mark's Work Wear House big-box outlets on land adjacent to Highway 97.

The area is a popular tourist waystop because it is near the Coquihalla Connector, which links the Okanagan to other parts of Central B.C. and the Lower Mainland, as well as the Hope-Princeton Highway.

"The benefit for the First Nation is that they develop their land consistent with an economic development plan that they have set out over a number of years," says Bassett.

(Monte Stewart can be reached at monte@businessedge.ca)