A Concise and Analytical History of BC Leasehold

Less than a decade ago virtually no one among the general public was aware of the dire predicament confronting a relatively small segment of “home owners” in British Columbia known as residential leaseholders. Until the 1970’s residential leasehold had not yet come into existence in BC. Before the 1950’s development land was abundant and home buyers tended to expand outward into the suburbs as metropolitan land became scarcer and more expensive. For those who could not afford to buy a house or condominium the only alternative was to rent. As it so happened—and primarily as a ploy by certain Landlords to avoid government imposed rent restrictions—rental apartments would become the first source of residential leasehold units in BC. With the massive population growth that became apparent in the 1960’s and 70’s apartment rental and residential condominium ownership began to climb radically, in tandem with the numerous high-rises suddenly sprouting up as a preferable alternative to moving further and further from primary urban centers. Technological advances in the construction industry combined with city zoning changes accounted for the increase in high-rise construction in metropolitan areas where population density was greatest. Between 1962 and 1974, for example, more than 220 high-rises were constructed in Vancouver’s West End alone, most of which were either offered for sale as freehold strata “condos” or constructed expressly as rental units.

 

Although residential Leasehold had existed for hundreds of years in other parts of the world, leasing one’s home was a relatively new real estate concept when it was introduced in BC in 1974. In England and Wales where it accounted for 80% of all home “ownership” a complex system of legislation had evolved over the centuries to defend the rights of leaseholders. All over the world, and even elsewhere in Canada, legislation was firmly in place governing leasehold residential properties. In BC no legislation whatever had developed to inform or protect prospective leaseholders. As late as the early 90’s most potential apartment buyers were unfamiliar with the full range of home ownership which had suddenly arisen in modern real estate markets, or how they might be reflected in the complexities of the contracts that governed them. Consequently they were ill-prepared to comprehend the difficulties that confronted them when faced with the prospect of becoming a leaseholder rather than a freeholder. Few were aware a distinction even existed between them and fewer still understood that they might require the services of a lawyer to clarify contractual obscurities they might not be cognizant of, or even to enlighten them as to the advisability of their purchase! In their naivety most saw no reason not to accept their contracts in good faith on the innocent assumption that no landlord would knowingly exploit or otherwise take advantage of them. Real estate agents, being unfamiliar with the potential legal snares that might disadvantage their clients, were themselves too ill-informed (or otherwise predisposed,) to advise them adequately as to the legal adversities which might befall them in affixing their signatures to a standard-form contract that failed to define terms or clarify its own obscurities. Unfortunately the May 1st 1974 Lease would, for next two years, be virtually the only 99-year term residential leasehold contract being proffered in BC and because all the private corporate landlords were using the same contract there was nothing to compare it with.

 

Considerable investigation undertaken by the BCLA over the past two years has charted the evolution of Leasehold residency in BC. That research confirms that the May 1st 1974 Lease—presumably the handiwork of George Mulek who introduced it—was the first long-term residential lease ever created in BC. It was drafted in a form superficially resembling that of a commercial lease but without the advantages to residential leaseholders that a commercial lease would necessarily entail: the ability of both parties to negotiate the terms of the lease. That was because virtually all the first residential leases on the market were essentially the same contract and so conceived as to make the actual landlord and tenant, on every head lease one and the same person. In other words, concealed behind the corporate veil on the original contracts, no separate and distinct lessor or lessee could actually be said to exist in any real sense. The commonly used contract was itself the concoction of a single mind—ostensibly that of George Mulek—and could not be said to have been negotiated at all. In the non-legal terms of the real world it was a legal fiction, a bogus contract in which the owners of the buildings alone made all the rules and devised to their own advantage all the terms of the contract for the so-called lessees assigned under them. This tenuous conception of leasehold was put into practice by the owners of at least a dozen other leasehold buildings whose implementation of the lease’s “terms” followed almost exactly the same pattern.

 

Unlike commercial leaseholders, who were cognizant of the general principles and complexities of leasehold negotiation (in which lessor and lessee with their help of their respective legal counsel, actively bargained to establish the terms of a mutually satisfactory contract,) prospective residential leaseholders had no idea that this kind of negotiation was even an option. They were simply offered a standard form take-it-or-leave-it contract which inadvertently but effectively divested them of any personal autonomy as homeowners. On the scant advice of well-meaning real estate agents, who generally—and for the most part sincerely—assured them they were getting “a good deal”, most prospective home owners innocently signed the contract without any notion of the potential complications that would inevitably ensue. For it was not at all clear that such a contract—conveniently drafted and proffered by the corporate landlords who would largely profit most by it—might be plagued with omissions, ambiguities, and undefined or needlessly confusing terms that would be impossible to understand fully and susceptible to interpretation by those with the financial and therefore “legal” power to enforce the lease. On the advice of their real estate agents—who were understandably unversed in the legal niceties of contract law generally (and the chaos of May 1st 1974 Lease in particular!)—thousands of optimistic potential homeowners blithely embraced the concept of leasehold ownership. A quarter of a century later—in an rash of lawsuits largely mistakenly directed against the landlords who proffered the lease rather than the contract itself—the first sign of the folly of that oversight and the circumstances giving rise to it, began, with a vengeance, to take its toll on BC leaseholders.

 

Even immediately after its inception, however, the document proved a highly controversial one and was considered contrary to public policy by astute observers. As early as May 16, 1974, serious consideration was being given in parliament to putting a freeze on the conversion of rental apartments to leasehold in an attempt by unscrupulous landlords to avoid rent controls.  The observations of Hugh Trenchard regarding these matters are highly instructive:

 

A month later, in June 1974, the proposed amendment to the Landlord and Tenant Act was presented in parliament. … In addition, leases exceeding three years required the approval of local governments, like the approval required for condominium conversions. The amendments were proclaimed in force August 9, 1974. By this time, however, several leases had already been created as of May 1, 1974 … many based on a process in which developers entered leases with themselves through corporate entities…

 

All this has been more than adequately recounted and analyzed in a key paper by Mr. Hugh Trenchard, delineating the little known history of legislative events in this matter and outlining the controversy surrounding 99-Year Private Corporate Leasehold in BC. That paper is entitled, Toward Regulating Long-Term Residential Leases in BC, and the BCLA makes it available to all concerned advising them to peruse it carefully. It was addressed to the British Columbia Supreme Court, Mar. 8, 2018, as a part of a civil action in defence of Leaseholder rights in a particular civil action, but its insight and competency—the importance of which cannot be underestimated here—demands that it be brought to the attention of the general public at large, the BC courts and the BC legislature.

 

Whatever the shortcomings of the May 1st 1974 Lease may have been in terms of public policy, it must have appeared a highly lucrative proposition to Vancouver’s City Planners, for two years later, on May 17 1976, the Corporation of the City of Vancouver authorized its own 60-year and 99-year residential leasehold strategies for the commercialization of properties in the False Creek and Champlain Heights areas. Though municipal legislation had effectively halted its proliferation, the May 1st 1974 Lease, may well have provided the stimulus and prototype for the City on how to proceed with its own lucrative leasehold ventures. After all, how could the city planners resist the temptation of enriching the city coffers by millions of dollars just through assigning public land for residential leasehold that would otherwise be forfeited if sold outright! It seemed a “no lose” situation. And as an added incentive it was obvious that, through the commercialization of public property, huge amounts of money were to be made not only by the City, but by the myriad Developers, Construction firms and all the other sub-contractors waiting in the wings. Minor problems, mostly involving un-prepaid 60-year Leases, would serve as a precaution to future such development but they would,—albeit not without distress and difficulty—be resolved.

 

Soon other organizations with public or endowment lands also took notice and likewise began to embrace the prospects of directing public lands to like commercial use. By the late 1980’s the University of BC which was in possession of unincorporated endowment lands also began to consider the possibility of generating revenue by means of residential leases on what was essentially public lands that either could or “should” not be sold. The UBC Properties Trust developed university properties by way of leasehold strata plans using criteria similar to the City of Vancouver. Unlike the City leasehold strategy however, all of the UBC leaseholds would be for 99-year terms and fully prepaid. Tripartite agreements were involved in all of the ground leases. Since these Leasehold contracts were created in the 1990s, they will only reach their term in the year 2090 after which they start to expire. A decade later, the SFU Community Trust decided to follow the example of UBC. Once again university properties were developed in anticipation of fully pre-paid 99-year tripartite Leases. Commencing a decade after those of UBC, the SFU Leases were not expected to begin expiring until the first decade of the year 2100.

 

The final BC entry into the arena of residential leasehold involved conveyance of Indian lands. As outlined in a Boughton Law Article by Jean Yuen,, this largely came about as a result of the creation of the First Nations Land Management Act of 1999 (FNLMA) which, in replacing the Indian Act of 1985, gave BC Indian Bands the ability to exercise powers, rights and privileges, permitting them to grant interests, rights or licenses on First Nations lands and the power to profit from the natural resources of those lands. These were undertaken to varying degrees of autonomy under one of several regimes: the two mentioned above, and the various forms of self-governing legislation invested in each Indian band. With so many factors at play in the conveyance of First Nations Lands the regulation of such leasehold contracts became far more diverse and complex than that governing University and Municipal properties. As a result such leasehold contracts would again, as with municipal strata leases, involve un-prepaid leases of 60 and 99 year terms.

 

Although the benefits of leasehold seemed obvious to its advocates there were and still are many serious detractors who condemn the commercial use of public lands for initiatives (such as residential leasehold schemes,) to raise funds that arguably could or should be forthcoming by other means. In an extensive November 26, 2017 internet article on Universities as real-estate developers Francis Bula (https://www.universityaffairs.ca/ ) made the following observations:

 

UBC, in particular, has been the subject of persistent criticism from certain faculty members and others who believe that it is undermining its role in the community and misusing land it was given on behalf of the public. “It’s a form of social theft,” says Charles Menzies, an anthropology professor who has been a representative in the past of the residents’ association on campus and is currently on the board of governors. “The focus on making profits off the land does more to keep developers employed than it does to benefit all BCers. And privatizing the land removes access to it for many people.”

 

It is easy, of course, to make cursory judgments about such matters for there are always pros and cons to everything. The opinions against the privatization of public lands in the case of the municipalities, universities, and so on, are perhaps somewhat facile. There may be reasons to condemn or deride the commercialization of public or endowment lands in the pursuit of ephemeral or arbitrary goals but in many cases the objectives ultimately do justify the actions. The public does benefit sufficiently to validate such commercialization. However, while that may well be the situation as regards the public use of public lands, in the instance of the private use of private lands—especially as regards the issue of residential leasehold—the exact opposite has too often proven the case.

 

This is especially true of the residential leaseholds still operative under the dictates of the May 1st 1974 Lease, an unconscionable legal contract whose ills, as the BCLA will reveal, have proven to be the most abusive and reprehensible imaginable anywhere. Leaseholders who believed they were purchasing 99-year leases that appeared on the surface to be clear and honest about the expenditures they would be held liable for discovered to their immense grief and indignation that they were suddenly being railroaded into paying outrageous sums of money they could never have foreseen in the Lease nor could possibly sustain indefinitely. And to make matters worse on every attempt to reason or protest, they incurred, or were threatened with, legal actions against them for which their landlords held them wholly responsible under the so-called plain terms of the Lease. If they questioned the dictates of their landlords in any way they were either ignored or accused of slandering the integrity of those who had proffered the contract to them. In other words their landlord was using their lease as a legal weapon effectively preventing them from protecting themselves under the law by financially prostrating them in advance. If they even sought an explanation or any degree of transparency they were subjected to the most outrageous abuse and humiliation. Or hit with unrelenting legal actions that could only be considered “prudent and reasonably incurred expenses” by the landlords themselves who were always forcing leaseholders to pay such costs without disclosing any details about them and often in advance of their even being incurred.

 

There are serious issues surrounding the development of both private and public land for commercial gain, but on the whole they have never been successfully brought into public debate and, for that reason alone, do not seem to have hindered the continuance of such projects generally. One needn’t look too closely to discern the many differences between them. Perhaps the main distinction between the private corporate development of leasehold land and the initiatives undertaken by the Municipalities, Universities and First Nations is that in one way or another the public ones all ultimately strive to benefit the public in positive ways. At the heart of their operations is a degree of social responsibility and even of philanthropy. They provide tangible rewards for those whose recourses they draw upon. The private Leasehold Landlords do exactly the opposite. As near as can be determined from their example so far, all that these private leasehold corporations accomplish—by inverting the benevolence of the above process—is enrich themselves by exploiting those whom they dishonestly profess to serve. The truth is that these private companies have been allowed to profit inordinately at the expense of those on whom they prey—showing no consideration for anything but their own gain. They give nothing back to the community; they only take—without conscience, without good faith and without compassion.