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The Title Holders

The Title Holders

The reasons why only a few Nunavummiut own their property
By Herb Mathisen
Aug 13
2018
From the July/August 2018 Issue

Historian Kenn Harper bought two duplexes from Murray Horn. Murray Horn, a career bureaucrat, bought them from Northern Property REIT, which had acquired three duplexes from Canadian Airlines many years before that. The duplexes—1016, 1018 and 1020 in Iqaluit—were actually first owned by Nordair, the now-defunct airline remembered for bringing regularly scheduled flights from Montreal to the eastern Arctic.

These real estate transactions seem unremarkable on the surface. But dig a little deeper and you discover the properties involved are Northern oddities—the results of the idiosyncratic history of land administration in Iqaluit, and Nunavut in general. Kenn Harper holds fee simple title over the properties—a fancy legal way of saying he owns the land outright and can sell it at will. And he is one the few owners of private property in the entire territory.

In Iqaluit, these lots are few and far between. The three old Nordair duplexes, the Anglican Bishop of the Arctic lot (with Iqaluit’s soup kitchen and Anglican Church), the Baha’i church and the Astro Hill complex (including the Frobisher Inn and the Storehouse), are among the few properties owned fee simple in town. There are a handful of such properties in Nunavut hamlets too.

But getting a clear picture of just how many there are is difficult. “It’s not the sort of thing that we pay a whole lot of attention to,” says Brian Lannan, territorial land administrator with the Nunavut government. There’s a valid reason why—in all but one intangible way, fee simple title isn’t so different from the lease agreements many Nunavummiut enter into these days.

How did private property ownership become such a rarity in Nunavut? Well, it’s important to first understand that, in the beginning, there was no concept of land ownership among Inuit. That only began when settlers arrived in North America. In Canada’s early days, most of the land in Nunavut—once a part of the Northwest Territories—was administered by the federal government and its policy was to lease out land in 30-year terms or less. There were some exceptions though. Churches, some banks, whaling stations and Hudson’s Bay Company factors’ posts were granted fee simple title. These account for the parcels of land that are still privately owned in Nunavut. “So anyone who has a fee simple title now got it from someone who got it from someone,” says Lannan. (In the case of Astro Hill, Lannan believes fee simple title was offered up as an “additional incentive to the private sector to develop the area.”)

The majority of homeowners and property holders have leases in Nunavut, with municipalities holding title over the land. Until the early 1980s, the typical lease was what is called a standard lease. In this arrangement, a homeowner leases their land in five-year terms and pays, say, a $500 fee per year in perpetuity.

You can think of the standard lease like rent. This person would own their home, but would forever be paying the lease of the land on which the home stood without ever building up equity—or quasi-ownership. They would also pay property taxes.

But another kind of lease has increasingly become the norm in Iqaluit and in Nunavut’s hamlets. It’s called an equity lease and it mimics property ownership. To explain, let’s use the example of a new development: A resident enters a lottery for a new lot and, if selected, they can pay to build their home on it. What they pay for the lot would be the cost of putting in roads, sewage lines (when applicable) and other development infrastructure. Most banks operating in the North will let the homeowner include the land costs in their mortgage so that they can pay the city or hamlet off right away. From the municipality’s view, the immediate cost recovery is preferable to the small yearly instalments that come with a standard lease. And for buyers it makes more sense because their mortgage with the bank (basically, a gigantic loan) generally has a lower interest rate than typically offered by municipalities.

When a homeowner enters into an equity lease on a new lot, they have to develop the land in some way in order to sell the lease or have it renewed. And the municipality can choose not to renew or transfer a lease if the holder is in arrears. “In some ways it’s good for [the municipality] that they hold title to it because if there’s any money owing on the land, they won’t allow a sale to go forward,” says John Matthews, a longtime Iqaluit realtor. “They won’t transfer a lease from one party to another party until everything’s paid.” That includes outstanding property taxes, water bills, whatever.

But if the homeowner has paid off the lot, developed the property and is in good standing, they will be able to sell the home and the lot it’s on. “You’re building up the equity in the land by paying off this lease and that’s transferrable,” says Yellowknife-based real estate assessor Lauchlin MacDonald, who has worked in Nunavut for 35 years. “When you sell your house and it’s sitting on this lot that you have an equity lease with, you’re selling the land and you’re selling the building and everything goes.”

If the homeowner holds the property and the lease runs out 30 years later, all they need to do is pay a nominal administrative fee to get it renewed. Then it’s just $1 per year for the length of the lease renewal.

Really, minus that fee, an equity lease and fee simple title are pretty close to the same thing. “Your rights to the land are essentially the same,” MacDonald explains. Both properties are subject to taxation, both are subject to expropriation. “A fully paid equity lease is as close to outright ownership as damn is to swearing,” says Lannan.

The only difference is a philosophical one—the capitalist craving to own, own, own. Or to be able to say, “It’s mine. Yeah, I’m the king,” says Macdonald. Still, it’s a hard compromise for some southerners—who worship at the altar of ownership—to come around to.

If two similar houses were side-by-side on identical lots, and one was a paid-out equity lease and one was fee simple title, MacDonald hypothesizes most people would still pay more for the latter even if they were getting the same package of rights. But they would be paying extra just to be able to say they are the king or queen of their castle.

The lack of fee simple title in Nunavut, he says, does cause some headaches, especially with banks outside of the North. “I did an appraisal here in Iqaluit on a house and we sent it in to the bank’s agents and all the underwriters down south see this lease and they can’t get their heads around it. ‘What? They’re paying $550,000? The land is leased!’” he says. MacDonald then has to explain that an equity lease amounts to quasi-ownership. Thankfully, most banks working in the North are familiar with the concept.

But why not avoid all the confusion and simply make the move to fee simple title, especially in larger markets like Iqaluit?

Well, imagine what might happen if a subdivision opened up lots with fee simple title. Dozens of lots go up for sale and developers or investors with deep pockets snap them up right away. And then they sit on them. (If you have fee simple title to a lot you don’t have any public commitment to develop it quickly. With an equity lease, you must develop your property within a given timeframe or your lease will not be renewed and cannot be transferred.) In Nunavut, new developments or subdivisions are slow to come to market—as much due to cost as to bureaucracy. The tight housing market would push up the value of the vacant lots, even though nothing has happened on them.

Nunavut has had two territory-wide referenda on the fee simple matter already, as prescribed in the territory’s founding acts. The first was held in 1995 before the territory was created and the second in 2016 to revisit the question. In both cases, each and every hamlet and city voted against fee simple title, with some fearing out-of-territory speculators would come in and monopolize the housing market. “I don’t think there’s going to be fee simple for quite a while,” says Matthews. “If ever.”

But really, does it even matter?