Challenging disputes with Creativity and Intelligence
Hodgson v. Musqueam, 2017 FC 509
Summary :
In 2014 the Musqueam Indian Band (MIB) advised each 99 year leaseholder in the Musqueam Park subdivision in Musqueam Indian Reserve No. 2, that in 2015 the land lease rent for each lot would increase from $10,000 yearly to $80,000 for the period 2015-2035. The MIB asserted that this constituted “fair rent” under a 20 year rent review cluse in each lease. If implemented such
increases would have forced most leaseholders to abandon their family homes and lose the investments, they had made in their houses. In the Spring 2015, after negotiations by the MPLA with the MIB stalled, the MIB issued its Notices of Rent increase. The MPLA retained Randy Hordo to act as lead counsel to resolve the rent review dispute. The MPLA also retained Howard Mickelson and Allan Doolittle as assisting co-counsel and solicitors. After further negotiations between Randy and legal counsel for MIB failed to result in an agreement, the MIB issued rent invoices based on its
notices. Proceedings were then commenced in the Federal Court of Canada, Trial Division, by the leaseholder’s legal team for 69 long term leaseholders to contest the notices. The claims were joined together for trial in Vancouver.
Successful Outcome
After a several week trial, the trail judge accepted the analysis and expert evidence advanced by counsel for the Leaseholders and fixed the annual average “fair rent” for the period 2015-2035 at
$24,500. No appeal was taken by the MIB.
The MIB was required to pay the Leaseholders $900,000 to satisfy their claims for court costs.
Background
In the 1960s the MIB surrendered approximately 40 acres of land to Canada for the purpose of developing the land as a subdivision of single family residential lots to be offered for lease. The land
was developed into the neighbourhood of Musqueam Park, in Vancouver’s high priced west side. It was comprised of 75 residential lots. Each 99 year lot lease set a fixed land rent for the first 30 years and also contained a provision for ‘fair rent’ to be determined for each 20 years thereafter at 6% of the then current land value.
Fair rent for the period 1995 to 2015 for each lot had been determined in prior litigation (1995-2000) to be $10,000 per year on average.
In Musqueam Indian Band v. Glass, 2000 SCC 52, the Supreme Court of Canada had determined that the nature of the interest in land to be valued under these leases is a hypothetical fee simple interest in reserve lands, in an unimproved and unserviced state.
In May of 2015, the MIB issued Notices of Annual Rent Increase to the residents of Musqueam Park for the 20 year period beginning June 8, 2015, averaging $80,000 per lot. This potential rent increase put all of the residents of Musqueam Park at risk of losing their family homes.
The Musqueam Park Leaseholders Association retained R.J. Randall Hordo, K.C. of Nathanson Schacter C Thompson LLP as lead counsel, and also retained Howard A. Mickelson, K.C. and Allan
L. Doolittle of Gudmundseth Mickelson LLP, as assisting co-counsel and solicitors of record, to resolve this crisis for the homeowners.
Randy negotiated a standstill agreement for the leaseholders so that any rent increases would be deferred until after a trial decision was rendered. The leaseholder’s legal team then worked closely with an expert in real estate appraisal, Larry Dybvig, of Grover Elliot C Co., and an expert in
subdivision costs and servicing, Nancy Hill, of AECOM, both of whom gave evidence at trial. Their expert evidence at trial supported an annual “fair rent” of $21,151 for an average lot for the review period.
The MIB retained an expert who gave evidence at trial. He expressed the opinion that annual fair rent for each lot should be between $116000 to $227,000 based on his opinion of the relevance of comparative adjusted land values of nearby fee simple lots and houses in the City of Vancouver. He was cross examined for several days by Randy.
After several weeks of trial in late 2016 and early 2017, Justice Mactavish, (now J.A.) issued written Reasons. The Court determined that an average annual rent of $24,480 per lot be set as fair rent for the period 2015-2035. Hodgson v. Musqueam Indian Band, 2017 FC 509. The Court rejected the opinions offered by the MIB’s expert, preferring instead and relying upon the analysis and opinions of the leaseholders’ experts.
Randy then negotiated an agreement that the MIB pay court costs of $900,000, which was ordered by the Court and paid by MIB.
