First Nations Property Ownership Initiative
Making Markets Work
on First Nation Lands
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First Nations Property Ownership (FNPO)
Proposal: In Summary
The FNPO initiative has been underway since 2006, led by the First Nations Tax Commission, under the leadership of Chief Commissioner Clarence T. (Manny) Jules, and supported financially by Indian and Northern Affairs Canada (now Aboriginal Affairs and Northern Development) under Ministers Prentice, Strahl and Duncan. The essence of the proposal is as follows:
- First Nations should have the option (requiring majority support of members) to hold the legal title to the land currently held by the Crown as "reserves" under the Indian Act;
- Individual First Nations should have the power to transfer title in fee simple (with any restrictions they would deem fit) to individuals without any loss of their jurisdiction over the land despite any possible change in ownership;
- First Nation jurisdiction over First Nation Land should be substantially expanded;
- A number of important safeguards should be included to preserve the First Nation character of the land;
- The new First Nation Land should be registered in a "Torrens" style land registry (which could eventually serve reserve lands as well).
The Problem: The wrong form of land tenure
Reserve land under the Indian Act (which governs almost all First Nations below 60) is Crown land, i.e. the legal title to the land is held by the Crown (federal and/or provincial), and the power to manage the land is federal. Because the land is held by the Crown for the use and benefit of Indian bands, a trust or fiduciary responsibility lies with the Government regarding its management of the land. The land itself is inalienable, and cannot be sold or mortgaged unless the Indian interest in it is yielded by the band to the government ("surrendered"). As far as "Indians" are concerned, they can hold only a right of "possession" of a parcel of reserve land, which can be sold or passed on only to other members of the band. To lease such land to a non-band member requires the approval of the government. Reserve land falls under federal law and is therefore not governed by the vast body of provincial law that governs the normal conditions of property rights in Canada, creating an extensive "regulatory gap".
The land tenure system described (exceedingly briefly) above was designed in the mid-19th century to fit with the then view of how the Indian issue would be solved. It was meant as a temporary measure: Indians would be placed on reserves until they were sufficiently acculturated to hold property in their own right, live independently of government supervision and protection, obtain the right to vote, and become subject to taxation. Reserves were isolated geographically and legally from the rest of society and were expected to disappear over time as the Indian population entered the surrounding world. Indians were to be granted property rights only when they had decided to leave their former way of life and enter "white" society. Until they did so, they would have to live under the land tenure system of the Indian Act, where the land they lived on was owned by the government. The idea behind this land tenure system was not to incentivize economic activity by the Indian population, quite the contrary; it was intended to incentivize leaving the reserves and the Indian way of life in order to gain the possibility of a "normal" economic and political life.
History, obviously, has not accorded with this view. Yet, the land tenure system of the Indian Act continues to exist and to frustrate the economic aspirations of First Nations.
The counter-economic structure of the Indian Act reserve system is too obvious and well-documented to need further mention. The consequences of this system are visible in the levels of poverty in First Nation communities across Canada. The First Nations Tax Commission, therefore, decided to undertake an extensive program of legal and economic research to better understand the costs and consequences of remaining within the current structure, and the possible benefits of alternative forms of land tenure which could be adopted while remaining consistent with First Nations culture. The results of this research can be summarized as follows:
- it is four to six times more expensive to do business on First Nation land than off; transferring title to reserve land from the Crown to First Nations can have major economic benefits through a quantum change in the capacity to raise and leverage capital, and through much greater speed, efficiency and certainty of transactions;
- a modern "Torrens" lands registry is a critical part of the above economic advantage by greatly increasing confidence in First Nation title and facilitating land based transactions;
- shifting from Crown land, public housing, and government- based economies on reserves to economies based on private ownership (including home ownership) and market participation is sine qua non for many communities to escape poverty and dependency, and to develop the confidence and behaviours of independence and self-reliance; FNPO would facilitate more investment, trade and innovation through secure property rights and access to credit;
- First Nation ownership of the legal title to First Nation land is a proven model in Canada, clearly established over the past 30 years through comprehensive claims agreements and self-government legislation; today there is far more First Nation land held in fee simple by First Nation people than reserve land held by the Crown; every comprehensive claim agreement since 1980 has provided land in fee simple to the First Nation claimants;
- the legal feasibility of the FNPO proposal is beyond question, as it is based on existing legislation (in British Columbia); it is true that south of 60 the cooperation of the provinces is needed, but there is every reason to believe that it will be forthcoming;
- transition costs for implementation should be modest; importantly, in the longer term, First Nation ownership of title will eliminate federal government involvement in First Nation land transactions as well as government liability for them;
- improved jurisdiction of First Nation governments over their land, coupled with provisions to facilitate "docking on" to provincial systems where appropriate, should help substantially to close the regulatory gap that today seriously hampers reserve land development;
- First Nation ownership of title to land and participation in markets is perfectly compatible with First Nation culture, and can be combined with appropriate safeguards and powers which will enable First Nation culture and communities to prosper long into the future, as is clearly demonstrated by the fact that First Nation and other First Nation people have freely chosen to own their own land in fee simple in modern day treaty negotiations in this country over the past 30 years.
The Proposal: The First Nations Property Ownership Act
The following are the key policy elements of the proposed enabling legislation.
- Joint Federal-Provincial Legislation
The proposal is to use mirror federal-provincial legislation following the models of comprehensive claim settlements in British Columbia. This is to assure the greatest possible legal certainty, and to encourage provincial cooperation in the implementation of the new land tenure regime.
- Voluntary and Limited to Specified First Nations
Participation in this legislation will be voluntary. The proposal is to limit the application of the legislation to the First Nations who have indicated their desire to enter under it and will be specified by name in it.
- Majority Consent of the First Nation Membership without "Surrender" of Land
Majority consent of the members of the First Nation through referendum should be required; however, there should be no requirement for "surrender" of the land under the Indian Act. The legislation should enable the direct transition from Crown ownership of title to First Nation ownership.
- Title Vested in First Nation Transferable to Individuals: Subject to Referendum
The legislation should recognize the First Nation as holding fee simple title to its former reserve land. The First Nation should have the power to transfer title to individual members of the First Nation and to allow members of the First Nation to transfer title in fee simple (or some lesser form of interest) to non-members. It is proposed that a referendum be employed for two purposes: one, to confirm majority support to enter into FNPO; and two, to confirm majority support for the ownership regime that the First Nation chooses to establish under FNPO. A First Nation may wish to combine these two purposes in one single referendum.
- Expanded Jurisdiction over First Nation Lands
Jurisdiction of First Nations over First Nation Lands should be substantially extended, along the lines of the powers set out in the lands provisions of the Nisga'a and Tsawwassen Agreements.
It should be made explicit that lands remain First Nation Lands regardless of any change in ownership. Obviously, the many other aspects of governance covered in the above mentioned treaties (e.g. wildlife management) would not form part of FNPO.
- Taxation of Interests in First Nation Lands under FSMA
The First Nations should have the power of taxation of any interest in First Nation Lands, including fee simple title held by non-members, as governed by the First Nations Fiscal and Statistical Management Act, and subject to the authorities of the First Nations Tax Commission under that Act.
- Tax Exemption on First Nation Lands Continues
The tax exemption of S. 87 of the Indian Act should continue to apply on First Nation Lands under FNPO. It is understood that comprehensive claims agreements have included the gradual termination of the S.87 tax exemption. However, such terminations formed part of broad agreements involving large tracts of land beyond reserve boundaries, mineral rights, hunting and fishing rights, and an array of other matters, including financial compensation. The FNPO proposal involves only the transfer of the legal title to land that is already set apart for the use and benefit of the First Nations. It does not, therefore, provide any material basis for exchanging the tax exemption for other significant benefits; nor does it extend the exemption in any way.
- Torrens Registry for First Nations Lands
The legislation should provide for the establishment of a Torrens-style land registry for all First Nations Lands. These provisions should include powers enabling the registry to recover its operating costs and the establishment of its insurance fund through user fees. The new registry could be housed in the FNTC. Cooperative arrangements with provincial registries should continue to be explored.
- Expropriation and Escheatment
First Nations should be provided with typical powers of expropriation for public purposes, with fair compensation, and subject, of course, to the supervision of the Courts. Escheatment should cause land to revert to the First Nation.
- Solving the "Regulatory" Gap
The solution to the regulatory gap on reserve land should involve a combination of First Nation legislation together with provincial law and administration and, to some extent, federal regulation. In many areas, the practical and cost effective solution will likely involve First Nations "docking-on" to provincial systems. In order to permit such "docking" arrangements, First Nations should have the powers necessary to adopt provincial laws (possibly in specified areas) and to make arrangements with the provincial government regarding their administration. Expanded federal regulatory powers for similar purposes could also be included.
- Additions to Reserves
The legislation should make provision that land being added to a First Nation reserve whether as a result of treaty land entitlement, the resolution of a specific claim, or any other purpose, can be placed directly under FNPO as "First Nation land". Of course, the joint federal/provincial process for converting provincial land to reserve land, and addressing third party interests, will remain necessary.
- Transitional Provisions
The legislation should address the transition from the reserve land system including: ascertaining existing rights and interests and boundaries under the reserve system; guaranteeing existing interests, including leasehold interests, certificates of possession, and other forms of interests and rights established under the Indian Act; mediation and dispute resolution regarding existing interests; and converting rights of possession to rights of ownership.
- Government and Management of First Nations Lands
Under the ongoing governmental role of the First Nation, the private management of First Nation Lands will expand over time under FNPO, reducing (or eliminating) the involvement of the First Nation (and certainly of the federal government) in the details of private transactions. As land management devolves to individual land owners, First Nations should adopt fee for service arrangements in order to defray associated governmental costs that are typical of similar land transactions across the country.
However, much First Nation Land is expected to remain communally owned and thus, to a considerable extent, the First Nation administration will retain many of the land management responsibilities it currently has under the Indian Act. Therefore, First Nations should continue to be eligible to receive support from the Department for these land management functions.
- Matrimonial Property
It is worth considering whether the power to make laws regarding matrimonial real property on First Nations Lands should be included in the legislation, including the power to adopt provincial laws, subject perhaps to any other federal legislation dealing with this matter that Parliament may adopt.
- Regulatory Powers
Given the fact that any amendments to FNPO will require legislation by the two levels of government, the provision of broad regulatory powers is advisable. Regulatory powers can be used to establish and manage the survey and registration requirements needed to support a Torrens system. Regulations can also be useful for the establishment of greater certainty and security in regard to certain matters where reliance on First Nation laws alone may not satisfy the market place, for example in the adoption of provincial laws in regard to builders liens.