Turner Drake Blog

It comes like a bolt out of the blue; the municipality wants to purchase your property so that they can widen the highway. Often times they intend to seize just part of your property: that front yard you so carefully nurtured to provide a fragile barrier between your home and the busy street is destined to become another traffic lane. Many owners have received this type of letter, more will receive similar letters in the future (if not from the municipality then the province, federal government or any organisation with expropriation powers such as a water authority, power utility, Crown Corporation). Sometimes the purpose of the exercise may not be clear, other than the fact that your property, or part of it, is required for the public good. During our early days in business in the 1970s some provinces, such as Nova Scotia, did not always inform owners that they had taken title to their property… the unfortunate owner only discovered such was the case when they enquired why they were no longer getting a property tax bill! Often times, municipalities such as the City of Halifax, did not advise the owner that they required the property, or part of it, content to leave it to the appraisal firm to break the news when they arrived on site to conduct their inspection. (We fired the City of Halifax as a client after arriving on site to find the property owner had not been informed about the expropriation; his wife was dying of cancer in the bedroom). Legally this is still the case in many provinces in Atlantic Canada; the acquiring authority does not have to inform you that you no longer own your property for several months after they have filed the expropriation document (Nova Scotia 90 days, Prince Edward Island 60 days). Thankfully in practice, that at least has changed, but the unfortunate reality is that property owners rarely have legal grounds to prevent the authority from purchasing their property. In other countries, property owners have to be notified that their property is to be expropriated and have the right to object that the acquisition is not really required for the road widening, or other scheme that is its raison d’etre, or that the scheme itself is not required to serve the public good. But this avenue is rarely available in Canada, or indeed in North America. (In this Region, proposed expropriations under the Federal and New Brunswick Expropriation Acts are the exception that prove the rule. Each require the acquiring authority to notify the property owner before they expropriate and provide a public enquiry to hear objections. However the Federal Act is really window dressing, the public hearing a mechanism to “vent”; the New Brunswick Act however does require the Expropriation Advisory Officer to issue a decision as to the necessity for the expropriation and whether the scheme is consistent with the public interest. If your property is located in Nova Scotia, Newfoundland or Prince Edward Island you have no say in the matter at all!. Even if subsequent events disprove the “valid public use” test, owners have no right to recover their property (the ill-fated Mirabel Airport in Quebec is an example… the original owners, or their descendants, were eventually offered 300 hectares of the 38,800 hectares originally expropriated, but only after a long, bitter and very public fight). So what do you do when you receive “the letter”, particularly if it does not mention “expropriation” and is instead a civilised attempt to negotiate compensation before the municipality seizes your property by force?

We live in an age when most of us have lost faith in our institutions, the civil service, politicians and the private sector. That trust has been eroded over the past two decades by greed, politicians who no longer adhere to acceptable forms of behaviour, the shrill cacophony of social media seamlessly blending fact with fiction, and an emancipated Fourth Estate no longer able to defend the “little guy”. The adage “you can’t fight city hall” too often engenders a feeling of helplessness, particularly if the acquisition involves your family home, the sanctuary you hold inviolate; or your business, a livelihood born of blood, sweat and tears. Cheer up, not all is bad, the press and electronic media may no longer have the heft they once did, but you do have the protection of an excellent and independent judicial system. Why is that important? The letter you received from the acquiring authority may not have mentioned “expropriation”, and the words “judicial system” may raise the spectre of long and expensive litigation in which you, the little guy, are pitted against an acquiring authority with much deeper pockets. But bear with us. Even if your property has not yet been expropriated the negotiations will be framed by the Expropriation Act because the acquiring authority has to rely on it if they cannot reach a settlement with you by negotiation. Now, it has to be said, the Expropriation Acts do not represent the legal community’s finest hour. The Nova Scotia and New Brunswick Expropriation Acts, each appear to have been written in a hurry by somebody suffering from a hangover. The Newfoundland and Prince Edward Island Expropriation Acts have a distinct feudal flavour, drafted in the days when peasants lived in huts of mud and wattle, addressed their betters with a touch of forelock, eyes downcast and a mumbled “zur” (or that, at least, appears to have been the assumption of the persons drafting them). In fact the PEI Act doesn’t even attempt to lay out the framework for compensation, happily delegating it to the court system, undoubtedly in the pious hope that the judge would have a clue what it was all about, because the person drafting the legislation sure as hell didn’t! Only the Federal Expropriation Act can claim lucidity, and even it overlooks the fact that businesses occasionally occupy real estate and are adversely impacted if it is whipped away from under their feet. But, and this is the good news, none of this really matters very much because there are some good Expropriation Acts elsewhere and a body of case law and appraisal practice that have established well proven methodologies for identifying and calculating compensation. The courts have embraced the principle that, since expropriation is the exercise of police power by the state (or its surrogate), the benefit of the doubt lies with the unfortunate property owner and they have not been shy in ensuring that the latter does not suffer financial loss as a result.

Expropriation

So what is “Expropriation” and why should you care? Expropriation is the seizure of your property, or a part of it, by the government, or a body authorised by them, for public use or benefit. The bad news, as we have already mentioned, is that you cannot object to it unless you live in New Brunswick or the property is being acquired under the Federal Expropriation Act… the good news is that you are entitled to be fairly compensated for your loss. The initial approach from the acquiring authority advising you that they want to purchase part or all of your property will rarely mention the word “expropriation”. Whilst this may be an attempt to spare your feelings by appearing to be non-threatening you should be cautious. We no longer have a strong media but, as mentioned, we do have an excellent court system… and they are on your side. While you will probably never need to go to court you should avail yourself of the protection afforded by our judicial system. Your rights to fair and proper compensation are codified in the relevant Expropriation Act (sort of) but you will not be so protected unless (1) your property has been officially expropriated or (2) the acquiring authority has agreed in writing to proceed as though you had been expropriated i.e. that they will afford you all of the compensation you would have been entitled to under the Expropriation Act had your property been expropriated. So this is Step One, make sure that the acquiring authority is prepared to offer you all of the rights and privileges afforded by the Expropriation Act and get that commitment in writing. If they will not provide it, refuse to negotiate until they expropriate your property.

Compensation

It is a fundamental principle of Expropriation that the acquiring authority is required, as far as monetarily possible, to put you in the same position after the acquisition as you were before it. Most court decisions have interpreted that principle as giving you the benefit of the doubt, short of plundering the public purse. The federal and some provincial Expropriation Acts acknowledge that the negotiations are unevenly balanced in that the property owner faces an acquiring authority with much deeper pockets and resources. Some Expropriation Acts attempt to level that playing field by requiring that the acquiring authority be transparent in their calculations of compensation, and some give the property owner access to their own professional advice if they desire it, at the acquiring authority’s cost. The Federal Act unambiguously provides that the property owner is entitled to professional advice at the Fed’s cost, the Atlantic provinces are more parsimonious, sometimes offering it if the property owner wins in court (Nova Scotia, New Brunswick, Newfoundland), or not considering it worthy of mention (Prince Edward Island). Nova Scotia limits the amount they will pay in legal costs and appraisal fees, something they are now allowed to do in their Act, so the unfortunate property owner has to pick up the rest of the cost, or find a cheap lawyer or appraiser. A word of caution: the devil is in the details and some acquiring authorities do not play by the rules established by the relevant Expropriation Act, case law or appraisal practice. It is essential to have an understanding of your rights under the Act, the type of compensation and how it is calculated. Each province in Atlantic Canada has its own Expropriation Act and each municipality, or other body with expropriation powers, is governed by that Act. The federal government also has its own Expropriation Act. Broadly speaking the Acts are similar, in practice if not content, and the methodology for calculating compensation is identical even when it is not specified in the legislation.

Negotiations

The acquiring authority may employ their own staff to negotiate, or will contract it out to a firm such as ourselves (we also negotiate on behalf of property owners). Our article “Land Agency… a respectable profession” elsewhere in this Blog details our approach when we are representing the acquiring authority: you should expect nothing less. The act of expropriation, or its anticipation, obligates the acquiring authority to fairly compensate you for your loss and that means they must engage in “principled negotiation” rather than attempt to settle the compensation claim for the lowest amount. If you find that you are not comfortable negotiating, insist that the acquiring authority pay for your professional representation. Whether the Act specifically allows for it or not, it has been our experience that acquiring authorities want to reach agreement without the adverse publicity of a formal expropriation, much less the agony and expense of a court action. They recognise that some property owners need professional assistance and that this may facilitate an agreement. If the acquiring authority is attempting to negotiate compensation before they formally expropriate, particularly if your property comprises woodland or agricultural land, the acquiring authority may attempt to negotiate without commissioning an appraisal, using instead their knowledge of property values. There is nothing wrong with them so doing provided they are open and transparent about their compensation calculations and are able to validate them by reference to other property sales. However you can require that the acquiring authority provide you with a formal appraisal (they have to anyway if they formally expropriate) and you should insist on this if your property has buildings on it, is in an urban area, or if only part of your property is being acquired and the remainder is likely to be adversely impacted. Many Expropriation Acts (Federal, Nova Scotia, New Brunswick) require that the formal offer after expropriation has to be accompanied by an appraisal. The formal appraisal should meet, at a minimum, the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) www.aicanada.ca/about-aic/cuspap/ . Frankly CUSPAP is not the most rigorous standard in the world, it is not specifically directed at expropriation, and most appraisers (like most lawyers) are not sufficiently familiar or skilled in recognising and computing the various Heads of Claim. Do not accept any appraisal tendered by the acquiring authority at face value. Research the author of the appraisal report on the internet and check his/her reputation with a trusted professional advisor to verify that they are experienced in expropriation work. At a minimum they should be an Accredited Appraiser of the Appraisal Institute of Canada or a Member of the Royal Institution of Chartered Surveyors (Valuation) but neither qualification guarantees that they are experienced and knowledgeable in expropriation. Do not assume that the acquiring authority has already done the research and has chosen their appraiser on the basis of merit; the Federal Government and some provinces do so, but other provinces and many municipalities, Halifax Regional Municipality for example, simply select an accredited appraiser on the basis of cheapest cost. Some acquiring authorities will instruct the appraiser to limit the types of compensation (Heads of Claim) they consider in the appraisal and although the omissions may be listed in the appraisal report their significance can easily be overlooked. The Province of New Brunswick Department of Transportation and Infrastructure, for example, instruct their appraisers to ignore Injurious Affection and Special Economic Advantage, items which often constitute the bulk of the loss suffered by the property owner.

Heads of Claim – A Hitch Hiker’s Guide

A governing spirit of expropriation, or the negotiations which preclude it, should be that the property owner (and tenant if the property is rented) will not suffer financial loss as the result of losing all, or part, of their property. You will not be compensated for emotional loss arising, for example, from the upheaval in your life. If you are a property owner the types of loss and accompanying compensation will fall under some, or all, of the following Heads of Claim:

(1) Market Value of the interest acquired in the property.

(a) “Market Value” is defined differently in the various Expropriation Acts but essentially is the amount of money you would get for your interest in the property if it was sold on the open market. For example, if you occupy and own the freehold (fee simple) interest in a residence which is acquired in its entirety by the municipality, your compensation will equal the sale price you would have achieved had you sold the property of your own free will through a real estate agent. This can cause a problem if the Market Value of your property is lower than that of other properties in the neighbourhood since the cash you receive will not be adequate to purchase a similar home. In that instance you are entitled to additional compensation under the “Home for a Home” head of claim (see below). Unfortunately you will not be compensated for any “special” value your property may have to the acquiring authority over and above its Market Value.

(b) If the municipality only takes part of your property (typically part of your front yard in the case of a road widening), you are entitled to the Market Value of that portion of your property. Obviously calculating Market Value is somewhat problematic since bits of front yards are not typically sold on the open market. Its value will therefore be based on the sale prices of comparable vacant lots expressed on a square foot or other unit basis. You are also entitled to the value of any improvements such as lawns, flower beds, bushes, etc. … but not the emotional value you may have invested in nurturing them. If fences and steps have to be demolished the acquiring authority has to replace them. Sometimes the loss of a front yard is so extreme it renders the home unsuitable for continued owner occupation; it may be uninhabitable or suitable only as transient accommodation such as short term rental. In that event the owner should be able to substantiate the acquiring authority purchasing the entire property. The “Home for a Home” provision may then be relevant.

(2) Home for a Home

(a) If the property is occupied by the owner, as opposed to being rented, as a family home, you will be entitled to additional compensation if the Market Value of the property is inadequate to purchase a similar home in the neighbourhood. In this event your compensation will be based on the Market Value of similar homes for sale in the neighbourhood. What happens if there are none for sale? Whilst the compensation does not require that you remain in the neighbourhood it does get a little tricky if you do not have that choice. In the unhappy event that substitutes are not available you would be entitled to be compensated for the Market Value of the next best alternative.

(b) If the property is rented, a cottage, or anything other than an owner occupied family home, your compensation is restricted to Market Value even if you cannot purchase a similar property with it. The acquisition will also trigger tax liabilities which you did not contemplate until you intended to sell the property. It is our view that the impact of paying those taxes now, rather than deferring them for the future, is a valid compensable item.

(3) Disturbance

(a) When a property owner is forced to move out of their home there will be moving expenses, as well as items such as drapes for the new home. The acquiring authority is required to compensate the owner for these items. If it is not practical to estimate these costs some Expropriation Acts (Federal and Nova Scotia) provide an allowance instead of up to 15% of the Market Value. The New Brunswick Expropriation Act allows, in addition to moving expenses, 5% of the market value of the residential portion expropriated, to compensate for the cost and inconvenience of finding another residence. The other Acts do not place any value on the unfortunate property owner’s time.

(b) If the property contains a business the occupant will suffer a variety of losses. If the business has to relocate it will incur a number of costs: new stationery, informing customers, staff overtime packing and unpacking, new signage, etc. as well as the cost of the move itself. Whether the business moves or not, profits will usually be adversely impacted by the road widening scheme and/or the relocation. Trade once lost to competitors may takes years to recapture, may even be lost forever. Whilst all of the foregoing is compensable some Acts provide that compensation for loss of goodwill, where the business has relocated, can be deferred for the earlier of a year (Nova Scotia) or nine months (New Brunswick) after the relocation, or for three years (Nova Scotia) or two years (New Brunswick) after the expropriation. It is not clear when the business can expect to be paid if it does not relocate, but given that it has to prove its loss one imagines that this would be twelve months (Nova Scotia), or nine months (New Brunswick) after the road widening scheme is complete. Thus a business can struggle to survive during and after the road widening but cannot claim for its loss until later. Whilst the acquiring authority can agree with the business owner to waive the deferment it is our experience that such is not normally the practice. Business loss (goodwill) is not specifically mentioned in the Federal, Newfoundland or Prince Edward Island Acts but is a compensable item.

(4) Injurious Affection

(a) Where only a portion of the property is acquired, a common situation with road widening schemes, the balance of the land may be reduced in value because (1) the remaining property is less useful since it is smaller, a more awkward shape, or is severed from the main parcel and/or (2) the construction or use of the road on the land acquired adversely impacts the value of the remaining property. For example, it may no longer be possible to park a vehicle on the land remaining because it is now too small or of the wrong configuration. A residential property without parking is less valuable than a house with a driveway. The construction of the widened highway may render access to the property more difficult if traffic increases. The increased noise and loss of privacy in the home which results from it being closer to the highway will reduce its value. Or take a farm cut in two by a new highway. The farmland on the other side of the new road, particularly if it is limited access highway, will be considerably less valuable because it is no longer as accessible from the farm buildings. Farm fields impacted by the new highway may no longer be of optimum size and shape; drainage may be adversely affected too. In our experience Injurious Affection usually represents the vast majority of the loss sustained by the property owner, especially in residential properties impacted by road widening. The accepted method of calculating Injurious Affection is the “Before and After” method. This methodology is codified in the Federal and Nova Scotia Expropriation Acts. The property is valued as it existed prior to the acquisition and commencement of the road widening (Before Value); and then valued again on the assumption that the road scheme is complete (After Value). The difference between the Before and After values, minus the Market Value of the land acquired, is the Injurious Affection. The New Brunswick Expropriation Act provides that a claim for Injurious Affection has to be made within one year after the damage was sustained, otherwise it is barred.

(b) For housekeeping purposes some Expropriation Acts include Disturbance under Injurious Affection. This has no impact, other than to confuse matters, unless the acquiring authority has directed their appraiser to ignore Injurious Affection (a common practice with the New Brunswick Department of Transportation and Infrastructure).

(5) Special Economic Advantage

(a) If the property is owner occupied i.e. not rented, the owner may be able to claim for any special economic advantage arising out of, or incidental to, their occupation of the property to the extent that they have not been compensated under the other Heads of Claim. For example, if you or a member of your family is disabled, and the home has been adapted to meet their requirements with ramps, grab bars, wider doorways and hallways, stair lifts etc. you will be able to claim for the cost of these improvements.

(b) The same conditions apply with commercial property that has been adapted to suite the unique requirements of the business. It applies as well to property that has additional value because of its location, such as a woodlot proximate to the owner’s mill.

(c) Special Economic Advantage is specifically mentioned in the Federal, Nova Scotia and New Brunswick Act.

(6) Special Purpose Properties

(a) Some properties do not normally sell on the open market; churches, schools, hospitals, religious and charitable institutions are examples. If the property being acquired falls into this category and the owner has to relocate, they can base their compensation claim on the reasonable cost of creating a similar property (technically known as “the cost of equivalent reinstatement”). Even though the buildings on the property they are vacating may be old, the claim for compensation can be based on the cost of building a new, otherwise identical structure, plus the cost of acquiring a replacement site…. though some Acts (Federal, New Brunswick) attempt to claw back some of the compensation if the owner has improved their position.

(b) The Federal Act, cognisant no doubt that we are meant to be a secular society and less fearful for their immortal soul than the Provinces, do not restrict the qualifying properties to religious institutions and instead embrace all properties that do not normally sell on the open market.

(7) Professional Fees

(a) The Federal Act provides that the acquiring authority pay the legal, appraisal and other costs reasonably incurred in ascertaining a claim for compensation. The onus is on the property owner to ensure that the costs are reasonably incurred, not that they are reasonable.

(b) The Nova Scotia Act provides that the owner is entitled to be paid the reasonable costs necessarily incurred in ascertaining a claim for compensation but this is only triggered by an application to the Nova Scotia Utility and Review Board after negotiations have failed. However in practice they are compensable up to the date the acquiring authority makes their Offer to Settle (just before the start of the Board hearing) and are not conditional on the property owner winning their case. Reimbursement of costs incurred after the Offer to Settle are conditional on the outcome of the hearing. The province has recently placed a limit on the fees it will reimburse for legal and appraisal advice. The property owner will now have to fund the difference, or find a cheap lawyer and appraiser.

(c) The New Brunswick Act makes no provision for the reimbursement of professional fees unless the matter proceeds to Court. Reimbursement may be dependent on the compensation award.

(d) The Newfoundland Act provides that professional fees are only paid for proceedings before the Board and they are conditional on the outcome of the hearing.

(e) The Prince Edward Island Act has yet to acknowledge the necessity for professional advice or its role in protecting property owners.

(8) Betterment

(a) Where only part of the property is being acquired, the remaining property may increase in value as a result of the scheme for which the property was purchased. For example, land may be purchased for a highway intersection, with the result that the land remaining after the acquisition increases in value because it has development potential for a service station, hotel, shopping centre or other commercial use. This increase in value, known as “Betterment”, has to be offset against the compensation. Depending on the Expropriation Act, Betterment may be offset against the (1) total compensation [Newfoundland and Prince Edward Island] or (2) the land remaining after the expropriation [Federal, Nova Scotia, New Brunswick].

(9) Factors Not To Be Taken Into Account

(a) Anticipated use by the scheme for which the property was expropriated.

(b) A value established by reference to a transaction which occurred after publication of the intention to expropriate, or the actual expropriation if there was no published intention to expropriate.

(c) Any increase or decrease in value resulting from anticipation of the expropriation.

(d) Any increase in value resulting from the property being utilised for an illegal use.

(10) Heads of Claim Have To Be Consistent

(a) The Market Value of the land acquired has to be based on its existing use value if the costs of relocating are to be allowed. For example, a property owner cannot claim for removal costs if he/she is basing the value of their property on the assumption that it could be redeveloped.

(11)  Payment of Compensation

(a)  Federal, Nova Scotia, New Brunswick, Acts - A “without prejudice” offer has to be made by the acquiring authority within 90 days of registration of the Notice of Expropriation. If the parties do not agree the compensation the Federal Act provides for payment of 100% of the offer of compensation; the Nova Scotia Act for 75% of the compensation (excluding business disturbance) and the New Brunswick Act 100% of the “Market Value” (other Heads of Claim such as Injurious Affection are excluded). This payment is “without prejudice” and the property owner is free to pursue his/her claim for additional compensation.

(b) Newfoundland – the property owner has to file a claim for compensation within the time limit specified in the Notice of Expropriation and where the parties do not agree on the amount the matter is sent to the Board to be “fixed”. Compensation is paid out within six months of the Board’s decision.

(c) Prince Edward Island – the property owner has to file a claim for compensation within six months of registration of the Notice of Expropriation “or in the case of land injuriously affected within six months of the injury”. Payment is only made after the parties agree on the amount.

Mike Turner is Chairman of Turner Drake & Partners Ltd. A fifty year veteran of expropriation on two continents he is still shocked at the cavalier attitude some acquiring authorities adopt when dealing with property owners. If you'd like more information about our expropriation services, feel free to contact Mike at (902) 429-1811 Ext. 312 or mturner@turnerdrake.com

“How much? Get out!” (followed by the noise of a slamming door). Another day in the life of the hapless land agent, doing his level best to get the most for the least. At least that’s the common perception, but here at Turner Drake we approach things a little differently.  Our team of Land Agents follow the concept of “principled negotiation”, not positional bargaining.  And it works.  We are routinely retained to provide Land Agency services under contract to governments and corporations, who are increasingly out-sourcing this type of work to the private sector.  The projects we work on are large and small, involving anywhere from half a dozen to several hundred different property owners, and our mandate is simple: negotiate fair deals for the purchase of land interests to support infrastructure projects. Without upsetting anyone.

Roads and transmission lines are especially popular these days.  Seems we just can’t live without them. These are corridor acquisitions: mile after mile of trees and fields with the occasional home or business. All neighbours.  All savvy negotiators. And all deeply suspicious of strangers who turn up on the doorstep bearing gifts.  So our approach must respect that and we have developed a simple formula built around three principles:

Consistency

We can’t divulge offers and settlements to neighbours.  It’s a privacy thing.  But we expect that neighbours will talk as soon as we leave.  In fact we encourage it.  They can compare figures if they like, essentially testing our integrity to see if anyone got a better or worse deal than the others. And therein lies the challenge with corridor acquisitions.  Those at the end of the line must be treated the same as those at the beginning; those who settle quickly must be treated the same as those who hold out for more; those who shout must be treated the same as those who whisper. Sure, there are perfectly valid reasons for paying different amounts, but it can’t be arbitrary.  It must be explainable.  It must be credible.  And it must be fair.

Transparency

We go to great lengths to make sure landowners understand what is happening and what is going to happen. Large infrastructure projects will already have gone through a very public process by the time we get involved and many landowners will have attended open houses …. and perhaps already made their views known. But the regulatory framework for compensation and landowner’s rights under the law are usually a mystery.  We explain them.  Fully.  Our team of Land Agents are trained negotiators with the support of an entire team of in-house professionals to draw on.  So we don’t present take-it-or-leave-it offers. We explain how they are calculated, usually by reference to a base-line appraisal or a third party site-specific appraisal. All of which is revealed to the landowners so they too can see how the calculations are made.

Respect

It goes without saying but we’ll say it anyway. Every landowner has a story to tell and it is our job to listen.  Respectfully and with an open mind. Of course we don’t believe everything we hear, but invariably we will learn something from everyone just sitting around their kitchen table. Eating the free cookies. Most people just want their voice to be heard, and anyone who is being asked to give up their land against their wishes deserves to be heard. We call it respect. It builds trust and it leads to mutually agreeable results.  And that’s all we’re looking to achieve. Without drama.  Without the slamming of doors.

Age distribution in Nova Scotia (Source: Statistics Canada Population Estimates)

Population change 2011-2016, Statistics Canada 2016 Census

Just 29% of Atlantic Canadian Baby Boomers would consider purchasing a condo, the lowest rate in the county.  Recall that the stat comes from a survey of home buying intentions…and recent trends have been for downsizers to opt for rental apartments over condominium apartments.  There is certainly incoming supply of apartment units: CMHC statistics on housing starts over the past few decades show a distinct shift from single-family construction to apartments:

…at least in Halifax:

…though the rest of Nova Scotia is a different story:

The breakdown of the same housing start data shows a distinct rental intention:

…which again is driven almost entirely by the Halifax pattern:

...while the rest of the province still shows a clear preference for offering options for home ownership, with very little constructed for either the rental or the condominium market:

On the demand side, the province appears largely influenced by the statistics for Halifax, with vacancy mirroring the same ups and downs over the past three decades, though vacancy is a bit tighter in the city (overall 2% in NS and 1.6% in Halifax in October 2018).  Demand is strong: vacancy rates have been falling since 2014, even as the inventory of rental units has been steadily increasing.

In the years ahead, expect continued growth in demand for higher density residential forms, especially of the rental variety.  This trend is driven by the Halifax market, and offers an appealing lifestyle (low maintenance, low commitment), combined with the option to live off the equity unlocked from the sale of the family home.  It is not far-fetched to extrapolate that demand for multi-unit rental apartments may also exist in smaller municipalities in the province, but that rural housing economics (lower housing prices but similar construction costs) have thus far constrained the supply side of the equation.   

Turner Drake & Partners’ Economic Intelligence Unit follows closely trends in real estate and the factors that can impact its value, from demographic patterns and preferences, to climate change.  Custom reports translate data into conclusions.  For more information on how we can assist you, please call or email Alexandra Baird Allen: 902-429-1811 x323 or abairdallen@turnerdrake.com.

Specific Claims are launched by a First Nation band against the Government of Canada for historic grievances, typically over issues like unfulfilled treaty obligations, loss of reserve lands and mishandled First Nation funds. The most common cases that cross our desk involve the sale of reserve lands by the government of the day without the Band’s consent, either because it was never surrendered by them or because it was invalidly surrendered.

The events are always historic and quite often pre-date Confederation – a time when settlers were actively seeking to establish themselves in the new world and the government of the day was eagerly trying to accommodate them through grants and leases of land.  And sometimes that happened to be unsurrendered reserve land.

Those readers with a penchant for all things historical will find interesting reading on the origins of these claims by researching King George III’s “Proclamation of 1763”, issued in those turbulent times of squabbling between the French and the British. It imposed a fiduciary duty of care on the Crown which endures to this day, and is enshrined in the Constitution Act of 1982.  Heady stuff.

Our involvement in these files begins when the historical research has been done and the claim has been accepted by the government for negotiation. The stage is then set for negotiations to begin over the amount of compensation that the FN should receive from the Government of Canada.

The structure within which these negotiations take place is laid out in federal government guidelines. The first, released in 1982, set out the policy on specific claims and established guidelines for the assessment of claims and negotiations. These were tweaked under successive governments but the fundamentals remain the same.  They can currently be found in the document entitled “Specific Claims Policy and Process Guide”, available online and currently (still) under review.

We have been actively engaged on claim files in the Maritime provinces since the company began over 40 years ago – impressive, but a mere blink of the eye within the context of the time periods actually covered by these types of claims. Our involvement occurs in one of two ways.

1.       As an independent Consultant, hired under a joint terms of reference to calculate the ingredients of the claim, which then forms the platform for negotiations between the parties.

2.       As a Technical Expert on behalf of the First Nation, advising their negotiation and legal team on the technical aspects of the claim, ensuring that the process follows the guidelines and that the FN receives the compensation it is due.

We have represented (or continue to represent in currently active claims) over half a dozen First Nations throughout NS and NB, usually in the role of Technical Expert.

The structure of a claim is set out in the guideline and usually there are two components, calculated separately but intrinsically linked through the historical record.

(1) Current Unimproved Market Value - Where a claimant band can establish that certain of its reserve lands were never lawfully surrendered, or otherwise taken under legal authority, the band shall be compensated either by the return of the lands or by the current unimproved value of the lands. A relatively straight forward process…..

(2) Historical Loss of Use - Compensation will include an amount based on the loss of use of the lands in question, where it can be established that the claimants did in fact suffer such a loss. This can include losses from timber, agriculture, minerals and aggregates, fishing rights, land rental losses and a myriad of other components.  A far from simple process, often involving experts from different fields … and forests. The claim clock begins when the lands where first taken – usually 100 years or more in the past.

The process is not a quick one. Reconstructing historical events – and placing a value on them - takes time and diligence.  This is no splash-and-dash appraisal job.  And rightly so because there is much at stake here. Claims typically run into the millions of dollars and the calculations behind them must withstand robust scrutiny by both sides.  The cost of righting past wrongs does not come cheaply – or quickly.

As Senior Manager of our Brokerage Division, Ashley Urquhart assists both landlords and tenants meet their space requirements, and vendors and purchasers optimise their property portfolios. For more real estate brokerage advice, you can reach her at aurquhart@turnerdrake.com or 1 (800) 567-3033.

Allocation of Common Area

Under the Office Standard, building owners can allocate to each tenant their proportionate share of common area. This process of “grossing-up” the tenant’s space means each unit has two areas: a Tenant Area (the space physically occupied by the tenant), as well as a Rentable Area (the Tenant Area plus a proportionate share of common space).  In a retail building this is not the case, as this Standard does not allow for the grossing up of common areas. Under the Retail Standard, Gross Leasable Area is simply the area designed for the exclusive use of an occupant with no share of common area.

Consider a hypothetical office unit with a Tenant Area of 1,250 ft.² located within a building that contains three additional units of the same size and 200 ft.² of common area.  Each unit comprises ¼ of the total Tenant Area, and is allocated 25% of the common area (25% x 200 ft.² = 50 ft.²) making the Rentable Area of the unit 1,300 ft.² (blue overlay on left side graphic below). If this were a retail building the Gross Leasable Area would be 1,322 ft.² as this unit would simply be measured to the exterior face of all exterior walls, while excluding any allocation of building common areas (green overlay on right side graphic below).

These are just two of the many differences between the Retail and Office Standards. With a total of six BOMA Measurement Standards it is critical to verify that the correct standard has been applied to your building, and that your space has been certified to verify its accuracy.  

Please be suitably impressed by this photo: it has all three of a church, a lighthouse and a commercial heritage building

Five years ago, the Chronicle Herald reported that some of Nova Scotia’s churches were exploring the option of deregistering their buildings’ heritage status under the provincial Heritage Property Act.  Nova Scotia’s churches are often their town’s signature property, featuring architectural details ranging from elaborate stained glass windows to ceilings built by 19^th century shipwrights using the same techniques used on the hulls of wooden ships.  But cultural and demographic shifts have reduced demand for churches in the province.  Dwindling congregations mean reduced budgets unable to cope with the high costs of maintaining and operating historic properties.  Deregistration is required for demolition, the only option some congregations saw in the face of financial realities: maintenance requirements outweighed the ability to keep these architectural gems standing.  Recent years have seen other churches amalgamate congregations, keeping and maintaining a single building while selling the rest off for (hopefully sympathetic) redevelopment.

Wolfville United Church as it was

A more literal beacon facing a similar threat of extinction is the Canadian lighthouse.  Changing technologies have rendered redundant their function, if not their cultural attraction.  In May 2008, Parliament passed the Heritage Lighthouse Protection Act, a bill to designate and preserve lighthouses of historic significance.  It took effect in May 2010, only to be followed in June by an announcement declaring almost all Canadian lighthouses surplus, no longer to be maintained by the Coast Guard.  Since then, community groups have become the champions of select historic lighthouses, while the rest, presumably, will suffer the same fate as many an unfortunate ship along our rocky coasts.  

Peggy’s Cove lighthouse, a likely survivor

The foregoing each illustrate the perils of functional obsolescence: when a building’s functionality no longer meets market demands only its cultural significance can protect it – and then only if a champion steps up, e.g. government, community group, or passionate property owner.  Urban heritage properties are particularly susceptible to rising functional obsolescence due to the high value of the land on which they sit: the financial rewards of redevelopment contrast starkly with the economic pitfalls of retaining and maintaining them. Demolition is tempting. 

This year we celebrate Canada 150.  With our history and heritage, for better or worse, on prominent display, we decided to turn our attention to the uphill battle faced by commercial heritage properties in Halifax.

Size Matters

Open concept office-in-waiting

Downtown heritage buildings in Atlantic Canada are at an inherent disadvantage versus modern construction because they are simply too small.  Even 30-year-old buildings are feeling the strain imposed by their new, more spacious contemporaries, whose design is able to accommodate demand for open concept offices.  In Halifax, total demand has yet to catch up with new supply. Rental rates are restricted and tenants can afford to move into the new buildings, leaving the last generation of Class A office space struggling to stay relevant – and occupied.  The trend is toward larger floorplates as companies are opting for large, open concept offices with collaborative workspaces and few individual offices.  Downtown Halifax doesn’t have a supply of unused historic warehouses with high ceilings and large floorplates ripe for conversion well suited to modern tastes. Instead, our heritage properties are mainly small buildings, 3-6 storeys high and with floor plates between 1,000 and 6,000 square feet (typically at the lower end of this range). 

Halifax has a few examples of what can be done to overcome this drawback.  Barrington Espace and the RBC Waterside Centre both maintained the façades of a number of adjacent heritage properties while completely overhauling their innards, joining the buildings within to allow for larger floorplates (Saint John’s CentreBeam Place is another example of where this technique was used successfully).  If done carefully, this can present a best of both worlds compromise.  If not, the result may be the Disneyfication of heritage: it looks about right, but there’s no soul.  Either way, it is not an option for detached heritage properties: they are left to find occupants happy with the original floorplates size.

Barrington Espace, RBC Waterside Centre, CentreBeam Place…thanks, Google Street View!

Finding a Fit

Heritage properties need a certain tenant.  The predominant competitor of the heritage office building is the home office: to attract a tenant away from this “free” space, a historic building must provide cachet and interest, and must find a tenant who wants (or needs) both as marketing tools for their business.  Heritage tenants are drawn from a pool of largely creative firms represented by public relations and marketing firms, IT companies, and (interestingly) employment recruiting agencies.  Often, these firms are start-ups; there is a symbiotic relationship between the two, with the heritage property providing an inspiring ambiance (and maybe cheap rent: see below), and the company providing income and life to the building.  What the heritage property has more trouble providing is a flexible workspace that can grow with the company.  When they become too large for their space, they must seek a larger floorplate in a more modern building.  There is a happy medium: mid-sized companies who could occupy an entire heritage property as a single tenant.  But in Atlantic Canada, most companies are either large or small, a by-product of provincial regulatory demands which force companies to “get large or go under” (Atlantic Canada is made up of four small provinces each with their own regulatory requirements for businesses: half the population and half the land area of any other province, but four times the regulations…but this is a topic for another day).         

The Champions

There are three classes of champions for heritage properties: passionate owners (hopefully with deep pockets), community groups who recognize the social benefit of maintaining our built heritage, and governments which either have a measure of both these characteristics or are open to the influence of those who do. 

Heritage property owners must appreciate the unique features of old buildings.  To quote one (you’ll never guess who), they “speak to you in a way new buildings don’t.  There is a sense of calm, a personality.  They have been there for centuries, and if the economics can work, they will be there long after you’ve turned to dust.”  Ah, the economics.  Heritage properties in Halifax do not attract a rental premium as they do in some larger cities, such as Toronto’s trendy Distillery District.  There may be a purchase premium, albeit not driven solely by heritage, but location as well, due to the prime situation some heritage properties enjoy by virtue of having gotten there first.  Halifax’s downtown is distinguished by its waterfront; heritage properties with a connection to it in particular may enjoy a purchase premium, provided this connection is maintained (pause now to be thankful for the public outcry that halted “Harbour Drive” before it started…and hopeful that the redevelopment of its first phase, the Cogswell Interchange, will be successful in repairing the fabric of the area). 

Toronto’s Distillery District, as modelled by a pair of junior TDPers

There is a social benefit to heritage properties, usually external to the site itself.  A 2011 study by Place Economics highlighted six areas of positive economic impact attributed to heritage preservation: jobs, property values, heritage tourism, environmental impact, social impact and downtown revitalization.  Heritage properties differentiate cities from one another, providing a unique draw to residents, visitors and immigrants alike.  The world’s most successful cities have vibrant heritage architecture, often interspersed with modern buildings.  Community groups recognize this and fight to preserve historic built environments, but it is often the building owners who fund these broader social benefits by bearing the increased costs of renovation and upkeep.  It is here that governments can play a vital role via heritage preservation policies, but they must take care that they get them right.       

Incentivise or incense?

Halifax Regional Municipality recently commissioned a study to investigate heritage incentives.  However structured, these are a means by which society as a whole, via taxes, can help pay for the social benefit of heritage properties.  Two of the largest pitfalls of which governments must be wary when enacting policies to protect heritage properties both involve the risk of (inadvertently) penalizing property owners. 

The first is the more obvious one, wherein the owner of a protected building is prevented from redeveloping a site to a more lucrative density, diminishing the ability to make money from the property and potentially its market value.  One avenue available to the city is to compensate the property owner for the diminished value by purchasing the air rights, i.e. the space above the building in which they would otherwise be allowed to build, but are prevented by heritage preservation policy.  This could be accomplished either directly, with the municipality retaining ownership of the air rights, or by opening the market for air rights trading, allowing heritage property owners to sell their air rights to developers of non-heritage sites to increase the allowable height on their sites.  (Yes, this has the potential to open another can of worms, but it’s a good theory if the policy is well thought out). 

The second potential pitfall lies in supporting some, but not all heritage properties; such as with the creation of a heritage preservation zone.  While those properties (and their owners) located within the zone stand to benefit from financial incentives offered by the municipality, any heritage properties outside the zone are placed at greater disadvantage.  Still competing against larger modern buildings, they are now on an uneven field against their direct (heritage) competition.  The supported properties have the money to modernize without deficit to their owners’ bottom line, while unsupported properties are further penalized physically and financially. 

For more on heritage rights and wrongs, don’t miss our Summer 2017 newsletter, coming soon to a mailbox near you.  If you are not already subscribed to this informative and gutsy publication, please get in touch with us at 902-429-1811 or tdp@turnerdrake.com.

Alexandra Baird Allen is the Manager of our Economic Intelligence Unit, a position which makes surprisingly good use of her liberal arts degree in history & cultural studies, as well as her expertise in GIS.  For more information on our Economic Intelligence Products, visit our website or contact Alex at 902-429-1811 ext. 323 or abairdallen@turnerdrake.com.