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Musqueam lease dispute ends
November 9, 2000

The long running Musqueam lease dispute appears to be over as the Supreme Court of Canada released its decision today. In Musqueam Indian Band v. Glass, 2000 SCC 52, the court split 5-4, with the majority holding that the annual rent payments should be based upon 6% of the fair market value of fee simple land less servicing costs and discounted 50% to adjust for the fact that the land was on an Indian Reserve. This outcome restored the original trial decision of the Federal Court.

The Musqueam dispute arose in 1995 when rent renewal clauses contained in a large number of long term ground leases first took effect. The Musqueam lands are located adjacent to the City of Vancouver. They form a portion of an Indian Reserve that was surrendered for development as a single family residential development in the early 1960's. Each parcel was separately leased on 99 year terms. The rent was fixed in the lease for the first 30 years, but was subject to review after 30 years and every 20 years thereafter to the end of the term. The lease provided that on renewal the annual rent was to be set at 6% of "current land value". During the initial 30 year period land values escalated dramatically. The result was to produce dramatically higher rents. Unfortunately, the term "current land value" was not defined precisely enough in the lease so as to prevent the lengthy and costly dispute which followed.

Although the Musqueam dispute did not involve expropriation, it nevertheless drew considerable interest from expropriation professionals because of the land valuation issues involved. It also drew considerable interest in the mass media because of the hardship stories offered by many homeowners who saw their annual rents skyrocket. However the Chief Justice noted early in her reasons that the leaseholders had obtained professional advice before purchasing their homes so the case was treated by the court as a simple lease renewal clause interpretation case and hardship was not considered.

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