Up to $1 billion in B.C. loan guarantees needed after Cowichan ruling: expert

A property tax expert representing Richmond homeowners affected by this summer’s Cowichan title decision says it could cost the province a billion dollars to backstop financing for properties in the area covered by the decision, far more than the $150 million in loan guarantees offered by Premier David Eby.

Last week, at a Chamber of Commerce event in Vancouver, the premier told business leaders his government will “go to the wall” to defend private property rights after the B.C. Supreme Court granted the Cowichan Tribes Aboriginal title to 7½ square kilometres of southeastern Lulu Island and another two-thirds of a square kilometre along the Fraser River shoreline.

The decision has raised uncertainty for private property holders in the region around whether the value of their properties will be impacted, whether they will be able to renew their mortgages, or whether they will be able to get financing from banks to buy or develop properties in the title area.

Eby told CP on Friday that Montrose Properties, which develops warehouses and owns about a third of the land in the title area, estimated it was facing roughly $100 million in “financial challenges,” while private residential mortgages in the region amount to about $54 million.

“We’re working on a guarantee so that they’re able to access financing, mortgage financing, financing for their business that they would in the ordinary course of business if this decision hadn’t been made,” the premier told Postmedia in a year-end interview.

Paul Sullivan, principal at Ryan LLC, a global tax firm dedicated to business taxes, said the problem with the premier’s promise is it lacks details and falls far short of what will be needed if banks get nervous about providing financing.

He also said there is a lack of clarity around whether the financing will help with propping up the property value of properties as their assessed values could fall after the title decision.

“Are you guaranteeing a value of the property for financing purposes? Are you just guaranteeing that you will be able to get your financing, but you’ve got to go get your value agreed to with the bank,” said Sullivan.

“There’s just not enough being said here to me. This feels like a sound bite without any interpretive detail.”

He said banks tend to lend 70 to 75 per cent of a property’s value and that the current value of the properties in the title area is roughly $1.3 billion. That means that backing up 70 per cent of the title area value could cost the province just under $1 billion.

That doesn’t take into account the full area that the Cowichan argue they hold title to, with Sullivan placing that land value at over $3 billion.

An estimated 45 privately-owned properties are included in the title area, including warehouses owned by Montrose Properties, several dozen residential addresses — some of which are worth millions of dollars — and a golf course.

While the Cowichan Tribes did not seek to invalidate title over private properties in the region, the former site of one of the nation’s summer fishing villages, Justice Barbara Young ruled that the granting of fee simple title on the land was an infringement on Cowichan title.

She also determined that the title for land owned by the city and the federal government within the title area is “invalid.”

Eby and the province are appealing the decision and have applied for a stay on the ruling until the B.C. Court of Appeal can have its say.

The premier has, however, ruled out using the notwithstanding clause to overrule the decision.

Constitutional law scholar Joel Bakan, a professor at UBC, said Eby couldn’t use it even if he tried.

He said the Cowichan decision is rooted in Section 35 of the Canadian Constitution, which guarantees First Nations, Métis and Inuit people the right to hunt, fish and live on title lands, and that the notwithstanding clause does not apply to that section of the Constitution.

“I think the Supreme Court of Canada has to really resolve this issue of how Section 35 applies in the context of private residential and commercial lands,” said Bakan.

“Governments do have the power under the Supreme Court of Canada Act to initiate a reference, and that would certainly be a more efficient and expeditious way to get this issue before the Supreme Court of Canada and create some certainty around it.”

Richmond Mayor Malcolm Brodie told Postmedia that all options need to remain on the table to help those affected by the Cowichan case.

“The problem that has been caused by the Justice Young’s decision is so wide, sweeping and pervasive that all options need to be on the table, whether it’s using the notwithstanding clause, whether it’s some kind of a constitutional amendment,” said Brodie, while admitting that the easiest option would be for the courts to shoot down the original ruling.

At the same time, he said he is happy the premier promised loan guarantees, saying it is exactly the kind of program the city has been asking for.

B.C. Conservative interim leader Trevor Halford, however, said the offer of loan guarantees shows a government that is desperate.

“The fact that he’s now providing loan guarantees or putting that on the table shows me that there is a sense of panic on how real this situation is,” said Halford.

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