Supreme Court of Canada –  2 S.C.R. 633
This case was one of the firsts to have definitely reconsidered reserves territorial regime. The Court confirmed that because of their legal environment, lots on reserve are worth a lot less than those outside the reserve. Since then, and until today, aboriginal and non-aboriginal governments are still looking for a viable solution to the low value of reserve lands.
The Court must determine the meaning of the terms “current land value,” “unimproved” and “this agreement” in the Musqueam rent review clause
The “current land value” is the value of the land as freehold, and not as lease. However, these lands cannot be evaluated the same way as those outside the reserve. Their value must take into account the legal restrictions in terms of land use and the rules of the market. A reserve’s legal regime must be considered in appreciating the value of these lots and, as a consequence, it is reasonable to conclude that the Musqueam lands are worth 50% less than comparable property outside the reserve (5 justices against 4).
Between: Mary Glass et al.
And: Musqueam Indian Band, Chief Joseph Ralph Becker, Ernie Campbell, Wayne Sparrow, Leona M. Sparrow, Nolan Charles, Mary Charles, Johnna Crawford, Gail Y. Sparrow, Myrtle McKay and Larry Grant
And: the Crown of Canada
In 1960, the Musqueam Indian Band, from the Musqueam Nation of British Columbia, relinquished nearly 40 acres of reserve land to the Crown for the intent of leasing. The land is located within the boundaries of the City of Vancouver, just beside its wealthy West side.
In 1965, the Crown entered into an agreement with the Musqueam Development Company Limited (unrelated to the Band). The company divided the land into lots and the Crown supplied the company with leases for each lot. Each lease had a term of 99 years.
In 1966, the company allocated the leases to individuals, who built houses on the lots. Seventy-five houses were built. The leases stipulate the rent and the terms for review of the rent. The provisions of the leases also state the criteria that should be met when reviewing the rent: the rent due upon review would have to represent 6% of the “current land value.”
In 1980, the Crown transferred the leaseholds to the Band so that it could receive and manage the rents directly. At that time, the rent was about $300-$400 annually.
In 1995, the time came for the Band’s first rent review. The Musqueam Band wanted to increase the rent to match rents outside the limits of the reserve, which would represent a 7 000% increase (from $450 annually to $36,000) (Frank, 2000). The parties were unable to reach an agreement with regard to the meaning of “current land value” and on whether the charges for servicing the lands should be subtracted from the value of the land. The Band took action in order to establish the “fair rent” owed to it at the time of the review.
The Musqueam Band: The increase was reasonable since the land parcels had been leased for 30 years at a rate well under their value. They claimed that reserve land has the same market value as non-reserve land (Fenwick, 2001).
Glass et al. (the residents): They could never afford to buy the land at the expiration of the lease. They also claimed that they should not be affected by the rent increase because they do not vote in the Band Council elections. Furthermore, the Band greatly exaggerated the “real market value” since it did not consider factors that could decrease the land’s value when compared with land situated outside the boundaries of the reserve (Fenwick, 2001).
Federal Court, Trial Division (1997): The “current land value” should be calculated as signifying a theoretical fee simple value of the land reduced by 50% so as to consider the “long-term leasehold interest and Indian reserve features.” As for the servicing costs, they ought to be subtracted from the current land value.
The Federal Court of Appeal (1999): The decision is overturned. The 50% reduction for the Indian reserve feature purposes should not be included in the current land value, which meant the fee simple value of the land. The leaseholders were granted leave to appeal on the issue of the proper meaning of the phrase “current land value.” The Band was granted leave to cross-appeal on the question of the deductibility of servicing costs.
Gonthier, Major, Bastarache, Binnie et LeBel
Gonthier (Major, Binnie and LeBel): The meanings of “land” and “value” are well-established principles in law. “Land” is intended to stand for a right to obtain a good title in fee simple and “value” usually signifies the fair market value of the land (based on what a seller and a buyer would pay for it on the open market). The tenant’s interest in the land is also irrelevant in assessing its value.
In the absence of a hypothetical market value to assess the value of the land at the time of the review, the actual value should “reflect the land as it is in its actual circumstances and should not change the nature of the land appraised.” Accordingly, the Band must take the actual market value for this capital asset. Since the land parcels were never surrendered, they are still considered reserve lands. Therefore, they are subject to restrictions regarding sale, use, and the Band’s power to levy property taxes and enact by-laws. These factors considerably decrease land value. Hence, the appeal court’s decision to decrease the annual rent by 50% was correct.
With regard to the costs of servicing the land, the Court determined that the term “unimproved” has to be read as “unserviced” lands. Hence, it concluded that the value of the lots should be reduced by accordingly.
Bastarache: Believes that the “current land value” “should be calculated as leasehold land, including its status as reserve land because (i) this is the best description of what the land in fact is, and (ii) this is consistent with the parties’ intentions” (par. 61 of the decision).
With this decision, the Court conveyed the notion that reserve land under a long-term lease is worth much less than its off-reserve counterpart since their location decreases their market value.
This raised the question of whether long-term leases are of any use to Indian bands. Inevitably, the rent revenues will always be lower than the real market value, rendering this regime ineffective. Since the dispute, various bands became unable to lease or develop their reserve land with private partners due to consumers’ fears of an unreasonable rent increase. This ruling and other lower courts’ decisions have created uncertainty for bands and their off-reserve commercial partners, which could lead to slower commercial developments on-reserve, to a worsening of economic conditions for residents and to reserve land being devaluated (Flanagan and Alcantara, 2004: 524-525).
In march of 2010, Tom Flanagan, Christopher Alcantara and Andre Le Dressay published Beyond the Indian Act: Restoring Aboriginal Property Rights. This book proposes to revolutionize First Nations’ territorial regime by allowing private property on reserve (Flanagan, Alcantara and Le Dressay, 2010). In the following years, Stephen Harper’s conservative government
Osoyoos Indian Band v. Oliver (Town),  3 R.C.S. 746
Fenwick Fred R. 2001. “Hot Times in the Vancouver Real Estate Market,” Law Now 25 (4): 38.
Flanagan Tom and Christopher Alcantara. 2004. “Individual Property Rights on Canadian Indian Reserves,” Queen’s Law Journal 29 (2): 489-532.
Frank Steven. 2000. “Getting angry over native rights,” Time (Canadian edition) 155 (20): 16-25.
Parent Alexandra. 2011. « Vers l’abolition de la Loi sur les indiens? Une question d’autonomie », Faits et Causes, Online : http://www.faitsetcauses.com/2011/12/14/vers-labolition-de-la-loi-sur-les-indiens-une-question-dautonomie/ Consulted July 29th, 2013.